Finance Bill released by the Central Board of Revenue (CBR) reveal that the government has announced tax exemption on capital gains for further one year and income of banking company would be computed under the new Seventh Schedule incorporated in the Income Tax Ordinance, 2001.
The exemption to Mutual Funds on CFS interest income has been withdrawn; professional firms would be taxed at par with AOPs and Presumptive Tax Regime (PTR) for service providers to exporters/export houses has been abolished.
The withholding tax for commercial importers covered under Presumptive Tax Regime (PTR) has been reduced from 6 to 5 percent; a uniform adjustable withholding tax at the rate of one percent for manufacturers; withholding tax on import of edible has been reduced from 3 to 2 percent; 5 percent WHT would be applicable on purchase of locally manufactured cars and E&P companies have been exempted from the WHT on imports (other than vehicles).
A new scheme has been announced for retailers under which 0.5 percent tax would be applicable up to turnover of Rs 0.5 million; Rs 25,000 plus 0.5 percent of the amount of turnover exceeding Rs 5 million, having turnover from Rs 5 to Rs 10 million and tax would be Rs 50,000 plus 0.75 percent of the amount of turnover exceeding Rs 10 million in case of above Rs 10 million turnover.
The existing corporate tax rate of 35 percent would continue in 2007-2008, while concept of ''group assessment'' has been introduced for holding companies and their subsidiaries for submission of a consolidated income tax return.
According to major revenue measures on the sales tax side, the existing levy of excise duty @ 5 percent on non-fund banking services is being extended to include all non-fund services except cheque book issuance charges, Umra and Hajj service charges, cheque return charges and utility collection charges.
To discourage the informal manufacturing in iron and steel, plastics and paper, the sales tax is being increased from 15percent to 20percent on import and supply of their raw materials and chemicals.
The retail price of cigarettes has been increased by 7 percent to improve the incidence of excise duty; sales tax zero-rating has been withdrawn on chemicals of multiple usage and collection of sales tax from CNG stations would be done from gas distribution companies.
The commercial importers, iron/steel sector, restaurants and biscuit and confectionery sector would now operate in standard sales tax procedure. Zero-rating of sales tax has been extended to utilities of rice exporters; sewing machines; bicycles; writing inks/exercise books; trailers and semi-trailers and zero-rating would be available on the uncooked poultry meat.
Under the sales tax relief measures, the government has exempted sales tax on cottonseed oil and abolished excise duty on cable TV operators; petroleum bitumen; motor gasoline and jet fuel and abolished excise duty on exchange companies and health insurance. Moreover, sales tax exemption would be applicable on the surgical tapes and ultrasound gel.
The government has also withdrawn input tax adjustment on supply of utilities ie electricity/gas to the residential colonies of manufacturers. For the facilitation of passengers various levies on international air travel ie excise duty, foreign travel tax and government airport tax are being clubbed together in the name of Air Travel Tax (ATT). The rate is same but exemption for passenger coming from abroad is being withdrawn.