In order to reinforce efforts being made for broadening of the tax base and to bring about an increase in the number of return filers a new section 227C was inserted through the Finance Act, 2018 whereby a bar was placed upon acceptance and processing of applications for booking, registration or purchase of a new locally manufactured motor vehicle or for the first registration of an imported vehicle by any vehicle registering authority or a manufacturer of a motor vehicle unless the person was a filer as defined in section 2(23A) of the Ordinance.
Such restriction was also placed upon authorities responsible for registering, recording or attesting transfer of any immovable property exceeding five million rupees and any application or request by a person for registering, recording or attesting transfer of any immovable property exceeding Rs 5 million could not be accepted or processed unless such person was a filer as defined in section 2(23A) of the Ordinance.
This restriction resulted in hardship for various categories of persons including low income earning individuals purchasing motorcycles etc and for persons acquiring property through inheritance. Moreover, this measure also negatively impacted nonresident individuals desirous of investing in the real estate sector. In order to alleviate the genuine hardship being faced by various categories of persons the Finance Supplementary (Amendment) Bill, 2018 envisages the exclusion of certain persons from the purview of section 227C of the Income Tax Ordinance, 2001.
The FBR said that the restriction on purchase of locally manufactured/imported vehicles by non-filers shall not extend to purchase of motorcycles having engine capacity less than 200cc. Moreover, non-filers shall also be at liberty to purchase agricultural tractors, motorcycle-rickshaws, rickshaws and any other motor vehicle having an engine capacity less than 200cc. Furthermore, persons holding a Pakistan origin card or a national identity card for overseas Pakistanis who are able to produce a certificate from a scheduled bank verifying receipt of foreign exchange remitted from outside Pakistan through normal banking channels during a period of sixty days prior to the date of booking, registration or purchase of motor-vehicle shall also not have to adhere to the condition of being a filer for the purchase of a locally manufactured or imported vehicle.
Moreover, as in the case of purchase of motor vehicles the condition of being a filer shall not apply in respect of persons holding a Pakistan origin card or a national identity card for overseas Pakistanis who are able to produce a certificate from a scheduled bank verifying receipt of foreign exchange remitted from outside Pakistan through normal banking channels during a period of sixty days prior to the date of registering, recording or attesting transfer of immovable property valuing above Rs 5 million.
In order to effectively enforce the bar on purchase of locally manufactured/ imported vehicles and immovable property valuing above Rs 5 Million by non-filers the Finance Supplementary (Amendment) Act, 2018 envisages levy of various penalties upon local manufacturers of vehicles, Excise and Taxation department and authorities responsible for registering, recording or attesting transfer of immovable properties.
The FBR said that a local manufacturer of a motor vehicle accepting or processing any application for the booking or purchase of a locally manufactured motor vehicle by a non-filer shall be liable to pay a penalty of 5% of the value of the motor vehicle under section 182 of the Income Tax Ordinance, 2001.
Secondly, a registering authority of Excise and Taxation Department accepting, processing or registering any application for registration of a locally manufactured motor vehicle or the first registration of an imported vehicle by a non-filer shall be liable to pay a penalty of 3 percent of the value of the motor vehicle.
If any authority responsible for registering, recording or attesting the transfer of immovable property accepts or processes the registration or attestation of immovable property valuing above Rs 5 million in the case of a non-filer, such authority shall be liable to pay a penalty of 3 percent of the value of such immovable property. It would also be pertinent to mention that authorities responsible for registering, recording or attesting the transfer of immovable properties include housing authorities, housing societies, co-operative societies, registrar of properties etc, the FBR added.