LAHORE: The Punjab government has brought the online ride-hailing services in the tax net through special rate of 4% under the Punjab Sales Tax on Services through the Finance Bill 2020-21, increasing the total number of services to 69.
Earlier, sector was categorised under ‘Rent a Car’ services. However, a separate head and special tax rate was introduced for the sector through Finance Bill 2020-21, tabled by Punjab Finance Minister Hashim Jawan Bakhat in the Punjab Assembly on Monday. He presented the third budget of the Pakistan Tehreek-e-Insaf (PTI) led provincial government.
Keeping in view the impact of Covid-19 pandemic, the government revised downward the tax collection target to Rs317.1 billion for the fiscal year 2020-21, compared with the fiscal year 2019-20 target of Rs380.92 billion. The finance bill stated that ‘based on operational experience of Punjab Revenue Authority (PRA) during the last fiscal year, certain amendments have been proposed to further streamline the procedures under the Punjab Sales Tax on Services Act 2012 and enhance facilitation for taxpayers. Apart from certain changes to penalties, all changes are to facilitate businesses during the prevalent coronavirus situation and take steps towards documentation of economy. Electronic invoicing initiatives are being extended to maximum number of service sectors. Rates have been reduced for restaurant sector/ beauty parlours on transactions conducted through debit/credit card.
The government has proposed to charge 5% the above mentioned sectors in case getting payment through plastic money (debit/credit cards) to document the economy; otherwise, they will be charged 16% of the tax rate.
Further, the government has proposed reducing the rate of taxes on certain sectors through the finance bill. The bill stated, ‘the rates have also been reduced for the sectors hit by corona pandemic such as hotels, caterers, marriage halls, etc. In order to promote the use of information technology and empower the technology-based entrepreneurship, the rate for this sector has been reduced from 16% to 5%. The tax rate on manpower recruitment services has also been reduced to 5%, specifically for the services of which the value has been fixed by the Bureau of Emigration and Overseas Employment”.
The bill stated that the overall objective of reducing the tax rate was to ease the hardships of the businesses by reducing rates on number of service sectors. The idea is to increase voluntary compliance without resorting to coercive measures.
Through the bill, the government has brought down the stamp duties on various property transactions to 1% from prevailing 2% to 5% of rates on different transactions. The finance bill stated that “despite grave monetary challenges to the government exchequer in revenue collection, sufficient relief in reduction of stamp duty under the Stamp Act, was given to the general public due to Covid-19 during the last quarter of the Financial Year 2019-20, which is being extended for the Financial Year 2020-21.
Upon insertion of definition of an urban area in the Stamp Act, 1899 through Punjab Finance Act, 2017, which includes an area developed by a development authority, housing authority, statutory body, cooperative housing society or a real estate company or developer, the existing clause of Article 63-A (ii) has become redundant and requires to be omitted in the Schedule I of the Stamp Act, 1899”.
On excise and taxation, the Finance Bill 2020-21 proposed discount of 10% in property tax for maintenance has been proposed to align the taxation with market rates. Rate of Entertainment Duty on cinemas is proposed to decrease to 5% from 20% for revival of the sinking industry. Similarly, relief in payment of property tax and motor vehicle tax under the Punjab Urban Immovable Property Tax Act, 1958 and the Punjab Motor Vehicles Taxation Act 1958 has been proposed by extending the rebate periods.
The finance bill stated that the steps would be helpful in increasing the government revenue and create fiscal space. In current situation of Covid-19 pandemic, some measures have been proposed to create ease for taxpayers.
The bill has proposed amendments to the Punjab Urban Immovable Property Tax Act, 1958 (V of 1958), for the financial year 2020-21 with the four recommendations. A discount equal to 5% of the tax being paid would be allowed on payment of tax through e-payment system. A rebate equal to 10% of the amount of annual tax would be allowed if the amount of annual tax was paid in lump sum on or before Sept 30, 2020. The government has proposed that a taxpayer could pay property tax on yearly or half-yearly basis due to Covid-19 pandemic. “The tax would be paid on yearly basis or half-yearly basis as the assessee may choose or by such later day as the government may by notification determine”. Further, the late payment surcharge would not be imposed for the tax amount due.
Further, the amendments are also proposed to sections 3 and 9 of the Punjab Motor Vehicles Taxation Act, 1958 (XXXII of 1958), for the Financial Year 2020-21. The proposed amendments are ‘discount equal to 5% of the tax being paid would be allowed on payment of tax through e-payment system, a rebate equal to 20% of the amount of annual tax would be allowed if the amount of annual tax was paid in lump sum on or before the 30th of Sept 2020. And if a person fails to pay any amount of tax due within the period fixed for such payment, he would not be liable to pay any penalty if he pays the same during the financial year 2020-21. The relief is given till June 30, 2021.
Some of the measures are specific to FY 2020-21 in the backdrop of corona situation. However, it has been endeavoured that a balance may be created between relief and revenue generation for the government. To promote payments through E-payment, special discount of 5% in both the levies has been proposed.
No new tax/levy is proposed; however, existing structures of the levies has been proposed to be made people-centric, while the interests of the government for creation and generation of necessary revenue streams have also been watched.