FBR widens the scope of the definition of IT, IT-based services – Business & Finance

ISLAMABAD: The Federal Board of Revenue (FBR) has broadened the scope of the definition of computer services and IT services, raised the anticipated tax rate from 2% to 4% for commercial importers and reduced the turnover tax business for oil marketing companies (OMC) from 0.75% to 0.5% by amendment to the 2022 finance bill.

According to the comments of a leading tax expert, Ashfaq Tola, on the Amended Finance Bill 2022, the IT Services and IT Services clauses (30AD) and (30AE) define IT services as including development software, software maintenance, system integration, web design, web development, web hosting and network design.

While IT services are defined to include inbound or outbound call centers, medical transcription, remote monitoring, graphic design, accounting services, human resources (HR) services, telemedicine centers, data entry operations, cloud computing services, data storage services, television program production and insurance claims processing.

The amended bill now provides that the definition of computer services and services facilitated by information technology is not limited to the aforementioned services. This means that any other similar service will also be deemed to fall under the definition of IT services and IT-enabled services.

Section 148 provides for the deduction of taxes at different rates on different specified goods. In addition, Article 148 also provides that the taxes which must be deducted by industrial enterprises at the rates of one percent and two percent are subject to review.

The bill proposed that the tax to be collected by an industrial enterprise under section 148 be adjustable regardless of the rate at which such collection is required.

The bill also proposed that the tax to be collected on the importation of the following items be treated as a minimum tax, including edible oil; packaging material; paper and cardboard; or plastics. The bill also proposed to increase the advance tax rate from 2% to 4% for commercial importers. The bill also proposed that the tax deducted at the importation stage in the case of importers other than an industrial enterprise should be a final tax instead of a minimum tax.

The amended bill removed the proposed final tax amendment and made it a minimum tax again.

Tola added that Section 21(l) of the ITO provides that a business expense of any person shall not be permitted if paid by any means other than a cross banking instrument from the business bank account. of the taxpayer.

The Bill proposed to amend the above clause and also introduced another clause (the), under which payments of business expenses by businesses by digital means from the notified taxpayer’s business bank account to the commissioner have been made mandatory for the claim of these expenses.

It is still proposed that all other exceptions to the above restrictions apply. Exceptions are as follows: Expenditure under a single account does not exceed Rs 1,000,000 in total per annum; expenses related to utility bills; transportation costs; Trip costs; postage and payment of taxes, duties, fees, fines or any other legal obligation.

The Amended Bill reduced the threshold for aggregate expenditure under a single account from Rs 1 million to Rs 250,000. The amended bill also excluded expenses not exceeding Rs25,000 from these provisions.

Clause (9A) provides that the amount of tax payable on taxable income under “Capital gains” on the disposal of immovable property is reduced by 50% on the first sale of immovable property (75% in cases after three years) acquired or assigned to former members and serving personnel of the Armed Forces or former employees or serving personnel of the federal and provincial governments, being the first assignees of the immovable property, duly certified by the awarding authority.

The bill proposed to remove the above exemption. However, the amended bill reinstated the exemption, Tola added.

Copyright Business Recorder, 2022

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