ISLAMABAD: The government has made it mandatory for property developers, promoters and construction companies to obtain federal excise registration for payment of federal excise duty (FED) on development of plots.

Explaining major amendments in the Finance Bill 2008, official sources told Tax Review on Monday that the services of property developers and promoters would be liable to federal excise duty. The development of plots shall be subject to FED at Rs 100 per square yard and construction of residential and commercial units shall be subject to FED at Rs 50 per square foot of covered area.

There is no need to issue an SRO, or amended procedure, for implementation of the decision, as the property developers/promoters would be bound to obtain excise registration under the amended First Schedule of the Federal Excise Act 2005.

The Finance Bill has also been amended to allow input tax adjustment to local manufacturers of energy savers. In the 2008-09 budget, the government has exempted energy savers from payment of sales tax, through amendment in the Sixth Schedule of the Sales Tax Act, 1990. Now, the sales tax exemption has been withdrawn on the energy savers and subsequently zero-rating facility has been extended to this item. In this way, the local manufacturers of energy savers would be entitled to input tax adjustment. The adjustment facility under input tax/output tax mechanism would be instrumental in generation of refund for the manufacturers.

Officials explained that the definition of 'supply' under the Sales Tax Act, 1990 has been revised to rectify errors in the law. The scope of 'supply' within the sales tax regime was very wide as per definition issued in the 2008-09 budget. Secondly, there were two mistakes in the definition of 'supply', which has been corrected through amendment in the Finance Bill 2008. The FBR has introduced two amendments pertaining to manufacturers of intermediatory goods and payment to clarify supply under the Sales Tax Act. For example, it is not necessary that payment must be involved in each and every local supply, thus, amendment has also been made keeping this viewpoint.

According to the amendment in the Saes Tax Act, (33) 'Supply' means a sale or other transfer of right to dispose of goods as owner, including such sales or transfer under a hire-purchase agreement.

(a) putting to private, business or non-business use of goods produced or manufactured in the course of taxable supply;

(b) auction or disposal of goods to satisfy a debt owed by a person; and

(c) possession of taxable goods held immediately before a person ceases to be a registered person.

On a representation of the Azad Jammu and Kashmir government, the FBR has amended Finance Bill 2008 to again incorporate input tax definition in the sales tax law. According to the amended Finance Bill, '(e) Levied under the sales tax Act, 1990 of Pakistan as adopted in the State of Azad Jammu and Kashmir, on the supply of goods received by the person'.

Sources said that the government has decided to change the date for collection of federal excise duty (FED) on cigarettes from June 22 2008 instead of July 1 to ensure availability of stock of all brands of cigarettes in the market.

Through amendments in the Finance Bill 2008, sources said, the Federal Board of Revenue (FBR) has enforced new rates of FED on cigarettes from July 1 2008. However, there were apprehensions that the retailers etc might create artificial shortage of stocks of cigarettes in the market to obtain increased prices on the product from July 1. Therefore, the new effective date of collection of revised rates of excise duty on cigarettes has been made June 22.

Other amendments showed that the direct/indirect exporters covered under the Duty and Tax Remission for Export (DTRE) scheme; goods temporarily imported for subsequent re-exports and manufacturing bonds facility would be exempted from withholding tax. Withholding tax exemption has also been extended on import of cotton lint, cotton yarn, and fabrics. Sales tax exemption has been granted to hospitals owned by federal or provincial government, hospitals of statutory teaching universities having two hundred or more beds and charitable hospitals.

Through an important amendment in Income Tax Ordinance 2001, withholding tax has been drastically reduced on purchase of new cars, ranging between Rs 7,500 and Rs 50,000 depending upon the engine capacity of such vehicle. The limit of total taxable income of senior citizens has been increased from Rs 400,000 to Rs 500,000 to allow 50 percent rebate on tax liability.