Govt proposes sweeping tax changes in Finance Bill effective from July 1

ISLAMABAD: The government of Pakistan has drafted amendments to the Finance Act for the next fiscal year in line with Parliament’s instructions, introducing significant tax, compliance, and digital enforcement changes effective from July 1, ARY News reported.

Exemptions and concessions

Under the proposed Finance Bill, Pakistan International Airlines (PIA) will receive a 15-year sales tax exemption on aircraft purchases.

The government has also proposed a reduced 10 percent sales tax on stationery items used by children, including pencils, pens, and sharpeners.

Revised car taxation structure

From July 1, a one-time fixed tax of Rs10,000 will be imposed on vehicles up to 1000cc in the federal area.

For pre-2010 model cars up to 1000cc, the token tax will be increased to Rs20,000. For post-2010 models in the same category, the revised token tax will be Rs6,200, compared to the earlier Rs1,500.

For vehicles between 1001cc and 1300cc, token tax will be charged at 0.3 percent of the invoice value. For higher slabs, revised token tax calculations will also apply under updated valuation rules.

Amendments to Income Tax Ordinance

Amendments to Section 182 of the Income Tax Ordinance 2001 have been approved under the Finance Bill.

Under the revised framework, tax liability may be determined on the basis of current taxable income or the highest tax assessed over the last three years, whichever is higher.

Stricter compliance for filers and non-filers

The government has proposed stricter penalties for both filers and non-filers who fail to comply with Federal Board of Revenue (FBR) notices.

A penalty of Rs1 million will be imposed for the first violation, while repeated non-compliance may attract fines of up to Rs2 million.

Electronic monitoring system enforcement

From July 1, strict action will be taken against businesses that fail to install the required electronic tax monitoring systems.

Tampering with or damaging FBR’s electronic monitoring infrastructure will be punishable with up to five years imprisonment.

Factories, plants, and commercial outlets found violating these requirements may also face fines of Rs1 million per offence, with repeated violations attracting additional penalties.

Installation and maintenance of the electronic system will be mandatory, while deactivation or interference will invite legal action. FBR will also issue detailed enforcement procedures on its website on July 1.

Incentives for digital compliance

The FBR will offer rebates of up to Rs30 million to businesses installing approved electronic monitoring systems.

Mandatory e-filing and digital reporting

From July 1, all income tax returns will be required to be filed electronically through the FBR’s Iris system.

Companies will also be required to submit financial statements in machine-readable formats, making electronic filing fully mandatory.

Algorithm-based tax settlement system

Under a new algorithmic settlement mechanism, taxpayers opting in will be allowed to file revised returns without prior approval from the Commissioner.

Such taxpayers will also be exempt from certain penalties and surcharges under the revised system.

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