Senate body rejects key proposals of Finance Bill

ISLAMABAD: The Senate Standing Committee on Finance has rejected some key provisions of the Finance Supplementary Bill, 2021 including provision of digital payment, disclosure of information of public office holders, increase withholding tax from 10 to 15 percent of cellular services, 17 percent sales tax on seeds, 17 percent sales tax on locally-manufactured mobile phones, and increase in the rate of withholding tax on purchase of motor vehicles to discharge on money.

The committee completed the review of the Finance Supplementary Bill, 2021, on Monday, and will finalise its recommendations for the Senate today (Tuesday).

However, committee proceedings were suspended for 10 minutes due to a fight between Senator Saadia Abbasi of the PML-N and Senator Dr Shahzad Wasim of the PTI.

Through the Finance (Supplementary) Bill, 2021, the FBR has been empowered to disclose information of politically-exposed persons. The amendment has been proposed whereby the particulars of high-level public officials and public servants in BPS-17 and above, their spouses, their children, or Benamidars, shall not be precluded from disclosure by section 216(1) of the Income Tax Ordinance, 2001.

Committee members objected that it is a dangerous amendment and will be used for political victimisation.

Finance Minister Shaukat Tarin informed the committee that the amendment proposed in section 216 of the Income Tax Ordinance, 2001, regarding disclosing information of the politically-exposed persons was demand of the International Monetary Fund (IMF), “but I will consider the recommendation of the committee”.

The committee strongly recommended that the definition of the “digital means” as defined by the State Bank of Pakistan (SBP) be incorporated in the Income Tax Ordinance 2001 through the Finance Supplementary Bill, 2021.

Chairman FBR Dr Muhammad Ashfaq Ahmed said that the confusion of the business community was removed by incorporating definition of the “digital means” of the SBP. The technology is rapidly evolving every day and therefore we have not specified the definition of the digital mode in the Income Tax Ordinance, 2001. He added that 99 percent of the transactions taking place in the market are through cheques. However, committee members objected that the definition should be made part of the law. The FBR chairman agreed that the definition of the digital means would be incorporated in the Finance Supplementary Bill, 2021.

Dr Ashfaq Ahmed added that a reasonable amendment could be proposed that digital payment should not be enforced till the SBP confirms that all banks are fully ready for accepting digital payments of the companies.

Senator Saleem Mandviwalla questioned why the government wanted to incorporate such a provision where 90 percent of the corporate sector would be penalised.

While observing that the manual cheque system should operate parallel with the digital mode, Chairman of the Committee Senator Talha Mahmood rejected the provision of digital payment.

FBR Chairman informed that the withholding tax on foreign produced dramas/serials/plays has been proposed on the recommendation of the Ministry of Information. The committee supported a proposal to provide a list of business bank accounts to the FBR by the banks to encourage documentation.

The Senate panel also unanimously rejected the imposed tax on “naan” and “bread” including the one prepared in bakeries.

“Bread is consumed by all classes of society; children of the middle class use them for lunch,” Senator Farooq Naek stated, while debating on the proposed amendment.

The committee also rejected the proposed imposition on yogurt, butter, desi ghee and milk, by majority vote, while tax has been imposed on flavoured milk, cheese, cream, and whey.

The representative- Supreme Council of Export Processing Zone requested for the exemption of sales at import stage in EPZ on the analogy that the documentation is already done on imports.

The committee rejected a number of tax impositions by majority vote and gave recommendations on a way forward in the interest of the common public.

The All Pakistan Textile Mills Association submitted that the omission of the provision on the CNIC, which exempted the sellers from selling products to unregistered buyers in the market has been withdrawn in the new Finance Bill, shifting all obligations of verifications of validity of the CNIC on the complaint and registered seller mills. The All Pakistan Textile Mills Association submitted that the FBR also require seller to charge 3pc additional tax: and once 3pc additional tax is charged there should be no further penalty.

The APTMA submitted that it is the duty of the FBR to register the persons to whom sales are made rather than putting on the industry to act as sub agents of the FBR in the matter of documentation and collection of taxes.

The committee accepted the proposal of the APTMA and recommended that no penalty should be imposed on the seller and that a solution against the unregistered market must be devised.