BUDGET BRIEFINGS

ON

FINANCE BILL 2023

 CONTENTS

1. INCOME TAX .................................................................................................................................. 4

2. SALES TAX ................................................................................................................................... 11
3. FEDERAL EXCISE DUTY .......................................................................................................... 15
4. CUSTOMS ACT, 1969 ................................................................................................................ 16
5. ISLAMABAD CAPITAL TERRITORY (TAX ON SERVICES) ORDINANCE, 2001 ............ 24
Dear Clients

The commentary on Finance Bill, 2023 which is for exclusive use of clients and staff of Rizwan & Company.
The material contained is in the nature of general comments only. The said summary neither purport nor
intended to be an advice on any particular matter and therefore should not be acted upon without obtaining
appropriate advice.

Rizwan Bashir
Partner
Lahore: June 10, 2023
 INCOME TAX services and IT-enabled services as defined in
the Ordinance. However, this expansion is
DEFINITIONS [Section 2] subject to the condition of registration and
certification by the Pakistan Software Export
The insertions in the definitions are as follows: Board.

Income [Section 2(29)] Updated table of tax is as follows:

Current Proposed
The bill proposes the inclusion of Section 236Z
Category Turnover Rates Rates
within the income definition. Additionally, the Bill also (NTR) (FTR)
proposes the addition of Section 236Z (pertaining to
Upto Rs. 100
Bonus shares) in the ITO, which will be further i 7.5% 0.25%
million
addressed in this document. This implies that the
Upto Rs. 250
proposal aims to categorize bonus shares as part of ii 15% 0.5%
Million
a taxpayer's Taxable income.
Rs. 250
iii Million to Rs. 20% 0.75%
Permanent Establishment [Section 2(41)]
800 Million
The bill proposes the removal of the term "fixed" from
the definition of Permanent Establishment (PE). As
Previously, the definition of Small and Medium
a result of this amendment, it will no longer be
Enterprises (SMEs) only applied to manufacturers.
necessary for a place of business to be established
However, this amendment suggests the inclusion of
at a specific location with a certain degree of
IT service providers (Section 2(30AD)) and
permanence.
providers of IT enabled services (Section 30AE)
within the scope of SMEs, as long as their turnover
A place of business is currently required to be
does not exceed PKR 800 million in a tax year.
"fixed," meaning there must be a connection
between the place of business and a specific
The bill proposes a new requirement for SMEs to
geographical point. This amendment appears to be
register either with the Federal Board of Revenue
an anti-avoidance measure that aims to include
(FBR) on the FBR web portal or with the Small and
foreign entities operating in Pakistan without a
Medium Enterprises Development Authority on its
distinct physical place of business. Consequently, it
SME registration portal (SMERP).
may also encompass the virtual presence of foreign
entities, potentially leading to the establishment of
Additionally, the bill proposes to register with SMEs
virtual PEs.
engaged in IT and IT enabled services and obtain
certification from the Pakistan Software Export
Additionally, the bill proposes the inclusion of the
Board, in addition to their registration with SMERP.
term "or Entity" in Section 2(41)(d) of the ITO. This
amendment expands the scope of a "Services PE"
Tax holiday for the SME setup exclusively as
to include entities as well. Consequently, it implies
Agro based industry in a rural area [CLAUSE
that foreign individuals or groups offering services
154 OF PART-I OF THE SECOND SCHEDULE]
through entities in Pakistan could now be considered
as constituting a Services PE within the country.
The proposed amendment suggests the inclusion
of a new clause in the Second Schedule, which
SPECIAL TAX REGIME FOR SMALL AND
introduces a tax holiday for Small and Medium-
MEDIUM ENTERPRISES (SME) [SECTION
sized Enterprises (SMEs) exclusively established
2(59A)]
as Agro-based industries in rural areas that have
been duly notified. The tax holiday is subject to the
The bill proposes the replacement of the existing
following conditions:
definition of Small and Medium Enterprises (SMEs)
with the following amendment. This proposed
(a) Profits and gains generated by the enterprise
change has two main effects:
shall be exempt from tax for the period
spanning from tax year 2024 to tax year 2028.
(a) The maximum threshold for qualifying as an
(b) The establishment of the enterprise must occur
SME has been raised to a turnover of PKR 800
on or after July 1, 2023.
million from the previous limit of PKR 250
(c) The enterprise should not be formed through
million in a tax year.
the transfer, reconstitution, reconstruction, or
splitting up of an existing business.
(b) The scope of the SME (Small and Medium-
It is important to note that this tax holiday is
sized Enterprises) definition is broadened to
intended for SMEs defined under the Fourteenth
encompass individuals involved in providing IT
Schedule.
 (a) Every company will be required to collect a 10%
SUPER TAX ON HIGH EARNING PERSONS tax from each shareholder at the time of issuing
[SECTION 4C & 147] bonus shares. For inactive taxpayers, the tax
rate will be 20%.
The Finance Bill 2023 includes a proposal to
introduce new slab rates for the super tax, targeting (b) The value for this purpose will be determined
taxpayers with income surpassing Rs 300 million. as the day-end price on the first day of book
Consequently, the highest slab rate of 10% will be closure for listed companies. For unlisted
applied to taxpayers across all sectors who earn companies, the prescribed value will be used.
more than Rs 500 million. This adjustment aims to The Federal Board of Revenue (FBR) is
eliminate any discriminatory treatment. The revised expected to issue the necessary Rules
table for super tax rates is as under. regarding this matter.
Sr Income Under Section 4C For For tax
No. tax year (c) This tax will be considered as a final tax.
year 2023 and
2022 onward (d) If shareholders fail to pay the tax, the company
1. Upto Rs 150 million 0% 0% is required to sell off shares equivalent to the
2. Exceeding Rs 150 million but does not 1% 1% tax liability.
exceed Rs 200 million
3. Exceeding Rs 200 million but does not 2% 2%
exceed Rs 250 million EXEMPTIONS UNDER FOREIGN INVESTMENT
4. Exceeding Rs 250 million but does not 3% 3% (PROMOTION AND PROTECTION) ACT, 2022
exceed Rs 300 million
5. Exceeding Rs 300 million but does not 4% [SECTION 44A]
exceed Rs 350 million
4%
6. Exceeding Rs 350 million but does not 6%
exceed Rs 400 million
It would be recalled that the Foreign Investment
7. Exceeding Rs 400 million but does not (Note) 8% (Promotion and Protection) Act 2022 (FIA) was
exceed Rs 500 million enacted by the Federal Government on 13
8. Exceeding Rs 500 million 10%
December 2022 paving way for the promotion and
protection of certain qualified foreign investments in
order to ensure sustainable economic activity and
The Finance Act of 2022 introduced the concept of
growth and improve the investment climate in
super tax under section 4C, requiring taxpayers to
Pakistan by providing incentives in direct and
pay this tax along with their returns. To facilitate the
indirect taxes, as well as ease of transfer and
collection of super tax as advance tax, necessary
repatriation. Under principal offerings streamlined by
amendments have been made to sections 4C and
the FIA, the Federal Government, Provincial
147. These amendments will come into effect on
Governments, local governments, and other
July 1, 2023.
relevant authorities will be able to collaborate and
work together to ensure the provision of incentives
The National Clearing Company of Pakistan
and protection to QI.
Limited (NCCPL) currently collects tax on capital
gains from the disposal of specific securities. As a
The FIA applies to all QIs, as specified in the First
result, individuals who earn income from such
Schedule to the FIA. A QI means the investments,
sources are required to pay Super Tax along with
sectors, industries or projects as may be chosen,
their annual tax return. A new proposal suggests
approved and duly notified by the FG. An investment
that Super Tax should also be collected on capital
would be treated as a QI if the amount of investment
gains from the disposal of these securities listed in
(whether equity or debt) in Pakistan exceeds US$
the Eighth Schedule through NCCPL.
500 million or its equivalent PKR amount. However,
the Federal Government has powers to notify an
TAX ON BONUS SHARES [SECTION 39(lb) &
investment as QI even if the investment amount
236Z]
criteria is not met. For now, only Reko Diq project in
the province of Baluchistan is designated as QI.
The bill proposes the inclusion of a new Section
39(lb) within the ITO. This amendment corresponds
The Second Schedule and Third Schedule of the FIA
to the proposed change in Section 2(29) of the ITO,
provides categories of incentives granted to the
which pertains to the definition of income. With this
investors of QI and the QIs itself. These include:
proposed amendment, income generated from the
issuance of bonus shares will be classified as
income under the category of "Income from Other  Exemption from tax on income including
sources. turnover tax, final tax, capital gain tax,
The following are the key features of these taxation dividend tax and withholding tax;
measures:
  Provisions of anti-avoidance may not be
applicable to the QIs;
 Exemption from Federal and Provincial
sales tax;
 Exemption from FED;
 Exemption from CD on import of all capital
goods required to perform functions of
enterprises located in an export processing
zone or related QI for use by an investor;
 Exemption from capital value tax or any
other tax similar in nature;
 Exemption from any export duty or similar
duty, Cess or levy on the export from
Pakistan by an investor in connection with
the QIS;
 Exemption from property taxes;
 Exemption from stamp duty and / or
registration fees levied by the Federal
Government, a Federal Government entity
or a Provincial Government;
 The project area of a QI may be declared as
an export processing zone entitled to the
exemptions available to export processing
zones;
 Stabilizing a royalty rate negotiated and
agreed with the Provincial Government;
 Exemption from application of Federal and /
or Provincial labor and social welfare laws
including laws pertaining to workers’
participation in companies’ profits and
workers welfare fund;
 Exemption from levy of Federal and / or
Provincial development and / or
infrastructure development cess;
 Permission for opening, maintaining and
operating foreign currency bank account
outside Pakistan or within Pakistan, subject
to certain conditions;
 Access to non-discriminatory rates of
foreign exchange transactions, if deemed
appropriate; and
 Exemption from any Federal or Provincial or
local charges, cesses, duties, fees, levies,
taxes or tolls.
Section 14(1) of FIA provides that protected benefits
including the Second Schedule and Third Schedule,
shall have overriding effect on any other law and in
the event of any conflict whether enacted prior to or
subsequent to FIA, the provisions of FIA shall prevail
unless the subsequent law expressly provides that it
overrides FIA. Section 14(5) of the FIA further
enforces that the statutes affected by the Second
Schedule shall stand amended in accordance with
the provision of the Second Schedule to the FIA.
Keeping in view the dynamics of the FIA, the Bill
proposes to suitably amend the provisions of the
Ordinance, the ST Act, the FE Act and the Customs
Act accordingly.
TAX CREDIT FOR CONSTRUCTION OF HOUSE
[SECTION 65l]
The bill proposes the addition of a new Section 65I
in the Income Tax Ordinance (ITO). This new
section aims to provide individuals with a tax credit
for the construction of a new house during the Tax
Years 2024 to 2026. To be eligible for the tax credit,
the construction of the new house must be
completed within the respective tax year, and the
individual must submit the completion certificate
along with their income tax return.
The amount of the tax credit proposed is
determined as the lesser of 10% of the tax
assessed to the individual for the tax year or PKR
One million.
For the purposes of Section 65I, a "new house" is
defined as a residential house whose layout plan
has been approved by the relevant authority on or
after 1st July 2023.
AMENDMENTS IN DEFINITION OF
ASSOCIATES AND RELATIVES [SECTION 85]
a) The Bill has proposed to substitute Section
85(1) of the ITO. The aforesaid proposed
amendment seeks to build on the current
definition of Associates in the ITO. Currently,
section 85 provides that two persons shall be
associates where the relationship between the
two is such that one may reasonably be
expected to act with the intentions of the other.
The bill proposes to further expand the
definition by adding following:
 One person sufficiently influences, either
alone or together with an associate or
associates, the other person; or
 One person enters into a transaction,
directly or indirectly, with the other who is a
resident of jurisdiction with zero taxation
regime. The proposed amendment is an
anti-avoidance measure as it seeks to
broaden the scope of an associate. Once
enacted, a broader range of transactions
shall be subject to the arms-length
principle, and may be subject to transfer
pricing audits.
Moreover, this proposed amendment read with the
proposed amendment to Section 2(41)(i) (through
which the word “fixed” has sought to be removed),
may result in the constitution of more dependent
agent PEs in Pakistan under Section 2(41)(g) of the
ITO. Moreover, it may also affect the exemption
from tax on profit on debt received by a non-
resident person on a security issued by a tax
resident person in Pakistan in terms of Section 46
of the ITO, as the said exemption is not available to
associates.
Furthermore, it may also expand the geographical
source of income under section 101(3)(e) of the
ITO. It may also have an impact on Section 106 of
the ITO for Thin Capitalization.
b) The Bill has proposed to define jurisdiction with
zero taxation regime as any Jurisdiction as may
be specified.
PROPOSED ADDITIONAL TAX ON CERTAIN
INCOME, PROFITS AND GAINS [SECTION 99D]
The bill proposes the addition of a new section,
namely Section 99D, in the ITO. This amendment
aims to introduce a provision for taxing "unexpected
income, profits, or gains," whether disclosed or
undisclosed.
The main features of this provision are outlined as
follows:
(a) This provision holds overriding effect on other
provisions of the Ordinance or any existing
laws currently in effect.
(b) It is applicable for any of the preceding five
years prior to the tax year 2023 and onwards.
(c) The Federal Government will determine
economic factors, such as international price
fluctuations impacting commodity prices in
Pakistan or any specific sector of the economy,
as well as variations in income, profits, or gains
due to foreign currency fluctuations. This will be
done through an official gazette notification.
(d) The rate of taxation under this provision will not
exceed 50% of the income, profit, or gains.
(e) The specifics related to the scope, payment
method, and any exemptions will be addressed
in the aforementioned notification.
THRESHOLD OF FOREIGN REMITTANCES
INCREASED [SECTION 111]
The bill proposes an increase in the threshold for
foreign remittances received under Section 111(4)
of the ITO, from PKR 5 million to USD 100,000. This
new threshold aligns with the amendment made
through the Income Tax (Amendment) Ordinance,
2018, where the threshold was reduced to PKR 10
million. At that time, considering the exchange rate
of PKR/USD, PKR 10 million was approximately
equal to USD 100,000. The current Bill suggests
maintaining the same threshold of USD 100,000.
Importantly, this proposed increase in the threshold
is not expected to have any adverse impact on
Pakistan's status with the Financial Action Task
Force (FATF). Any potential concerns related to
money laundering can be investigated by the
Financial Monitoring Unit. It's worth noting that this
section of the ITO specifically relates to tax
exemption for foreign remittances received through
the banking channel and subsequently converted
into PKR.
MINIMUM TAX RATE FOR LISTED COMPANIES
[SECTION 111]
Section 113 of the ITO currently stipulates the
imposition of a minimum tax based on the turnover
of taxpayers. Presently, the general rate of turnover
tax under this section is 1.25%. However, the bill
seeks to reduce this turnover tax rate to 1%
specifically for companies listed on the Pakistan
Stock Exchange. If a company is already being
charged at a reduced rate, that reduced rate will
continue to apply.
RECOVERY OF LIABILITY OUTSTANDING
UNDER OTHER LAWS [SECTION 146D]
A new section is being proposed to grant the
Commissioner the authority to recover any
outstanding liabilities under other statutes or laws
currently in effect. This provision applies to
defaulters who have liabilities that meet the
following criteria:
a) The liabilities are considered as income tax
arrears under the respective law.
b) The liabilities are required to be collected or
recovered by the Commissioner Inland
Revenue.
c) The liabilities have been referred to the
Commissioner Inland Revenue for recovery.
In such cases, the Commissioner will be
responsible for recovering the outstanding amounts
and depositing the received funds into the
designated account specified in the applicable law.
AUTOMATIC ISSUANCE OF EXEMPTION
CERTIFICATE ON PAYMENTS TO NON-
RESIDENTS [SECTION 152]
If a payer needs to remit an amount to a non-
resident without deducting tax, they can request an
exemption certificate from the Commissioner under
section 152(5A) of the Ordinance. The
Commissioner is required to issue an order within
thirty days upon receiving the application.
Under the proposed amendment, if the
Commissioner fails to issue the order within the
thirty-day period (excluding any adjournment
requested by the taxpayer), the certificate will be
automatically processed and issued through the INCREASE IN RATE OF CERTAIN
IRIS web portal. However, the Commissioner retains WITHHOLDING TAXES [SECTION 153]
the authority to modify or cancel the automatically
issued certificate after providing written reasons and The ITO currently includes Section 152 and Section
an opportunity for the taxpayer to be heard. 153, which outline the deduction of tax from
payments made to Non-Residents and Residents,
TAX ON INDIRECT EXPORTERS [SECTION 154] respectively, for the provision of Goods, Services,
and contract execution. The bill proposes an
Supplies made to exporters authorized under the increase in the rates by 1% as follows:
Export Facilitation Scheme, 2021, under a firm
contract, are proposed to be treated equally to Description
Existing Proposed
supplies made to exporters authorized under the Rate Rate
DTRE Rules, 2001. As a result, payments for these Sale of Goods:
supplies will be subject to a final withholding tax rate (a) In case of Company 4% 5%
of 1%. (b) All other cases 4.5% 5.5%
Provision or Rendering
of:
EXPORTS OF IT SERVICES [SECTION 154A]
(a) Certain specified 3%
4%
services
The proposed amendment in the Bill introduces a (b) Other services
proviso to Section 154A(2c) that excludes exporters - By company 8% 9%
registered and certified by the Pakistan Software - Any other case 10% 11%
Export Board (PSEB) who export computer Execution of contract
software, IT services, or IT enabled services from other than sports
filing sales tax returns under Federal or Provincial Person
laws. This exclusion allows them to opt for the final (a) In case of company 6.5% 7.5%
tax regime under Section 154A of the ITO. (b) All other cases 7% 8%

The Bill suggests removing the requirement to file
sales tax returns in order to benefit from the final tax
regime for exports of computer software, IT services,
or IT-enabled services by exporters registered with
the Pakistan Software Export Board.
Additionally, the reduced tax rate of 0.25%
applicable to the export of services related to
computer software and IT/IT-enabled services by
individuals registered with the Pakistan Software
Export Board is proposed to be limited to the tax
years 2024 to 2026.
INTERNATIONAL CENTER OF TAX
EXCELLENCE [SECTION 230J]
The bill proposes the establishment of the
International Centre of Tax Excellence through the
introduction of a new section, Section 230J. This
institute will play a crucial role in advancing internal
development for tax policy, creating model national
tax policies, conducting interdisciplinary research in
tax administration and policy, promoting
international tax cooperation, forecasting revenue,
organizing international seminars, workshops, and
conferences to address current challenges faced by
tax authorities in international taxation, enhancing
the capacity of Inland Revenue officers, conducting
tax analysis, improving the design and
implementation of tax administration to maximize
revenue within existing provisions, closing the tax
gap, and performing any other functions as directed
by the Board or the Federal Government.
INCREASE RATE OF TAX ON COMMERCIAL
IMPORTERS [SECTION 148]
The proposed amendment suggests an increase in
the tax rate for commercial importers of goods
classified in Part III of the Twelfth Schedule. The
rate is proposed to be enhanced from 5.5% to 6%
of the import value, which includes customs duty,
sales tax, and federal excise duty.
PROPOSED PROVISIONS RELATED TO
BANKING COMPANIES [RULE 7G SEVENTH
SCHEDULE]
The Seventh Schedule contains provisions for a
reduced tax rate of 20% on income generated from
additional advances in certain sectors, including
micro and SME, low-cost housing, and farm credit.
These provisions were initially applicable until the
tax year 2023, but the bill seeks to extend them until
the tax year 2025.
In line with this concept, a new provision is
proposed to introduce a reduced tax rate of 20% on
income from additional advances in the IT sector.
This provision will be applicable for the tax years
2024 and 2025.
An exemption was introduced through SRO
213(I)/2023 dated February 22, 2023, pertaining to
profit on debt and capital gains derived from the
Federal Government's sovereign debt or a
sovereign debt instrument by approved non-
resident banking companies under a sovereign
agreement. The bill proposes to incorporate this
exemption with certain amendments.
The Finance Act of 2019 introduced a higher tax
rate on the income of banking companies from
additional investments in government securities.
The Finance Act of 2022 amended these provisions
to make them applicable from the tax year 2022
onwards. The amendment changed the taxation
mechanism from taxing additional investments to
taxing the entire income derived from such
investments, provided the advance-to-deposit ratio
did not exceed 50%. Through SRO 226(I)/2023
dated February 27, 2023, these provisions were
made inapplicable for the tax year 2024. The bill
seeks to incorporate this amendment.
TAX ON CASH WITHDRAWAL [SECTION
231AB]
Adjustable advance tax on cash withdrawals by
non-filers has been reintroduced at a rate of 0.6% if
the total sum of payments for cash withdrawal in a
day exceeds Rs 50,000. Similar provisions were
previously introduced in 2005 and remained
applicable until June 30, 2021. The clarifications
issued regarding the earlier provisions will continue
to apply.
ADVANCE TAX ON FOREIGN DOMESTIC
WORKERS [SECTION 231C]
A new provision for advance tax has been proposed
concerning the employment of foreign nationals as
domestic workers. The authority responsible for
issuing or renewing domestic aide visas will collect
this tax from the agency, sponsor, or employer,
depending on the circumstances. The prescribed
amount of advance tax is Rs.200,000, which can be
adjusted against the tax liability of the agency,
sponsor, or employer, as applicable, on their
income.
ADVANCE TAX ON PURCHASE OR TRANSFER
OF IMMOVEABLE PROPERTY BY OVERSEAS
INDIVIDUALS [SECTION 236K]
The collection of advance tax from the purchaser of
immovable property at a rate of 2% of the fair
market value, which is considered as final tax for
certain Pakistani expatriates, is undergoing
proposed changes. According to the proposal,
advance tax will not be applicable if the buyer or
transferee is a non-resident individual who holds a
Pakistan Origin Card (POC), National Identity Card
for Overseas Pakistanis (NICOP), or Computerized
National ID Card (CNIC). Furthermore, the
individual must have acquired the immovable
property through a Foreign Currency Value Account
(FCVA) or NRP Rupee Value Account (NRVA)
maintained with authorized banks in Pakistan, as
per the foreign exchange regulations issued by the
State Bank of Pakistan. To avail of this exemption,
the individual will need to submit the prescribed
certificate as required.
INCREASE IN RATE OF TAX ON REMITTANCE
ABROAD THROUGH CREDIT, DEBIT
OR PREPAID CARD [SECTION 236Y]
The bill proposes obligation on all banking
companies to collect adjustable advance tax when
transferring any amount outside Pakistan using
credit, debit, or prepaid cards. The proposed
amendment suggests an increase in the tax rate for
such transactions, raising it from 1% to 5%.
REDUCTION IN TAX LIABILITY ON NEW
BUILDING CONSTRUCTION PROJECT
[CLAUSE 21 PART II 2ND SCHEDULE]
A proposal has been put forth to grant a reduction
in tax liability, allowing for the lower of 10% or Rs.
5 million, on income derived from a business
related to the construction of a new building for the
tax years 2024 to 2026. This reduction will be
applicable to individuals identified as "builders" and
is subject to specific conditions that need to be met.
TAX EXEMPTION EXTENDED FOR SALE OF
IMMOVEABLE PROPERTY TO REIT [CLAUSE
99A PART I 2ND SCHEDULE]
The current period of exemption on profits and
gains from the sale of immovable property or
shares of a Special Purpose Vehicle to any REIT
scheme was set to end on June 30, 2023. However,
there is now a proposal to extend this period until
June 30, 2024.
TAX EXEMPTION FOR DIFFERENT
ORGANIZATIONS [CLAUSE 66 PART I SECOND
SCHEDULE]
The Finance Bill aims to incorporate the income of
the following organizations into Table 1 of Clause
(66) in Part I of the Second Schedule:
(i) The Prime Minister's Relief Fund for Flood,
Earthquake, and Other Calamities,
effective from August 5, 2022.
(ii) Film and Drama Finance Fund.
(iii) Export-Import Bank of Pakistan.
(iv) Shaheed Mohtarma Benazir Bhutto
Institute of Trauma, Karachi.
(v) Shaheed Zulfikar Ali Bhutto Institute of
Science and Technology.
INCOME OF PERSONS RESIDING UNDER FATA
AND PATA – CLAUSE (145A), PART I, 2ND
SCHEDULE
The duration of the income exemption for residents
of the former Tribal Areas, which was granted prior
to the Constitution (25th Amendment) Act, 2018,
was originally set to end on June 30, 2023.
However, it is now being proposed to extend this
exemption until June 30, 2024. Similar
amendments have also been suggested in other
relevant tax legislations.
REDUCTION IN TAX LIABILITY FOR YOUTH
ENTERPRISE – CLAUSE 22 PART III 2ND
SCHEDULE
The bill proposes a tax reduction for the taxable
income of a Youth Enterprise as follows:
EXEMPTION FROM TAX COLLECTION ON
IMPORT RELIEF OPERATIONS EQUIPMENTS
[CLAUSE 123 PART IV 2ND SCHEDULE]
The proposal suggests granting a retrospective
exemption on goods imported for relief operations
aimed at assisting those affected by floods, as
certified by NDMA or PDMA. Additionally, the
import of tomatoes and onions during a specific
period will also be eligible for this exemption. These
exemptions were initially granted through statutory
notifications.

The tax reduction will be determined as follows:

 For Associations of Persons (AOPs) and

Individuals: 50% of the taxable income or
Rs. 2 million, whichever is lower.
 For Companies: 50% of the taxable income
or Rs. 5 million, whichever is lower.
A Youth Enterprise refers to a startup meeting the
following criteria:

 For sole proprietorships: Owned by a Youth

Individual.
 For AOPs: All members are Youth
Individuals.
 For Companies: 100% of the shareholding
is owned by Youth Individuals.

The startup should be established on or after July

1st, 2023.

 A Youth Individual is defined as a natural

person up to 30 years of age on the first
day of the relevant tax year.
 This benefit is applicable for tax years 2024
to 2026.

PRIME MINISTERS RELIEF FUNDS [CLAUSE

121 PART IV 2ND SCHEDULE]

The proposed exemption pertains to the Prime

Minister's Relief Fund for Flood, Earthquake, and
Other Calamities, effective from August 5, 2022.
The fund will be exempted from the following
provisions:

 Minimum tax on turnover as specified in

section 113.
 Withholding tax on profit on debt as
outlined in section 151.

Additionally, donations made through SMS will not

be subjected to tax withholding as per section 236.
 SALES TAX
1. Definitions
I. Goods [Clause (12) Section 2]
The Finance Act of 2022 expanded the definition of
'goods' as outlined in the Sales Tax Act of 1990 (ST
Act) by including the 'production, transmission, and
distribution of electricity' within its scope.
In 2023, an agreement was reached between the
provincial and federal governments regarding the
regulations for determining the place of provision of
services for certain specified services. As per these
rules, the transmission and distribution of electricity
is now classified as a service, and the taxation rights
between provinces and the federation will be
governed by the specified rules, effective from July
1, 2023. As a result of this change, a new taxable
service entry is proposed to be added through this
Bill, listed as serial number 60 in Table 1 of the
Schedule of services provided under the ICT
Ordinance, 2001, with a tax rate of 15%.
As a result, the Bill suggests the reversal of the
definition of the term "goods" to its original state
before the amendment introduced by the Finance
Act of 2022. This would involve eliminating the
inclusion of the words 'production, transmission, and
distribution of electricity' from the definition of
'goods'.
II. Supply [Clause (33) Section 2]
The Bill aims to harmonize the definition of supply
by excluding the 'production, transmission and
distribution of electricity' from its scope. This
proposed amendment aligns with the amendment
suggested for the definition of goods.
III. Tier-1 Retailer [Clause (43A) Section 2]
The Bill suggests narrowing down the existing list of
qualification criteria for Tier-1 retailers as stated in
the ST Act. Under this proposed amendment,
retailers dealing with articles of jewelry, precious
metal, or metal coated with precious metal, as well
as retailers who qualify based on shop area criteria,
would be excluded from the Tier-1 retailer category,
provided they do not fulfill any other qualification
criteria mentioned in clause (43A) for Tier-1 retailers.
2. Directorate General of Digital Invoicing and
Analysis [Section 30CA]
Through the substitution of Section 30CA, the Bill
suggests changing the reference of the Directorate
General of Digital Invoicing and Analysis to the
Directorate General of Digital Initiatives.
3. Offences and Penalties [Section 33]
Sr. No. 23 of the Table in Section 33 of the ST Act
stipulates the offense on cigarette packs
manufactured, possessed, transported, distributed,
stored or sold with counterfeited tax stamps,
banderoles, stickers etc., whereas the column which
provides the penalties also covered specified goods.
The Bill now proposes to streamline the offense with
the penalty by replacing the expression “cigarette
packs” with “goods or class of goods as specified by
the FBR under Sub-section (1) of Section 40C”.
As a result, the scope of the above offense which
was previously confined to cigarette packs will also
be applicable on other specified goods i.e. tobacco
products, beverages, sugar, fertilizer, cement,
petroleum products, steel sector and goods
specified in the Third Schedule.
FIFTH SCHEDULE
(ZERO RATED SUPPLIES)
a) Import or Supplies- The Foreign Investment
(Promotion and Protection) Act, 2022
[Section 4]
The Bill suggests adding a new entry to the Fifth
Schedule, which would enable zero-rating
benefits for imports and supplies associated with
the Reqo Diq Project:
S. Description
No.
Imports or supplies made by, for or to a
qualified investment as specified at Serial
No.1 of the First Schedule to the Foreign
8A
Investment (Promotion and Protection) Act,
2022 for the period as specified in the
Second Schedule to the said Act.
The Reko Diq project includes all work done by
the Reko Diq Mining Company (Private) Limited
(formally Tethyan Copper Company Pakistan
(Private) Limited (“RDMC”) and its associated
companies since its date of incorporated as well
as Reko Diq Phase 1, Reko Diq Phase 2 and all
subsequent phases, including all roads,
pipelines, power generation facilities,
transmission lines, processing facilities and any
other infrastructures used in or in connection
with Reko Diq project operations, and all lands
and orebodies, including Tanjeel, that lie within
the mining lease areas granted to RDMC
pursuant to the Implementation Agreement to be
entered into in respect of the Reko Dik Project
between Barrick Gold Corporation, Oil and Gas
Development Company Limited, Pakistan
Petroleum Limited, Government Holdings
 (Private) Limited, Balochistan Mineral clause (xxv) in column 2 of serial number 12 to
Resources Limited, Pakistan Mineral (Private) align it with the description of PCT Code
Limited, the Islamic Republic of Pakistan and the 9017.2000, as clarified below;
Province of Balochistan and in connection with
the Antofagasta Exit Deed dated 20 March Existing Description Proposed Description
2022, between the Islamic Republic of Pakistan, Geometry Boxes Other drawing, marking out
the Province of Balochistan and Antofagasta plc. (PCT heading or mathematical calculating
9017.2000) instruments (geometry box)
b) Other Drawing, Marking Out Or (PCT heading 9017.2000)
Mathematical Calculating Instruments:
The Bill suggests expanding the coverage of
zero rating by modifying the description of
c) Local Supplies to Registered Exporters Authorized under Export Facilitation Scheme 2021
The Bill proposes to broaden the scope of zero rating for exporters who are registered under the Export
Facilitation Scheme, 2021, by including the term "commodities" in the description found in column 2 of
serial number 21, as explained below;

Existing Description Proposed Description

Local supplies of raw materials, components, parts and
plant and machinery to registered exporters authorized
under Export Facilitation Scheme, 2021 notified by the
Board with such conditions, limitations and restrictions
as specified therein.
Local supplies of commodities, raw materials,
components, parts and plant and machinery to
registered exporters authorized under Export
Facilitation Scheme, 2021 notified by the Board with
such conditions, limitations and restrictions as specified
therein.

SIXTH SCHEDULE (EXEMPT GOODS)

TABLE I – IMPORTS OR SUPPLIES

a) Exemption on items to be withdrawn:

The Bill suggests the omission of the following entries from Table I of the Sixth Schedule, as they have
become obsolete due to the expiration of the time limit mentioned in their exemption description:

S. No. Description Tariff Heading

Import of auto disable Syringes till 31st December, 2021
9018.3110
159
(i) with needles 9018.3120
(ii) without needles
Import of following raw materials for the manufacturers of auto disable syringes
till 31st December, 2021
9018.3200
160
4016.9310
(i) Tubular metal needles
(ii) Rubber Gaskets

b) Limitations on existing exemptions:

The Bill proposes to withdraw the exemption from sales tax for certain goods that are currently eligible
for exemption when sold without retail packaging but under a brand name or trademark. The proposed
changes in the description of these entries aim to clarify and modify the conditions under which these
goods will no longer be exempt from sales tax:

S. Existing Description Proposed Description

No.
Red chillies excluding those sold in retail packing Red chillies excluding those sold under brand
16 bearing brand names and trademarks. names and trademarks.

Ginger excluding those sold in retail packing Ginger excluding those sold under brand names and
bearing brand names and trademarks. trademarks.
17

Turmeric excluding those sold in retail packing Turmeric excluding those sold under brand names
18 bearing brand names and trademarks. and trademarks.

c) Expansion of Scope for Existing Exemptions:

i. The Bill suggests adding an explanatory note to serial number 121 of Table-I, clarifying that blood
transfusion sets, when imported along with blood bags CPDA-1 in the same consignment and not
packed in aluminum foil, are also eligible for exemption.
ii. The Bill suggests extending the time limit for the exemption provided in entry number 151, which
relates to supplies and imports of plant, machinery, and equipment for installation in tribal areas, from
June 30, 2023, to June 30, 2024. Additionally, the time limit for the exemption mentioned in entry
 number 152, which pertains to supplies of electricity to residential and commercial consumers in tribal
areas, would also be extended to June 30, 2024.

d) New insertion allowing exemption of sales tax:

The Bill suggests the inclusion of new entries under Table-I of the Sixth Schedule to the ST Act, which
would exempt the import or supply of the following items from sales tax:

S. Description Headings
No.
175 Contraceptive and accessories thereof 3926.9020 and 4014.1000
176 Bovine semen 0511.1000
177 Saplings Respective heading
178 Combined Harvester – Thresher 8433.5100
179 Dryer for agricultural products 8419.3400
No-till-direct seeder, planters, trans-planters and other
180 8432.3100 and 8432.3900
planters
Import of goods as mentioned under S. No. 159 of Part III of 7471.3010,
Fifth Schedule to the Customs Act, 1969 (IV of 1969) 8471.3020,
chargeable to customs duty at the rate of zero percent, 8471.3090,
subject to the conditions, restrictions and limitations 8471.4110,
mentioned therein, by the software exporters registered with 8471.6010,
the Pakistan Software Export Board. 8471.6020,
181
8471.6090,
8471.7040,
8471.9020,
8471.7020,
8471.5000 and
8517.6270

TABLE II

a) Limitations on existing exemptions:

Currently, goods sold in retail packaging under a brand name were eligible for exemption from sales tax.
The Bill proposes to charge sales tax on goods sold under a brand name, regardless of whether they are
in retail packaging or not. The entries are provided below:
S. PRODUCTS
No.
32 Yogurt
34 Butter
35 Desi Ghee
36 Cheese
37 Processed cheese not grated or powdered
39 Products of meat or meat offal
41 Meat of bovine animals, sheep, goat and uncooked poultry
42 Fish and crustaceans

EIGHT SCHEDULE
TABLE – I

a) Revision in reduced sales tax rate:

The Bill suggests amending the sales tax applicable to supplies made from retail outlets that are
integrated with the Board's computerized system as follows:

S. No. Description Existing Rate Proposed Rate

Supplies as made from retail outlets as are
66 integrated with Board’s computerized 12% 15%
system for real time reporting of sales.

b) Scope of reduced sales tax rate enhanced:

The existing reduced rate of 1% is currently limited to substances registered as drugs under the Drugs
Act, 1976, and Active Pharmaceutical Ingredients (excluding excipients) used for the manufacturing of
registered drugs under the Drugs Act, 1976, or raw materials for the primary production of pharmaceutical
active ingredients.
The Bill proposes to expand the scope of the reduced rate of 1% to include medicaments classified under
Chapter 30 of the First Schedule to the Customs Act, 1969, with certain exceptions. It is noteworthy that
this relief is proposed to be applied retroactively from July 1, 2022. The tariff headings, reduced rate of
sales tax, and conditions for the application of the reduced rate will remain unchanged. The proposed
descriptions for entry 81 and 82 are as follows:

S. Existing Description Proposed Description

No.
Substances registered as drugs under the Drugs Act, 1976 (XXXI
of 1976) and medicaments as are classifiable under chapter 30 of
the First Schedule to the Customs Act, 1969 (IV of 1969) except
the following, even if medicated or medicinal in nature, namely:-

(a) filled infusion solution bags imported with or without infusion

Manufacture or import of
substances registered as drugs
81
under the Drugs Act, 1976
(XXXI of 1976)
given sets;
(b) scrubs, detergents and washing preparations;
(c) soft soap or no soap;
(d) adhesive plaster;
(e) surgical tapes;
(f) liquid paraffin;
(g) disinfectants, and
(h) cosmetics and toilet preparations.
This substitution shall be deemed to have been made from the
1st day of July, 2022.

Raw materials for the basic manufacture of pharmaceutical active

Active Pharmaceutical
ingredients and for manufacture of pharmaceutical products,
Ingredients, excluding
provided that in case of import, only such raw materials shall be
excipients, for manufacture of
entitled to exemption which are liable to customs duty not
drugs registered under the
exceeding eleven percent ad valorem, either under the First
82 Drugs Act, 1976 (XXXI
Schedule or Fifth Schedule to the Customs Act, 1969 (IV of 1969)
of 1976) or raw materials for the
or under a notification issued under section 19 thereof.
basic manufacture of
pharmaceutical active
This substitution shall be deemed to have been made from the 1st
ingredients.
day of July, 2022.
 FEDERAL EXCISE DUTY
Federal Excise Duty (FED) is traditionally an activity-
based charge. However, currently, it is collected at
the time of supply of excisable goods and services.
Simply supplying excisable goods does not make
them subject to FED unless the supplier also
produced, manufactured, or imported those goods.
Likewise, excisable services are subject to FED
when they are provided or rendered within Pakistan.
The specific goods and services that are considered
excisable are listed in the First Schedule.
Duties specified in the First Schedule to be
levied- [Section 3(1)] The proposed clause (e)
suggests adding a new provision to sub-section (1)
of section 3, with the intention of streamlining rather
than generating revenue. This provision aims to
provide clarity regarding the chargeability of Federal
Excise Duty (FED) on goods and services. The
proposed clause states that FED will be applicable
to any item specified in the First Schedule
Duty on inefficient fans & Incandescent bulbs -
[First Schedule Table I] Imposition of FED on
energy inefficient fans @ Rs. 2000 per fan and
incandescent bulbs @ 20% ad valorem is proposed
as approved by the Federal Cabinet in Case
No.01/01/23, dated 03.01.2023.
Duty on Royalty and Fee for Technical Services
- [Serial 11, Table II] The bill proposes to revise the
description and heading of services listed under
Serial Number 11 of Table II of the First Schedule to
the Federal Excise Act (FE Act), without any change
in the applicable duty rate, which will remain at 10%
of the charges.
Serial Existing Proposed
No.
11 Franchise Franchise services,
Services/9823.0000 royalty and fee for
technical services /
respective heading
Moreover, through the proposed amendment, all
technical services provided/ rendered from out of
Pakistan to the recipient of such services in Pakistan
would also be subject to FED in the ICT.
Amendments in the Third Schedule-[Section
16(1),Table I and Table II] The Bill proposes to
insert a new category in Table-I & Table-II to give
effect to the relevant provisions of tax exemption for
the Reko Diq project.
 CUSTOMS ACT, 1969
Definitions
Smuggle [Section 2(s)]
The definition of "Smuggle" means;
 to bring into or take out of Pakistan in
breach of any prohibition or any restriction;
and
 the act of carrying, transportation, removing,
depositing, harboring, keeping, concealing,
retailing, or enroute pilferage of transit
goods.
Now, the Bill proposes to clarify that the term
"Smuggle" as defined above is in relation to the
territorial jurisdiction of Pakistan.
General Powers to Exempt Customs Duties-
[Section 19(1), 19(5)] The Federal Government
currently has the authority to exempt certain entities
from the payment of Customs Duty (CD) under
certain circumstances, such as abnormal
circumstances, the implementation of bilateral or
multilateral agreements, or when the entity is an
international financial institution. The bill proposes to
extend this exemption to entities that have
agreements with the Government of Pakistan.
Sub-section (5) of Section 19 of the Federal Excise
Act (FEA) states that all notifications issued after
July 1, 2016, that have not been rescinded or placed
before the National Assembly, shall continue to be
enforced until June 30, 2023. The bill proposes to
extend the enforcement period for these notifications
until June 30, 2024.
Power to determine the Customs Value- Section
25A(1) The Director of Customs Valuation, while
determining the customs value of any goods
imported into or exported out of Pakistan, may
incorporate values from internationally acclaimed
publications, periodicals, bulletins or official
websites of manufacturers or indenters of goods.
It is now proposed that instead of incorporating the
values from aforementioned sources, the Director of
Customs Valuation may only consult these sources
to determine the customs value of any goods.
Declaration and Assessment for Home
Consumption or Warehousing or Transshipment
- [Section 79(1)] Section 79 provides that the owner
of imported goods may file the GD of goods for home
consumption, warehousing, transshipment or for any
other approved purposes, within ten days of arrival
of the goods. The Bill seeks to add the mandatory
time of filing of GD at the land Customs Station at
border within three days of arrival of goods.
Punishment for Offences- [Section 156] The bill
proposes to remove the penalty for not placing
invoices and packing lists in containers. This penalty
was imposed by the Finance Act, 2021.
The bill also proposes to replace the progressive
penalty rates with a fixed penalty for failing to attach
or electronically upload mandatory documents. The
existing penalty rates were as follows:
 First offense: PKR 50,000
 Second offense: PKR 100,000
 Third offense: PKR 150,000
 Fourth offense: PKR 200,000
 Fifth offense and onwards: PKR 250,000
The proposed penalty is a flat rate of PKR 50,000.
The bill also proposes to set a minimum penalty for
smuggling, evasion of duty and taxes, and breach of
prohibitions or restrictions. The minimum penalty will
be equal to the value of the goods involved.
Power of Adjudication- [Section 179(2)] This
Section gives Customs officers the authority to
adjudicate and handle cases involving the
confiscation of goods, the recovery of duties and
other taxes that have not been levied, underpaid, or
mistakenly refunded, the imposition of penalties, or
any other violation. To make things easier for
taxpayers, it is now proposed that the respondent
may choose to be adjudicated through the Customs
Computerized System (CCS).
The CCS is a web-based system that allows
Customs officers to handle cases more efficiently
and effectively. It also provides taxpayers with a
more convenient and transparent way to dispute
Customs decisions.
The proposed amendment would make it easier for
taxpayers to challenge Customs decisions by
allowing them to choose to be adjudicated through
the CCS. The CCS is a more efficient and
transparent system, and it is expected to reduce the
time and cost of resolving Customs disputes.
Appeals to the Appellate Tribunal - [Section
194A(1)] Subsection (1) of Section 194A of the
Customs Act, 1969, lists the orders against which
any person or an officer of Customs can file an
appeal with the Appellate Tribunal for Income Tax
and Customs (ATIR). In addition, the bill proposes to
allow appeals to be filed with the ATIR against
appellate orders or quasi-judicial orders passed by
the Chief Collector of Customs. These appeals will
be heard by a Special Bench consisting of one
Technical Member and one Judicial Member.
The Technical Member will be an officer of Customs
who has at least 10 years of experience in the field
of Customs adjudication. The Judicial Member will
be a retired judge of the High Court or an officer of
the Pakistan Administrative Service who has at least
10 years of experience in the field of law.
The proposed amendment is expected to provide a
more effective and efficient appeals process for
taxpayers who are aggrieved by orders passed by
the Chief Collector of Customs.
Person to Produce Authority if Required-
[Section 208(2)] Currently, any person can transact
business with the Customs authorities through an
authorized customs agent. However, the person can
also choose to transact business with the Customs
authorities themselves or through an authorized
employee or representative. The Federal Board of
Revenue (FBR) is now proposing to notify rules for
the eligibility criteria of a person for self-filing of
Goods Declaration (GD).
Advance Ruling- Section [Section 212B(2)(iii)]
Sub-section (2) of Section 212B provides a list of
questions on which advance ruling can be sought
by an applicant. The Bill seeks to delete Clause (iii)
of the said Sub-section by virtue of which the
advance ruling cannot be sought on applicability of
notifications issued in respect of duties or taxes
collected by the customs authorities.
AMENDMENTS IN FIRST SCHEDULE
CD on following goods is proposed to be changed
as per rates given below:
Amendments in fifth Schedule

The Bill seeks to reduce the rate of duty to 0%/ 5% on following goods (raw materials), if imported by the local
assembler/ manufacturer registered under the ST Act and subject to annual quota determination by the IOCO;
The bill proposes to reduce the rate of customs duty on the following goods to 0% if they are imported by a
local assembler or manufacturer who is registered under the Sales Tax Act, 1990 (STA) and who has obtained
an annual quota from the Import of Commercial Operations (IOCO) along with a certificate from the Export
Development Board (EDB) stating that the imported goods are not manufactured locally.
The bill proposes to reduce the rate of customs duty on machinery and equipment to 0% if they are imported
by local manufacturing units and if the following conditions are met:

 The Ministry of Industries and Production (MoIP) must certify that the goods are bona fide project
requirements.
 The goods must not be sold or otherwise disposed of without the prior approval of the Federal Board
of Revenue (FBR) and the payment of customs duty (CD) and taxes as prescribed by the FBR.
 Other conditions mentioned in Clause (iv) of the preamble of Part I of the Fifth Schedule must be met.

The MoIP certification will ensure that the goods are imported for bona fide project requirements and not for
speculative purposes. The requirement to obtain prior approval from the FBR before selling or disposing of
the goods will help to prevent smuggling and ensure that the government collects the correct amount of
revenue. The other conditions mentioned in Clause (iv) of the preamble of Part I of the Fifth Schedule are
designed to prevent the abuse of this concession.
The bill proposes to reduce the rate of customs duty to 0% on the following goods imported by software
exporters who are registered with the Pakistan Software Export Board (PSEB) subject to the following
conditions:

 The PSEB must certify that the imported goods are bona fide requirements for the software exporter's
own use.
 The export proceeds must also be certified by the PSEB.
 The software exporters may avail a concession on the assessed value of the imported goods (one or
more consignments)

equivalent to 1% of their export proceeds of the previous financial year.

The PSEB certification will ensure that the goods are imported for bona fide business purposes and not for
speculative purposes. The requirement to obtain PSEB certification for export proceeds will help to prevent
software exporters from declaring false export proceeds in order to avail the concession. The concession of
1% of export proceeds on the assessed value of imported goods is intended to provide a financial incentive
for software exporters to increase their exports.

The bill proposes to reduce the CD on the following goods:

Following amendments have been proposed:

 Exemption of duty on the import of plant, machinery and equipment for setting up of industries in
erstwhile FATA Areas to be extended from 30 June 2023 to 30 June 2024.

 Exemption from duty on import of specific paper, art card and board, as provided below for printing
of Holy Quran.

REGULATORY DUTY

The Budget 2023-24 has proposed some changes to the Revenue Duty (RD) regime, but no notifications
have been issued yet. The following are the proposed changes:

 Withdrawal of RD on import of second hand clothing, IT related equipment, synthetic filament yarn of
polyester not manufactured locally, parts for flat panels/ monitors/ projectors, silicon steel sheets,
 special steel round bars and rods of non-alloy steel exceeding diameter 50 mm. This means that
there will be no RD on the import of these goods. This is likely to make these goods more affordable
for consumers.
 Reduction of RD on 151 PCT codes pertaining to second hand clothing, fish, tiles, sports goods. This
means that the RD on these goods will be reduced. This is likely to make these goods more affordable
for consumers.
 Increase/ levy of RD on import of articles of glass to protect the local industry. This means that RD
will be imposed on the import of articles of glass. This is likely to protect the local glass industry from
foreign competition.
 Imposition of 20% RD on import of tungsten filament incandescent bulbs and their parts. This means
that RD at the rate of 20% will be imposed on the import of tungsten filament incandescent bulbs and
their parts. This is likely to discourage the use of these bulbs and promote the use of energy-efficient
bulbs.
 Increase in RD on export of molasses from 10% to 15%. This means that RD on the export of
molasses will be increased from 10% to 15%. This is likely to discourage the export of molasses and
promote its use in the domestic market.
 It is important to note that these are just proposed changes and no notifications have been issued
yet. The government may decide not to implement these changes or may implement them in a
different way.
 ISLAMABAD CAPITAL TERRITORY (TAX
ON SERVICES) ORDINANCE, 2001
FREELANCE EXPORTERS [SECTION 3(2A) The
bill suggests granting the cottage industry status to
freelance exporters who exclusively engage in
exporting IT and IT-enabled services. As a result,
these freelance exporters will be exempt from the
requirement of obtaining registration, issuing sales
tax invoices, and filing sales tax returns.
Under this provision, a freelance exporter is defined
as an individual who operates on a per-job basis and
is self-employed, without being affiliated with or
employed by any other person. They have the
freedom to work on multiple tasks simultaneously.
REDUCED SALES TAX RATE ON SERVICES
PROVIDED BY RESTAURANTS [SR NO. 1 TABLE
I – SECTION 3] The bill proposes a reduction in the
sales tax rate for services offered by various food
service establishments such as restaurants, cafes,
ice cream parlors, coffee houses, food huts, and
resorts, among others. The tax rate will be reduced
from 15% to 5% specifically for transactions made
through debit or credit cards, mobile wallets, or QR
scanning. However, there will be restrictions on the
adjustment of input tax for these transactions.
SERVICES PROVIDED BY SOFTWARE OR IT
BASED SYSTEM DEVELOPMENT
CONSULTANTS [SR. NO. 11 TABLE I – SECTION
3] The bill proposes a reduction in the standard rate
of sales tax for services provided by Software or IT-
based system development consultants listed in
Table I. The tax rate will be reduced from 16% to
15%.
ELECTRIC POWER TRANSMISSION SERVICES
[SR. NO. 60 TABLE I – SECTION 3] Previously,
electric power transmission services were
categorized as goods and subject to taxation under
the Sales Tax Act, 1990. The proposal suggests a
change in the taxation dynamics, whereby these
services will now be taxed under provincial sales tax
authorities and Islamabad Capital Territory Sales
Tax on Services Ordinance, 2001, at rates notified in
the relevant law
IT AND IT-ENABLED SERVICES It is proposed to
incorporate IT and IT-Enabled services in Table II
with a reduced tax rate of 5%, provided that no input
tax adjustment or refund will be allowed.
Additionally, a precise definition of IT and IT-Enabled
services has been included, aligning it with the
definition stated in the Income Tax Ordinance, 2001.
 Contact Information

Head Office/Lahore Office

Rizwan & Company
Chartered Accountants
114 A, Tipu Block,
New Garden Town, Lahore
+92 42 35846644-5

Karachi Office
Rizwan & Company
Chartered Accountants
Office 703, Landmark Plaza, Off Jang Press,
I.I. Chudrigar Road, Karachi
Phone +92 21 3569 3933

Islamabad Office
Rizwan & Company
Chartered Accountants
Office No. 2, 3rd Floor, Executive Complex,
G-8 Markaz, Islamabad
+92 51 8444563