CHANGES IN THE RIGHT DIRECTION?

COMMENTS ON FINANCE BILL, 2004 <!--[if gte mso 10]> COMMENTS ON FINANCE BILL, 2004 CHANGES IN THE RIGHT DIRECTION? By Huzaima Bukhari & Dr. Ikramul Haq, Advocates, Lahore Application of Finance Bill: Dichotomy in effective dates The Finance Bill 2004 contains at the end, "statement of objects and reasons" clearly providing that the purpose of this Bill is to make financial provisions for the year beginning on the first day of July 2004. On the contrary, the Bill itself in section 1(3) says "It shall come into force at once except the provisions of section 6 [amendments relating to the Income Tax Ordinance 2001] which shall come into force from the first day of July 2004",. This dichotomy needs to be immediately resolved. As per declaration under the Provisional Collection of Taxes Act of 1931, the provisions of clause 2, clause 3, sub‑clause (23) and clause 5, sub‑clauses 2(a), 5, 38(i), 38(ii), 38(iii) and 38(vi) of Finance Bill 2004 shall have effect as if they were provisions for imposition of duties of Customs, Excise and Sales Tax. It is declared in the public interest that the provisions of the said clauses have immediate effect under the Provisional Collection of Taxes Act of 1931. Levy and collection of taxes is the sole prerogative of a sovereign State. Parliament can introduce any change in tax laws by using its wide powers in this regard by either amending a particular tax statute or providing the same in a Finance Bill. The Finance Bill, 2004 shows that the Parliament has failed to exercise its sovereign power of imposing taxes under the Constitution. All the fiscal proposals have been prepared under tight bureaucratic controls without any public debate and transparency. The Parliament was not even engaged in the process of budget making as there was no input from any Select Committee of either House of the Majlis‑e‑Shoora regarding preparation of financial proposals for the 2004‑05 budget. No doubt this time the fiscal proposals are generally business‑friendly and growth‑oriented but the fact remains that the incidence of taxes will remain more on the poor and less on the rich. Instead of making declarations necessary, presumptive tax regime (PTR) has been further expanded. The importers, contractors, suppliers, petroleum product dealers, commission agents etc will pass on their tax burden to the consumers under PTR. The Tax‑GDP ratio has further deteriorated to below 10 % confirming that policy‑makers and tax administrators have failed to tap the real revenue potential of the country. The Parliament has once again proved to be a rubber stamp as far as the formulation of tax policy of the Government is concerned. As usual it is the handiwork of the Finance Ministry wizards and bureaucrats sitting in the Central Board of Revenue (C.B.R.). The Government has once again failed to demonstrate a political will to eliminate large‑scale tax evasion and the existence of a mammoth black economy that have resulted in colossal loss of revenue to the State. The Government has failed to rectify the situation which tends to reduce the built‑in elasticity of a fiscal system to the extent that the tax evaded income is spent on goods and services that help to generate inflationary pressures and raise prices of real property [our unprecedented remittances from abroad are largely going to this unproductive sector]. In the context of the prevailing grave challenge to combat terrorism, together with money laundering crises, and the problem of ever‑growing black money. (which according to official and independent experts is around Rs. 1.8 trillion: about 70 % of the total economy), there is ark urgent need to launch a. well‑thought for anti‑money laundering law to prevent this huge amount from becoming a lethal weapon in the hands of mafias who are now in control of economy as well as the Government. Pakistan has been facing a variety of crises specifically in areas of: resources for its developmental policies, meeting trade deficits, fiscal deficits and balance of payment, and what not. One of the factors responsible for the present situation is the great speed with which black money is generated. The C.B.R. is directly responsible for this phenomenon as its mafia‑like operations has helped the people to avoid tax on incomes by paying them "due share". Through the infamous system of SROs, the CBR's top officials provide "legal" ways and means to the mighty sections of society to amass huge wealth that is now threatening the very survival of the State. This black money in the hands of corrupt politicians, bureaucrats and terrorists has played havoc with the entire human community across borders. The ugliest face of black money emerges in the corridors of power, political as well as administrative. No country other than Pakistan knows better about the dangers of allowing money launderers and drug traffickers to get an upper hand. We are at present not only facing a drug‑abusing population (mostly young) of nearly 4 million, but also many terrorist organisations, which by themselves are a threat to the Government. The fact is that a cartel or a group of cartels have become so powerful that they can work out agreements with terrorists and saboteurs to undermine the authority of the State. No serious effort has been made by successive Governments, both military and civil, to determine the loss of revenue due to the existence of this underground economy, not to talk of devising concrete counter measures to bring enormous untaxed money into the mainstream of economy. Rampant corruption and unprecedented tolerance towards black money has made Pakistan a State where the very survival of public institutions is at stake at the hands of ruthless forces representing money power. One of the worst consequences of black money and tax evasion is their pernicious effect on the general moral fabric of society. They put integrity at a discount and place a premium on vulgar and ostentatious display of wealth. This shatters the faith of the common man in the dignity of honest labour and virtuous living. It is, therefore, no exaggeration to say that ill‑gotten wealth is like a cancerous growth in the country's economy, which if not checked in time, is certain to culminate in its death. In the Finance Bill 2004 no effort has been made to cure this malady. The second area that has been ignored in the Finance Bill, 2004 is improvement in administration and dispensation of justice. A society without a sound, reliable and speedy judicial system that does not ensure effective justice dispensation cannot survive for long. Administration and dispensation of justice under the various tax laws in Pakistan need serious attention. The entire system is now at the brink of disaster. There is an urgent need to ensure "justice", "rule of law", "fairness', "equity" and independence of appellate authorities from administration. Appellate authorities, as a matter of law and principle, should be independent in the true sense of the word. At present, the taxpayer, if aggrieved, can file air appeal against the order of the Deputy Commissioner of Income Tax (DCIT)/Assistant Collector of Customs," Sales Tax before the Commissioner of Appeals Collector Appeals, who works under the administrative control of the Central Board of Revenue. It is a mockery of justice that an important functionary in the hierarchy of the judicial system is directly subordinate to CBR, which is the highest administrative authority under the Tax Laws. Everybody knows the problem of these worthy Commissioners of Appeals/Collector of Appeals (sic!). They are part and parcel of revenue collection machinery. They work as a strong arm of the assessing officers/collectors and their fellow field Commissioners/Collectors, who are assigned with budgetary targets. The judicial system under the tax statutes, or for that matter under any statute, should completely and truly be independent of administrative interference or control. It is an essential prerequisite for, ensuring proper tax compliance and confidence of the taxpayer in the system. The present tax culture is based on "bad faith" between the taxpayers and the tax collectors. Both are victims of self‑interest and their main aim is to cheat each other. This culture can only be changed if an effective judicial system is introduced and properly implemented. All appellate authorities should be part of the judicial service working under the administrative control of the Honourable High Court. The present working of Tribunal under the Ministry of Law is against the principle of "independence of judiciary". The Tribunal as well as first appellate forum (Commissioner/Collector Appeals) should work under the High Court of their territorial jurisdiction. The same system is presently in vogue for civil judges/magistrates. The present pathetic state of tax administration can be measured from the fact that every year over 75,000 writ petitions/appeals are filed in Pakistan against the orders of the tax authorities. The litigants have to wait for years to obtain orders. On the contrary, in the civilized countries, only a few cases go for litigation to higher courts. A case in point is the United Kingdom where the number of income tax payers alone is 30 million whereas the number of appeals reaching the Lord Chancellor is only around 30 in a year. This confirms the tremendous public satisfaction with the quality of law and fiscal administration. In Pakistan we have barely 1 million registered income tax payers but the number of appeals filed annually is in thousands. In addition to revamping our existing tax appellate structures, there is an urgent need that the CBR reviews its links with businessmen and provide them a fast track dispute resolution system thus helping them instead of forcing them to enter into costly and time‑consuming litigations in courts /tribunals. Taxpayers, especially huge transnational corporations and foreign investors, want certainty on the tax treatment of transactions as quickly as possible (and preferably in real time). Closely related to this is a desire for transparent processes that enable businessmen to predict with reasonable confidence the Revenue's attitude to an issue. There will be times when a dispute is unavoidable but a mature relationship, built on mutual understanding and openness, should be capable of accommodating an element of business‑like disagreement. To achieve this goal the CBR needs to introduce a fast track dispute resolution system without any further delay. There is no proposal in the Finance Bill, 2004 towards improvement of the tax appellate system, which, is highly disappointing. The provisions relating to Alternate Dispute Resolution mechanism are also half‑hearted and not well‑thought for. In the forthcoming paragraphs an effort is made to explain the major changes proposed in various fiscal laws by the Finance Bill, 2004. INCOME TAX Section 2(1A) ‑ `Amalgamation' The benefit of amalgamation is proposed to be extended to insurance companies. Presently it is available to banking companies and financial institutions only. The deadline for amalgamation has been extended up to 30th June 2006. Section 2(35A) ‑ `Non‑banking finance company' This new definition is proposed to clarify the expression `non banking finance company' that appears at a number of places e.g. section 30. In the absence of specific definition of this expression there were possibilities of confusion and misapplication of law. However, the word `financial institution' is already separately defined in section. 2(24) and it would have been much better to use this general term that covers all kinds of institutions, rather than mentioning each and every type of financial institution by, its peculiar name. Better legal drafting of the Income Tax Ordinance, 2001 [hereinafter "the new Ordinance"] could have saved a lot of time that is now being wasted on amending the law every now and then. Specific definition of each kind of financial institution or one general definition covering all of them was a choice. At present there are simultaneously specific definitions in respect of various financial institutions as well as general definition of the expression `financial institutions'. Legislature needs to handover drafting law to trained legal draftsmen to make the new Ordinance simpler and comprehensive. Section 2(74) `Venture Capital Company and Fund' This amendment is consequential to amendments made in the relevant rules pertaining to venture capital companies and venture capital funds by the Securities and Exchange Commission of Pakistan (SECP). Section 20 ‑Deduction in computing business income The expression `in deriving business income' has been replaced with `wholly and exclusively'. The implication is simple as only those expenditures will be allowed that are incurred wholly and exclusively in earning income under sections 18 and 19. The language employed by Mr. Lee Burns (the Australian tax teacher who was given the task of drafting the new Income Tax Law for Pakistan) has, been disapproved time and again by some unknown local experts (sic!) for reasons best known to them. Apparently both the expressions `in deriving', and `wholly and exclusively' convey the same criterion. This amendment, however, will make all the existing case law relevant where this expression has been elaborated upon by the courts. Historically in Indo Pakistan tax statutes, the expression `wholly and exclusively' has a well settled legal connotation. Section 21(1) ‑ Enhancement of limitation At present any expenditure paid under a single account head which in aggregate exceeds Rs.50,000 other than by a bank instrument is, not allowable except expenditure not exceeding Rs.5,000. This limit is proposed to be enhanced to Rs.10,000. Section 21 (m) Non‑deduction of salary exceeding Rs. 10,000 other than by cross cheque etc The limitation of Rs. 5,000 for any salary paid/payable other than by cross cheque or direct transfer of funds to the employee's bank account is proposed to be enhanced to Rs. 10,000. This appears to be reasonable in order to facilitate a number of employees engaged in' industrial units in areas lacking banking facilities in their close vicinity. Section 22(4) proportionate depreciation This is a positive move proposing to allow depreciation for the full year where an asset is used even for a single day in a tax year as was the case under the repealed Ordinance The seasonal industries were, worst hit by this provision. Section 22(10) Calculation of profit/loss on disposal of passenger transport vehicle. There was an error in the language of this subsection which has now been rightly rectified. Now the terminal profit/loss on disposal of a passenger vehicle will be computed as under: Amount received on disposal Minus Written down value Section 23(1) ‑ Initial depreciation. This proposed amendment is a. revival of rule 5 of the Third Schedule to the repealed Income Tax Ordinance 1979 providing that for availing such depreciation, an asset should be wholly and exclusively used by a person in deriving income for the first time in a tax year or the year in which commercial production, whichever is later In certain cases an asset is used in a tax year only for trial production and commercial production takes place in a subsequent tax year. Section 28(1)(a), (b) & (c) ‑ Profit on debt, financial cost and lease payments A taxpayer is entitled to claim deductions for a tax year for any profit on debt, financial cost and lease rentals if related to earning `Income from Business'. The expression `in deriving income chargeable to tax under the head "Income from Business"' in all the clauses mentioned above is proposed to be substituted by `for the purposes of business'. This etymological amendment appears to be more of a cosmetic nature rather than of substance. Section 29A ‑ Provision regarding consumer loans benefit extended to other financial institutions The existing provision allows a banking company a deduction not exceeding 3 % of income for the tax year, arising out of consumer loans for' creation of a reserve to off‑set bad debts arising out of such loans. This facility is now proposed to be extended to non‑banking finance companies [expression now proposed to be defined in section 2(35A)] and House Building Finance Corporation engaged in the same activity. Section 29A(2) ‑ Insertion of `explanation' The term `consumer loan' is proposed to be defined in the form of an Explanation which will have retrospective effect. The purpose is to remove any ambiguity in interpreting the term `consumer loans' as different modes are being applied by different institutions. Section 34(3) & (4) ‑ Accrual‑basis accounting The condition for allowance of an expense vis‑a‑vis the expression `not before economic performance occurs' has been removed in totality by deleting this expression in subsection (3) and removal of its definition in subsection (4). The need for this amendment is quite obvious that under the established principles of accrual‑basis accountancy any accrued liability, which is not contingent in nature, is allowable although to be discharged in future. The liability in praesenti, though to be discharged de future, could have been disallowed by the taxation officers under the pretext of non‑occurrence of economic performance: This amendment will restore established principles of accounting. Section 54 ‑ Exemption and tax provisions in other law This section provides that no exemption, reduction or waiver given in any other law will have legal effect unless so provided in the Ordinance. The Finance Act 2003 inserted a proviso that any exemption from income tax provided in other law and in force on the commencement of this Ordinance shall continue to be available unless withdrawn. The proposed amendment intends to enlarge the scope not only in respect of exemption but also reduction in tax or liability of a person or exemption of operation of any provision to make it in conformity with clauses (a) to (d) of this section. New section 59B ‑ Group relief The proposed section is a new concept in Pakistan which is in vogue in most of the developed countries for promotion of industrial and business growth by giving benefit of absorption of losses etc. to holding company in respect of its subsidiaries. This is a business‑friendly amendment aimed at promoting corporate growth and culture. The proposed amendment intends to give "any company, being a subsidiary of a public company listed on stock exchange in Pakistan, owning and managing an industrial undertaking, may surrender its assessed loss for the tax year other than brought forward losses, in favour of its holding company provided such holding company owns or acquires seventy‑five per cent or more of the share capital of the subsidiary company." The claim of loss by holding company will be subjected to certain conditions mentioned in subsections (2) to (5) of proposed section. New section 60B ‑ Workers' Participation Fund The allowability of any payment made towards the Workers' Participation Fund under Companies Profit (Workers' Participation) Act, 1968 (XII of 1968) is proposed to be incorporated in the Ordinance as is the case of Workers' Welfare Fund and Zakat under sections 60 and 60A respectively. Section 64 ‑ Tax credit for profit on debt The existing section entitles a person to a tax credit in respect of any profit or share in rent and share in appreciation for value of house paid on a loan by a scheduled bank or a non‑banking financial institution regulated by SECP or advanced by the Government or local authority for utilization in co ruction/acquiring of a new house. In, the category of entities extending such loans there is a proposal to include a statutory body or a public company listed on stock exchange in Pakistan. This is to encourage housing industry by involving public listed companies and statutory bodies. Section 74(2A)‑ Tax year The C.B.R., under this proposed amendment, will get power to grant permission for special tax year which is presently available only to the Commissioner. Section 111(2) & (4) ‑ Unexplained income or assets In respect of any unexplained cash credit in books of accounts, investment or expenditure the relevant period is in the tax year in which discovery is made by the Commissioner. The proposed amendment intends to shift it to "tax year immediately preceding the financial year" in which discovery is made by the Commissioner. In subsection (4) the immunity in respect of foreign exchange remitted from outside Pakistan through normal banking channels has been reaffirmed. It has been further proposed that no addition can be made under subsection (1) of section 111 for a period beyond preceding five tax years or assessment years. Previously this was provided for in a circular which has now been proposed to be part of the statutory law to dispel any fear in the minds of the taxpayers in respect of addition for unexplained sources being made in the year of 'discovery regardless of time limitation. Section 113 ‑ Adjustment of minimum tax paid The minimum tax liability of resident companies to the extent of 0.5 % of turnover has been proposed to be adjustable against future taxes. However, limitation for such adjustment is restricted to six years. New section 113A ‑ Tax on income of certain persons A facility is proposed for retailers to opt for presumptive taxation as per rates given in Part III Division III of the First Schedule provided their turnover is up to Rs. 5 million in a tax" year. The expression `turnover' has the same meaning as in section 113(2). The term `retailer' is defined to mean "a person selling goods to general public for the purpose of consumption." The idea behind this proposed amendment is to facilitate small businessmen to avail benefit of section 115(4) i.e. non‑firing of return and non‑maintenance of accounts. The persons falling in this category would not be required to disclose any particulars of their business by opting for the presumptive tax regime. Section 114(5) ‑ Filing return of income Section 114(5) authorises the Commissioner to call for a return in respect of one or more last five completed tax years. The proposed amendment extends this power for requiring returns relating to last five completed assessment years as well. This amendment is defective. Section 239 does not save issuance of notices for assessment years under the repealed Ordinance. Rather, it says that in respect of any income year on or before 30th June 2002 the assessments can only be made under the provisions of the repealed Ordinance and not the new Ordinance. In view of this, how can notice be issued under section 114 for an assessment year under the repealed Ordinance? Section 239(2) says that for prior years, before the commencement of the new Ordinance, assessment is to be made and procedure to be adopted is as: specified in section 59 or 59A or 61 or 62 or 63 as the case may be under the repealed Ordinance: It is strange that section 56 is not saved but assessment is to be made under section 62 or 63 after issuance of notice under section 114(4). Section 115(3) ‑ Wealth statement The condition for filing of wealth statement in respect of salaried persons having last declared/assessed income of Rs. 200,000 or more is proposed to be deleted. Section 115(4) ‑ Retailers to file a statement instead of return The retailers proposed to be given benefit of presumptive taxation under section 113A will be required to file a statement instead of a return as in the case of other categories falling under this tax regime. Section 116 ‑ Wealth statement only for persons having income of Rs.500,000 or more Under the existing law every resident person filing a return of income for any tax year is bound to furnish a wealth statement as well. However, in the case of a salaried person it is to be filed where the last declared/assessed income is Rs. 200,000 or more. The amendment proposer, filing of wealth statement for all the categories now where income is Rs. 500,000 or more. This amendment is in conflict with the general scheme of the new Ordinance which requires voluntary compliance with proper documentation. If a person will not file his wealth statement, how will the department cross‑check or verify his declared version which constitutes assessment once complete return is filed under section 114. It appears that the policy‑makers have failed to appreciate the real purpose of the new Ordinance which requires acceptance of the declared version but vulnerable to audit by the department. The new law intended to promote voluntary compliance through true declaration backed by proper documentation. The policy‑makers are pleasing the politicians by giving them a free hand to avoid submission of statements of their assets and liabilities by, falsely declaring income below Rs.500,000. The facility of non‑filing of wealth statement vis- -vis limitation of income of Rs. 500,000 is a clear invitation for diversion of income, false declarations and massive evasion of tax. It clearly exposes the tall claims set by the Government that it was desirous of documenting economy. On the one hand the Government is providing facility of non- declaration of assets and liabilities and on the other wants to promote voluntary compliance. Both things cannot work simultaneously. This amendment will rescue many corrupt politicians and their bureaucrat friends, unscrupulous businessmen, money‑launderers and tax evaders from being entrapped by the tax department having once filed their declarations. Section 122A ‑ Revision by the Commissioner The words `suo motu' has been proposed giving the Commissioner power to take cognizance of any order passed by any taxation officer for revision which cannot be prejudicial to the person to whom the order relates. Section 127(1)‑ Appeal to the Commissioner (Appeals) The amendment proposes inclusion of section 162 thus giving a right to appeal to a person against whom proceedings for any default of non‑deduction of tax at source are initiated or order passed. Section 127(2)(b) ‑ Pre‑payment for filing appeal abolished In the aftermath of the decision by the Lahore High Court that no condition can be imposed for availing right of appeal, this amendment is proposed abolishing pre‑payment as a prerequisite for filing of appeal. This being a curative amendment will have retrospective effect. New section 134A ‑ Alternate Dispute Resolution Parallel to conventional appellate system, the fast track alternate dispute resolution mechanism is proposed for the first time in the income tax law which is different from Settlement Commission. The main features of this proposed mechanism are: any aggrieved person in connection with any matter of income tax pertaining to liability of income tax, admissibility of refund, waiver or fixation of penalty or fine, relaxation of any time period or procedural and technical condition may apply to the Central Board of Revenue for the appointment of a committed for the resolution of any hardship or dispute mentioned in detail in the application. The Central Board of Revenue may, after examination of the application of an aggrieved person, appoint a committee consisting of an officer of Income Tax and one or two persons from a notified panel of Chartered or Cost Accountants, Advocates, Income Tax Practitioners or reputable taxpayers for the resolution of the hardship or dispute. The committee will examine, the issue and may, if it deems necessary, conduct inquiry, seek expert opinion, direct any officer of Income Tax or any other person to conduct an audit and make recommendations in respect of the resolution of dispute as it may deem fit. The Board may, on the recommendation of the committee, pass such order, as it may deem appropriate. The aggrieved person may make the payment of income tax and other taxes as determined by the Board in its order under subsection (4) and all decisions, orders and judgments made or passed shall stand modified to that extent and all proceedings under this Ordinance or the rules made thereunder by any authority or forum shall abate provided that, in case the matter is already sub‑judice before any forum or tribunal or the court, an agreement made between the aggrieved person and the Board in the light of recommendations of the committee shall be submitted before that forum, tribunal or the court for consideration and orders as deemed appropriate. In case the aggrieved person is not satisfied with the orders of the Board, he may file an appeal or reference with the appropriate forum, tribunal or court under the relevant provisions of this Ordinance within a period of sixty days of the order passed by the Board under this section has been communicated to the aggrieved person. Section 137 ‑ Due date for payment of tax The retailers opting for presumptive taxation have been included for the purpose of payment of tax on the due date when they are required to file statement under section 115(4). Section 147 ‑ Advance tax In the existing advance tax obligation, the basis is turnover for the quarter and calculation on the basis of turnover to tax assessed ratio for the latest tax/assessment year. The proposed amendment intends to restore the pre 1997 position when advance tax was to be paid on the basis of last declared/assessed income with the right to give estimate of income. Interestingly the date of payment for each quarter has been reverted to the position prevailing originally in section 53 of the repealed Ordinance. This is a welcome move showing that ultimately sanity has prevailed and real income‑based advance tax liability is proposed. Section 148 ‑ Imports Collection of tax at the time of import is a vital source of revenue. Certain amendments have been introduced to remove short comings in the language. The more significant amendment in this section relates to making tax deducted on import of edible oil as full and, final discharge of liability whereas at present it is treated as minimum amount of tax payable by the person and where his final tax liability exceeds the amount collected, it has to be credited against that final liability. The term 'industrial undertaking' has been exhaustively defined in the proposed amendment. Section 152(5A) ‑Payments to non‑residents Presently the Commissioner is not bound to pass an order accepting/refusing the contention of the payer to make payment to a non resident without deducting tax. This causes delay in payment which is proposed to be avoided by imposing time restriction of thirty days within which order is to be passed by the Commissioner Section 153(3) ‑ Payments for foods and services A new clause (e) has been proposed to include a contract for advertisement services rendered by T.V. Satellite Channels' in the ambit of deduction of tax at source at the rate of 5 %. Section 155 ‑ Deduction of tax from rent The threshold of annual rent for the purpose of deduction of tax at source has been proposed to be enhanced from Rs.200,000 to Rs.300,000. New section 156A Petroleum products A new section is proposed to bring a petrol pump operator within the ambit of presumptive tax regime in respect of commission/ discount received by him from the principal. The rate of tax is provided at 10% of gross commission/discount. Section 159(1A) ‑ Exemption or lower rate certificate The amendment purports to delete a superfluous word. Section 164 ‑ Certificate of collection or deduction of tax In order to remove ambiguity in the language of the provision, certain words have been proposed to be deleted. Section 169(1) ‑ Presumptive tax regime (PTR) Two more categories viz. petroleum products and brokerage/ commission have been proposed to be included in PTR. Section 169(4) ‑ Imputable income under PTR omitted Through this proposed amendment the concept of imputable income while explaining any item under section 111 will no longer be applicable. This will create quite a stir as there is no other yardstick or evidence to quantify real income of persons falling under PTR. The law does not require them to file a return or submit accounts and therefore they are free to claim any amount of income as book profit or will be compelled to establish the quantum' of their true income. In both the cases it will become difficult for the department to justify such an abrupt change in law, shaking the confidence of the people caused by this uncertainty. Section 171 ‑Rate of compensation The prevalent rate of 15 % on delayed refund is proposed to be reduced to 6 %. The rate of additional tax has been revised from 18 % to 12 %. Equity demands that both the taxpayer and the department should be subjected to the same penal interest especially when the department charges additional tax from the day tax becomes due while compensation on delayed refunds commences on the expiry of three months of determination of refund. The time limitation as well as rate of penal interest for both the parties should be the same. Under Article 25 of the Constitution which debars any kind of discrimination the State has no justification to pay half the rate it charges to, a delinquent taxpayer and that too after a lapse of three months. Section 177 - Audit The scheme of voluntary compliance which is at the heart of the to be new ordinance appears to be disliked by the CBR. Abuse of sections 122 and 177 is reflective f old mind‑set of tax officials that taxpayer has no right to say that hi declared version should be accepted prima facie. Tax officials want absolute control of things which is not only a self‑acquired prerogative but also a main source of corruption. The changes proposed in this section show that the C.B.R. wants to be actively involved in selecting cases for audit, perhaps having little faith in its Commissioners. C.B.R. has taken a commanding role in selecting cases for audit, pushing the Commissioners to a secondary position. In the proposed substituted section, the element of secrecy in laying down criteria for selecting cases tantamount to abuse of power, violative of the constitutional provisions. Article 4 of the Constitution guarantees every citizen protection of law and debars the executive authority from taking any decision behind closed doors. It is a cardinal principle as elaborated by the Honourable apex Court and High Courts in various cases that where a statute, confers any power to an authority he should exercise the same reasonably, fairly and justly. It is essential that exercise of such powers should entail some valid reasons and where "the same is lacking, an affectee is entitled to demand the same, which the authority is bound to furnish [reference para. D, page 2277 of 1998 SCMR 2268]. The Honourable Supreme Court of Pakistan in 1977 SCMR 1804 at page 1810 provided the following guidelines: "The seven instruments that are most useful in the structuring of discretionary powers are open plans, open policy statements, open rules, open findings, open reasons, open precedents and fair formal procedure." If the C.B.R. wants to make its audit policy transparent, it needs to follow the above referred guidance by the apex Court. Section 177 as it stands now or proposed must be accompanied by some open policy statements/rules to safeguard the rights of the taxpayers from abuse of powers by executive authorities. Section 205 (1A) ‑ Additional tax The rate of additional tax has been proposed to be reduced from 18 % to 12 % in view of prevailing mark‑up rates in. the market. Section 205 (1B) new.‑ Additional taxes on advance tax The proposed amendment is in consequence to change in section 147 where basis for advance tax has been shifted from turnover to income. The amendment is the same as the position under the repealed Ordinance under section 87. On the one hand the department levies additional tax on short payment of advance tax (where estimate of income falls below 80% of actual income assessed) but on the other has no consideration for retaining the taxpayer's money without compensating him. Equity demands that the department should consider reviving payment of compensation as it used to prior to 1995. Section 210 ‑ Delegation An amendment is proposed to the effect that the Commissioner will not delegate powers to any taxation officer below the rank of Additional Commissioner as far as section 122(5A) is concerned. The revisional authority can only be exercised by a person other than the officer who originally passed the order. This is in line with section 66A of the repealed Ordinance. However, the proposed amendment has not taken into consideration the fact of the position in case where the Additional Commissioner himself is the author of an order. Section 233 ‑ Brokerage and commission Certain amendments have been proposed in this section to the following effect: Travel agents and insurance agents have been excluded in 233(1). Principal on making payment to an insurance agent or travel agent will withhold tax. Tax so deducted shall be full and final discharge of liability. The Government has been repeatedly claiming to reduce/ gradually eliminate presumptive taxation. Contrary to all claims, the Finance Bill 2004 proposes new categories in the PTR such as retailers, petroleum product sellers, travel agents and insurance agents. First Schedule ‑ various amendments The following significant amendments have been proposed in the First Schedule: The basic exemption for income has been raised from Rs. 80,000 to Rs. 100,000. For new category of retailers under PTR, rate of tax is 0.75 % of gross turnover. Rate for deduction of tax on payment to satellite channels for advertisements has been fixed at 5 % of gross amount payable. The rate of tax to be deducted under section 156 on winnings from a raffle, lottery, prize on winning a quiz, prize offered by companies for promotion of sale, or cross‑word puzzle shall be 20 % of the gross amount paid. For petroleum products rate of collection of tax shall be 10 % of the amount of payment of commission/discount. Full and final discharge of liability in the case of travel/insurance agents is provided at the rate of 10% and for all other persons earning income from brokerage/commission at the rate of 5 %. Second Schedule ‑ various amendments The following significant amendments have been proposed in the First Schedule: Part I In clauses (78) and (80), explanation has been added to clarify that certificates of investment issued by Investment Banks are also covered in these exemption clauses. Explanation being clarificatory in nature will have a retrospective effect. Clauses omitted are (81), (84), (88) A new clause (81A) has been inserted providing that notwithstanding the omission of clause (81), the existing holders of Foreign Currency Bearer Certificates will continue to have benefit of exemption till the encashment of certificates. New clause (88A) has been proposed providing "Notwithstanding omission of clause (88), the existing holders of Federal Government Securities and redeemable capital shall continue to have benefit of exemption till the maturity of the securities and redeemable capital". New clause (93A) is proposed which says that: "Profits and gains derived by a taxpayer from the running of any vocational institute or technical institute or poly‑technical institute, recognized by a Board of Technical Education or a university or any other authority appointed in this behalf by the Federal Government or a Provincial Government, as the case may be, set up between the first day of July, 2004, and the thirtieth day of June, 2008, both days inclusive, for a period of five years beginning from the tax year in which such institution is recognized. " Exemption available to income from capital gains has been extended up to tax year ending 30th June 2007. This is meant to maintain the present surge in capital market. The critics believe that real benefit of this exemption is not available to genuine investors but to the wicked stock‑brokers, money lenders, speculators and persons having enormous wealth but not paying any income tax. Such kinds of exemptions create imbalances and hardly contribute towards building up of the economy. The Government should have provided exemption to investors in shares of new companies rather than giving benefit to a handful of monopolists in the Stock markets. Part II Vide clause (13A) reduced tax rate of 1 % against normal rate of 6% is provided on import of di‑ammonium phosphate (DAP) fertilizer to promote agriculture. In respect of agricultural tractors imported in CBU condition, the tax under section 148 is proposed at the rate of 2 % of its import value. This substantial reduction in withholding tax‑ is aimed at promoting agriculture. Vide clause (13C) a number of items i.e. plant and machinery not manufactured in Pakistan, even if imported by commercial importers, are proposed to be subject to reduced withholding tax at the import stage. The proposed language is: "In respect of goods falling under HS Code 801.1100, 801.3200, 802.1200, 802.9010, 902.4010, 902.4090, 902.1110, 907.0000, 908.1000, 1704.0000,. 1806.0000, 3303.0000, 3304.00000, 3401.0000, 3702.3100, 3705.2000, 3707.9000, 4011.2090,50.04, 50.05, 50.06, 6301.1000, 8204.0000, 8301.1000, 8506.1000, 8511.1000, 8525.4000, 8529.9010 and 9004.1000 of the First Schedule to the Customs Act, 1969 (IV of 1969), imported, the tax under section 148 shall be collected at the rate of 2 % of its import value as increased by customs‑duty and sales tax, if any, levied thereon." In order to reduce the prices of locally manufactured vegetable ghee/oil etc. clause (13D) has been proposed providing reduced rate of 1 % in respect of edible oil purchased locally by manufacturers of cooking oil or vegetable ghee or both. Part III Amendment has been proposed in clause (1A) raising the limit of income of persons above 65 years of age from Rs.200,000 to Rs. 300,000 entitled to rebate of 50% on total tax payable. Part IV A new clause (3A) has been proposed to exempt people from payment of tax on any remission on loan or mark‑up under the State Bank of Pakistan, Banking Policy Department's Circular No.29 of 2002, dated the 15th October, 2002, to the extent not set off against the losses under Part VIII of Chapter III. A new clause (36A) has been proposed whereby exemption from withholding has been extended to widows and other eligible investors in Bahbood Savings Certificate or Account. Two new clauses viz. (38A) and (38B) are proposed exempting Venture Capital Company from withholding tax under section 150, 151 and 233, and Islamic Development Bank from under section 150. A new clause (47C) is proposed to the effect that the provisions of subsection (1) of section 154 will not apply to an exporter in respect of cooking oil or vegetable ghee exported to Afghanistan, from whom advance tax has been withheld under section 148 on import of edible oil. Fourth Schedule ‑ various amendments The following amendments have been proposed in the Fourth Schedule: In rule 1 an amendment has been proposed that in income from other business shall be profit or loss before tax as per profit and loss account prepared under the Insurance Ordinance, 2000 (XXXIX of 2000), excluding any surplus appropriation made during the year. Rule 2 is proposed to be substituted providing that the profits and gains of a life insurance business shall be the current year's surplus appropriated to profit and loss account prepared under the Insurance Ordinance, 2000 (XXXIX of 2000), as per advice of the Appointed Actuary, net of adjustments under sections 22(8), 23(8) and 23(11) of the Insurance Ordinance, 2000 (XXXIX of 2000) so as to exclude from it any expenditure other than expenditure which is, under the provisions of Part IV of Chapter III, allowed as a deduction in computing profits. And gains of a business to the extent of the proportion of surplus not distributed to policy holders. SALES TAX Section 2 (2A) ‑ Further taxes Reference to `further tax' has been deleted in the definition of the term `arrears' as the charging section 3 of Sales Tax Act 1990 [hereinafter, "the Act] deletes this levy. Section 2 (3A) ‑ New definitions, 'banking company' Through this amendment definition of "banking company" is inserted to remove any ambiguity while referring to this term wherever used in the Act. Section 2 (5A) ‑ Omission The definition of `common taxpayer identifier' has been omitted as this concept did not materialize as envisaged under section 20 of the Finance Act, 1999. Section 2 (9) ‑ Omission of reference to section 26A(6) Through this amendment reference to subsection (6) of section 26A has been omitted from the term `due date' as provisions relating to turnover tax for a retailer are no more part of statue. Section 2 (9a) and (aa) ‑ Omission Clauses (9a) and (9aa) have been omitted. These relate to definition of `enrolled persons' and `enrolment numbers' respectively. Section 2 (14) and (20) ‑ Inclusion of excisable goods for claiming input/output tax. In the definition of the word `input tax' an addition is made after the words 'excisable' in sub‑clause (d) by inserting the words `goods or'. This has been done as preciously only excisable services were included and there was no input tax claim available in relation to a registered person vis‑a‑vis excisable goods. The same amendment has been made in clause (20) of section 2 in respect of output tax. Section 2 (25) ‑ Omission in respect of further tax In the definition of registered person the reference of further tax has been deleted as this levy is no more part of statute. Section 2 (33)- Insertion of proviso In the term `supply' a proviso has been added whereby the Federal Government has been authorized to specify any other transaction which shall or shall not constitute `supply'. This proviso has been inserted after deleting sub‑clause (d) which means that proviso will be applicable for any transaction that may be termed as supply or otherwise by the Federal Government through an official notification. Section 2 (34) ‑Omission of term `turnover' Clause (34) has been amended to remove the word `turnover' from the ambit of expression `tax'. This has been done in consequence to abolition of turnover regime. Section 2 (37) ‑ Inclusion of certain words In the term `tax fraud' any action `including the making of taxable supplies without getting registration under the Act' has also been included purposefully to counter the menace of, flying invoices. Section 2 (38) ‑ Omission The concept of tax identification number (TIN) has been omitted because the scheme could not be implemented by the CBR despite tall claims in this regard. It shows how tax administration first makes schemes, gets allocation of funds and then wastes it without any accountability. The public has a right to know who prepared this scheme without proper home work and why it was not been implemented and amount of loss incurred by the exchequer for this entire exercise. Section 2 (45) ‑ Omission The term `turnover tax' leviable under section 3A has, been omitted in consequence to omission of section 3A. Section 2 (47) ‑ Insertion of certain words In this clause the reference to repealed section that is 50(4) of the Income Tax Ordinance, 1979 has been replaced with the parallel section [section 153] of new Ordinance, 2001. Section 3(1A) and (5)‑ Abolition of further tax This is the most important amendment made in the Act by relieving registered persons from the burden of 3 % further tax while making supplies to non‑registered persons. Section 3A ‑ Omission This is an important amendment withdrawing the powers of Federal Government in respect of recovering Sales Tax from persons receiving the supply, instead of the supplier. Section 3AA(4) Substitution In consequence to change in turnover tax regime, which has been abolished, reference to this effect has been omitted in this sub section and reference is now provided to section 14 instead of section 18. Section 4 ‑Omission. In section 4, the words a supply of have been, omitted because these were unnecessarily causing hardships for persons falling in the zero‑rating regime. Now the zero‑rating regime will be available to goods mentioned in this section without the condition of supply as defined in section 2(33) of the Act. Section 7 ‑ Certain amendments First amendment in this section relates to accrual base concept of accounting. Presently, input tax can only be claimed if paid during the tax period. Now it will be available even in respect of input tax payable for the relevant period. Second amendment in this section deletes the words `further tax' which is in consequence to deletion of this levy under the charging section. In subsection (2), amendment is made to the effect that in case of goods purchased in auction the registered person must hold a treasury challan in his name and bearing his registration number to claim input tax from output tax. Section 7A ‑ Insertion of new subsection (2). A new subsection has been, inserted empowering the Federal Government to specify the minimum value addition required to be declared by certain persons or categories of persons for supply of goods of such description or class as may be prescribed, and to waive the requirement of audit or scrutiny of records if such minimum value addition is declared. The idea behind this amendment is that the Federal Government through a Gazette notification can determine any minimum value addition in respect of persons or goods and if they abide by the value in their declarations they will be relieved of requirement of audit or scrutiny of record. It is quite shocking that on the one hand the Government wants to document the entire economy and time and again the concept of true declaration through voluntary compliance is being projected and on the other such loopholes are being created whereby through connivance, the taxpayers and revenue authorities can reach to some `understanding' in the name of waiver of requirement of audit or scrutiny of record. It is hard to believe that waiver from audit or scrutiny of audit is considered a great favour in this country whereas in the civilized society it is a norm which is respected by every citizen of the society. The State must encourage maintenance of record and also ensure its sanctity. If harassment is the reason to waiver then it is an open admission on the part of the Government that its tax administration is hostile towards businessman, besides being corrupt and inefficient. Section 8 ‑ Various amendments Some amendments have been made in this section to disallow tax credit in respect of the following: . Fake invokes; and . Purchases made by such registered person in case he fails to furnish information required by the C.B.R. through a notification issued under section, 26(5). Subsection (4) has been omitted which related to further tax that now stands abolishes In subsection (6) the words `or enrolled' appearing twice are omitted meaning by that tax credit will be allowed without the condition of enrollment. Subsection (7) has been omitted consequential to omission of section 3A. Section 10(1) First proviso-substitution of The existing first proviso providing that carry forward of excess amount vis‑a‑vis time limitation of one year has now been removed and CBR is given the power to notify in the official gazette the condition of refund, restrictions etc. It is hoped that CBR will reduce the period of payment of carry forward amount to a reasonable extent enabling .the taxpayers to have their legitimate amounts available at crucial times. Presently, the withholding of such refunds is causing serious cash crunch for export‑oriented units. Section 13(2)(b) ‑ Insertion of words The available power to the CBR to exempt any supply from the payment of the whole or any part of tax chargeable under the Act has been widened by providing the words import of supply of goods of such description or class, as may be specified'. There was objection from certain tax officials that CBR's, power is not extended to import of goods which has now been taken care of. Section 14(1) ‑ Substitution The entire subsection has been substituted giving the CBR power to make rules for registration of persons under the Act. Sections 15, 17, 18, 19 and 20 ‑ Omission Since the CBR has been entrusted with the powers to regulate registration under section 14 the related sections have been omitted. Section 21 ‑ De‑registration substituted Section 21 has been substituted giving CBR powers to make rules regarding registration, black listing and suspension of any taxpayer: The substituted section authorizes the Collector that if he is satisfied that a. registered person has issued fake invoices, evaded tax or has committed tax fraud, he may black list such person or suspend his registration in accordance with procedure prescribed by the CBR in the official gazette. Section 22(1)(d) ‑ Record ‑ Amendment The purported amendment inserts the words `Banking instruments' in terms of section 73 in addition to bank statements that a taxpayer is legally required to disclose. Section 23 ‑ Tax invoices ‑ omissions Clause (ff) has been omitted which has reference to further tax, now no more part of the statute. In subsection (2) the words `turnover tax' or' have been omitted with the abolition of turnover tax mechanism. Section 26 ‑ Monthly return ‑ Amendment and insertion In subsection (4) in the second proviso the reference to further tax is omitted. A new subsection (5) has been inserted empowering the CBR to require any person or class or persons for any goods of such description or class to furnish such summary or details or particulars pertaining to the import, purchase and supply during any tax period or periods, in such format as may be specified in a notification in the official gazette. Section 26A ‑ Turnover tax return ‑ omission With the abolition of turnover, tax the section relating to filing of return is also omitted. Section 26AA(4) ‑ Retail tax return ‑ omission of certain words In this subsection the reference to further tax has been omitted. Section 27(a) ‑ Special return ‑ omission of words The words `or enrolled' have been omitted since the new measures will require registration of every person instead of alternate option of enrolment. Section 32AA(2) Audit of retailers ‑ Omission of certain words In this subsection the words `turnover tax under section 3A or have been omitted after the abandonment of turnover tax system. Section 33 ‑ General penalties ‑various amendments A new proviso has been inserted providing that in case the amount of sales tax payable in the return does not exceed Rs.5000 penalty leviable shall not exceed Rs.1000. In subsection (3) the words `or enrolment' have been omitted. A further amendment is made that any person who is required to apply for registration fails to make an application within the specified period of registration before making supplies shall be punishable with a penalty of Rs.10,000 or 5% of tax involved, whichever is higher. A new clause (c) is inserted in section 3 providing that any person who fails to furnish the information required by the Board under section 26(5) shall be punishable with a penalty of Rs.10,000 or 5 % of tax involved, whichever is higher. In subsection (4) a penalty of Rs.25,000 or 100% of amount of tax involved, whichever is higher, will be leviable as a result of proposed amendment whereas previously it was 30 % of amount of tax involved. In subsection (6A) the words `or enrolled' have been omitted as a consequential effect of doing away with the concept of enrolment under the Act Section 36(3) ‑ Recovery of tax ‑ omission of words The reference of enrolment has been omitted as a consequential effect of doing away with the concept of enrolment under the Act. Section 37C(1)(b) ‑ Prosecution and punishments substitution The existing provisions of registration within 60 days of expiry of period given in section 15 read with clause (a) of subsection (3) of section 33 is substituted with the words `of the commencement of taxable activity'. Now if a person fails to get himself registered within 60 days of the commencement of taxable activity he shall be liable to prosecution and punishment. New section 38A ‑ Power to call for information This is a new section giving power to the Collector to require in writing from any person, including a banking company, to furnish such information or such statement in connection with any investigation or enquiry in cases of tax fraud. Section 40 ‑ Search under warrants ‑ substitution Section 40 is substituted giving more powers to the Sales Tax Officers to conduct searches where having reasons to believe that documents or things useful or relevant to any proceedings under the Act are kept in any place. However he cannot make search of such premises without obtaining a warrant from the Magistrate. Section 45 ‑ Power of adjudication ‑ amendments Previously cases related to certain contraventions were not part of adjudication under this section. These have now been added. Explanation to second proviso is amended by substituting the words `other than additional tax, and in case where only additional tax is involved' for `other than further tax or additional tax and in case where any further tax, whether or not with additional tax is involved'. This amendment is made to remove further tax which is no more on the statute. Section 45B(1) ‑ Appeals ‑ substitution The amendment seeks to substitute for the words ` 11; 36 or 45' , the words `10, 11, 36, 45 or 66'. Appeals previously not available for non‑action or wrong action in respect of carry forward excess amount and refund claimed within .one year are now made part of this section. Section 46(9) ‑ Appeal to Appellate Tribunal ‑ amendments Presently, the Chairman or any other member of the Appellate b‑Tribunal authorized in this behalf by the Chairman can sit singly to dispose of "any disputed case, other than a case where the determination of a question having a relation to the rate of sales tax or to the value of taxable goods for the purposes of assessment is in issue or is one of the points in issue, the difference in tax involved or tax involved [this legal lacuna of using the words `tax involved' twice shows callousness on the part of CBR]. The amendment now wants to limit this power where tax involved does not exceed Rs.5000/‑. The same limitation is already in operation in respect of fine or penalty. Section 47A ‑ Alternate dispute resolution ‑ substitution This section was inserted by Finance Ordinance, 2002 and since then negligible number of cases came for alternative dispute resolution which shows mistrust of taxpayers on the Committee constituted by the CBR. Now the whole section is substituted making the mechanism more attractive. However, the question remains why a taxpayer should trust members of the hand‑picked Committee of CBR. This system can only work if independent persons from judiciary are involved. Unless such a body does not represent people from the judiciary and members from trades and professions no taxpayer will come forward for dispute resolution. It appears that CBR is providing this only for the satisfaction of the international donors and is not serious in implementing a fast track dispute resolution system for the benefit of taxpayers. They fully' know that if such system is implemented they will be left with no bargaining power with the taxpayers. New section 49A ‑ Liquidators This new section provides the concept of liquidator and mechanism for recovery of taxes due lender this Act. It elaborates obligations and procedures of sale of any asset by the liquidators. Section 51(3) ‑.Bar of suits etc ‑ insertion of new subsection A new subsection (3) is proposed saying that `notwithstanding any thing in other law for the time being enforced, no investigation or enquiry shall be undertaken or initiated by any Government agency against any officer or official for any thing done, in his official capacity under this Act, Rules, instructions or directions made or issued thereunder without the approval of the Board. The purpose of insertion is simple i.e. to protect the officials for their misdeeds and wrongdoings. If National Accountability Bureau (NAB) can get hold of ordinary citizens why it cannot start an investigation or enquiry against sales tax officials and why prior approval of C.B.R. is needed? In the past, many officials of Customs and Sales Tax departments were arrested by NAB and they made plea bargains admitting their corruption and paying huge amounts to the NAB for their release. Instead of taking a serious note of this, an amendment has been proposed to making them sacred cows against whom prior approval of C.B.R. is required to investigate any matter relating to corruption, high handedness and inefficiency. This amendment is highly objectionable and must not be approved by the, Parliament in the public interest. New section 51 ‑ Assistance to the Sales Tax Officer This new section requires all officers of Customs, Central Excise, police and civil armed forces and all officers engaged in the collection of land revenue to assist officers of sales tax in the discharge of their function under the Act. Section 59 ‑ Tax paid on stocks acquired before registration ‑ omission With the abandonment of turnover tax and change in registration procedure the references in this section have been deleted. Section 67 ‑ Delayed refunds ‑ amendment The rate of compensation is reduced from 14 % to 6 % for delayed refunds whereas no such change has been made in additional tax rate. It is highly unjust that the State wants to pay less on delayed refunds due to declining mark‑up rates in the market but wants to charge extraordinary rate, having no connection whatsoever with the prevalent banking rates on non‑payment or short payment of sales tax. Parity demands that rates for additional tax and compensation on delayed refund should be equal. Section 73 ‑ Certain transactions not admissible‑substitution Once again this section has been substituted The CBR has been showing complete lack of reasonableness with regard to section 73. It is worthwhile to note that this section was substituted last year but was kept in abeyance through administrative instructions issued by the CBR. Pakistan is perhaps the only country where a law passed by the Parliament can be suspended by an executive authority and that too by issuing administrative instructions. The new substituted provision again provides that every payment for a transaction exceeding Rs.50,000 excluding, payments against utility bills is to be made by a crossed cheque drawn on a bank or by crossed bank draft or crossed pay order or any other crossed banking instrument showing transfer of amount of sales tax in favour of the supplier from the business bank account of the buyer. In case payment is not made in this manner, the buyer will not be entitled to claim input tax credit, adjustment or deduction, or refund, repayment or draw' back or zero‑rating of tax under the Act. The time limitation for making payment is now fixed at 180 days from the date of issuance of the tax invoice. The term `business bank account' is defined to mean `a bank account utilized by the registered "person for business transactions, declared to the Collector in whose jurisdiction he is registered'. Section 74 ‑ Condonation of time limitation ‑ insertion of proviso The C. B. R. has been given power to delegate its authority of condonation of time limit under this section to a Collector subject to notification in the official gazette and limitation provided therein. Fifth Schedule ‑ S.No.8 ‑ new entry A new entry is made which provides zero‑rating for import or supplies made to Gawadar Special Economic Zone, excluding vehicles falling under heading 87.02 of the Pakistan Custom Tariff, subject to such conditions, limitation and restrictions as the CBR may impose. Sixth Schedule ‑ Amendment In this Schedule following amendments have been made: Exemption withdrawn on supply of cotton seed used for manufacturing of oil. Cotton seeds are no more in exemption regime A new entry 6A is inserted to exempt from sales tax import/supply of edible oil and vegetable oil including cooking oil on which Central Excise Duty is charged and levied as if it were tax payable under section 3 of the, Act. The threshold for exemption in, respect of manufacturer and retailers is enhanced to 5 million. Exemption is now provided for raw material and intermediary goods manufactured or produced, and services provided or rendered, by a registered person consumed by him in the manufacture of goods subject to sales tax. Exemption from sales tax is extended on imported tractors, bulldozers and combined harvesters. S. No.53 relating to exemption available to cattle feed is omitted. CAPITAL VALUE TAX (CVT). Certain amendments have been made in Capital Value‑Tax imposed through section 7 of the Finance Act, 1989. The summary of these amendments is as under: CVT @ 0.1 % is imposed on resident persons on purchase value of modaraba certificates, any instrument of redeemable capital as defined in Companies Ordinance, 1984, shares of public companies listed on stock exchange. The members of stock exchange will be. responsible to collect CVT on the above‑ mentioned instruments. Provisions relating to adjustment of CVT against wealth tax, liability have been omitted. CENTRAL EXCISE The following salient changes have been made in Central Excise Act, 1944: Cable TV network has been brought in the ambit of excisable activity The scope of collection of Central Excise Duty has been extended to collection of goods in GST regime. Mechanism for alternate dispute resolution is provided for the first time through insertion of section 36D. First schedule is amended to include cable T.V. under the heading `services' for levy of 50% of the normal excise duty on advertisement on cable TV network. CUSTOMS The salient changes introduced in the Customs Act, 1969 are summarized as under: Custom duty on import of plant, machinery and equipment not manufactured locally is restricted to 5 %. Rationalization of custom duty on import of industrial raw material. Dispensation of indemnity bonds and installations certificates. Incentive package for agricultural equipment. Rationalization of duty structure for automobile manufacturers. Goods specified in clauses (a) to (f) of section 50 shall not be brought into or taken out of Pakistan. A new section 32 has‑been inserted elaborating them term `fiscal fraud' and consequential action for committing this offence. Section 156 has been amended providing penalty and imprisonment for a person who commits an offence under section 32A. Section 195C is inserted providing an elaborate mechanism for alternate dispute resolution. Similar provisions have been inserted in the Excise Act, 1944, Income Tax Ordinance.