||Pakistani Finance Bill Adopted by National Assembly
||Saturday, June 26, 2010
||Jun 28, 2010
The National Assembly on Friday approved the Finance Bill 2010 for the next fiscal year with majority vote by rejecting amendments moved by the opposition which triggered a walkout against the budget by Pakistan Muslim League (N). The National Assembly also empowered federal government to levy capital gains tax on securities to be sold on or after July 1, 2010 on selling point basis, even purchased on or before June 30, 2010.
-- PML-Q lends support while PML-N stages walk-out
-- Amendments by Opposition rejected
-- Government empowered to levy CGT on securities
The small investors of the stock market have been exempted from quarterly payment of adjustable advance tax on capital gains from sale of securities. Mutual Fund or collective investment scheme shall deduct capital gains tax on the basis of redemption of securities and according to the holding period.
Minister for Finance Dr Abdul Hafeez Sheikh moved the Bill 2010 in the House to give effect to the financial proposals of the Federal government for the next fiscal year starting from July 1, 2010 and to amend certain laws in the Bill. Treasury benches rejected with majority of vote the amendments of opposition and approved those moved by the Finance Minister to amend the Finance Bill 2010. Hafeez said that most of the amendments incorporated in the finance bill were proposed by the Senate and were bipartisan.
Responding to the opposition with regard to duty on deep freezers, the Minister said that two-way game can not be played. The Minister said that on the one hand the demand is to increase revenue while on the other taxation on goods used by the rich people is being opposed. He said that deep freezer was not the commodity of those who are unable to afford even clean drinking water. So the game played in the name of poor for the rich must now be stopped. About increasing direct taxes, he said that capital gains tax (CGT), being imposed after thorough deliberation of Senate standing committee on finance was a step towards direct taxes.
The Minister said that government was not provided required support to bring down the general sales tax (GST) to 15 percent, then how it could reduce it to 12 percent. The National Assembly approved with majority vote amendment in clause 6 of the Finance Bill for imposition of capital gains tax on sales of securities. The clause 37A has been inserted to deal with CGT on sale of securities. It says that the capital gain arising on or after the first day of July 2010, from disposal of securities held for a period of less than a year, shall be chargeable to tax at the rates specified in Division VII of Part I of the First Schedule:
Provided that this section shall not apply if the securities are held for a period of more than a year. Provided further that this section shall not apply to a banking company and an insurance company. The holding period of a security, for the purposes of this section, shall be reckoned from the date of acquisition (whether before, on or after the thirtieth day of June, 2010) to the date of disposal of such security falling after the thirtieth day of June, 2010.
(3) For the purposes of this section "security" means share of a public company, voucher of Pakistan Telecommunication Corporation, Modaraba Certificate, an instrument of redeemable capital and derivative products. Gain under this section shall be treated as a separate block of income.
Notwithstanding anything contained in this Ordinance, where a person sustains a loss on disposal of securities in a tax year, the loss shall be set off only against the gain of the person from any other securities chargeable to tax under this section and no loss shall be carried forward to the subsequent tax year.";
The amended Finance Bill further introduced a section "(5B) ie adjustable advance tax on capital gain from sale of securities shall be chargeable as under namely: Where holding period of a security is less than six months; rate of advance tax would be 2 percent of the capital gains derived during the quarter.
Where holding period of a security is more than six months but less than twelve months, the rate of tax would be 1.5 percent of the capital gains derived during the quarter. Provided that such advance tax shall be payable to the Commissioner within a period of seven days after the close of each quarter. Provided further that the provisions of sub section (5B) shall not be applicable to individual investors.
Division VII Under the head of Capital Gains on Disposal of Securities: The rate of tax to be paid under section 37A shall be as follows: Where holding period of a security is less than six months, 2011, 10percent; 2012, 10percent; 2013, 12.5percent; 2014, 15percent; 2015, 17.5percent; Where holding period of a security is more than six months but less than twelve months; 2011, 7.5percent; 2011, 10percent; 2012, 8percent; 2013, 8.5percent; 2014, 9percent; 2015, 9.5percent; 2016, 10percent. The CGT would be zero percent where holding period of a security is more than one year.
The amended Finance Bill 2010 has further clarified imposition of the withholding tax on banking transactions. According to the Bill, section 231AA has been revised to clarify the levy. Advance tax on Transactions in Bank: (1) Every banking company, non-banking financial institution, exchange company or any authorised dealer of foreign exchange shall collect advance tax at the time of sale against cash of any instrument, including Demand Draft, Pay Order, CDR, STDR, SDR, RTC or any other instrument of bearer nature or on receipt of cash on cancellation of any of these instruments.
Provided that this sub-section shall not be applicable in case of interbank or intra-bank transfer and also where payment is made through a crossed cheque for purchase of a financial instrument as referred to in sub-section (1). Every banking company, non-banking financial institution, exchange company or any authorised dealer of foreign exchange shall collect advance tax at the time of transfer of any sum against cash through online Transfer, Telegraphic Transfer, Mail Transfer or any other mode of electronic transfer.
The advance tax under this section shall be collected at the rate specified in Division VIA of Part IV of the First Schedule, where the sum total of payments for transactions mentioned in sub-section (1) or subsection (2) as the case may be, exceed twenty-five thousand rupees in a day.
Advance tax under this section shall not be collected in the case of transactions made by,- The Federal Government or a Provincial Government; a foreign diplomat or a diplomatic mission in Pakistan; or a person who produces a certificate from the Commissioner that its income during the tax year is exempt.", the provision added.
The amendment moved by the government for enhancement of penalty twice the value of goods to prevent smuggling through Afghan Trade Transit. The Bill has amended section 156 of the Customs Act, 1969 to check smuggling under the ATTA. The section 156, sub-section (1), clause (64) of Customs Act is amended to enhance the penalty to the extent of not less than twice the value of the offending goods besides the confiscation of goods for violation of section 128 and 129 of Customs Act, 1969. This penalty will create a deterrence vis-à-vis the smuggling of transit trade goods.
The House also approved with majority of vote with respect to discretionary grants for Speaker, Chairman, Senate as well as approved amendment in 1974 to increase petrol charges and air tickets for Parliamentarians.
The National Assembly also approved Rs 464 billion supplementary demands for grants and Appropriation for fiscal year 2009-10 and Charged Expenditures with majority of votes. An amount of Rs 424 billion was approved on account of supplementary demands for grants and appropriation for 2009-10 while Rs 39.593 billion on account of charged expenditure in the Supplementary demands for the Grants and appropriation relating to the supplementary budget for the year ending on June 30, 2010.