Abolition of Presumptive Tax Regime for commercial importers Section 148(7)
Abolition of Presumptive Tax Regime for commercial importers: Prior to the Finance Act, 2018 under sub-section (7) of section 148, advance tax on imports was final tax for such importers where the imported goods were sold in the same condition in which these were imported.
Through the Finance Act, 2018, tax required to be collected from commercial importers where goods are sold in the same condition as these were when imported, has been made minimum tax.
However, the minimum tax shall be 5% of the import value as increased by customs duty, sales tax and federal excise duty. This is illustrated through the following examples:-
Example 1
ABC Limited
Tax Year 2019
Taxable Income Rs.10,000,000
Normal tax @ 29% Rs.2,900,000
Import value including customs duty, sales tax and federal excise duty Rs.100,000,000
Tax deducted u/s 148 @ 5.5% Rs.5,500,000
Minimum tax @ 5% Rs.5,000,000
As minimum tax @ 5% is higher than normal tax @ 29%, minimum tax @ 5% shall be payable.
Example 2
Mr. XYZ
Tax Year 2019
Taxable Income Rs.5,000,000
Normal tax @ Rs.300,000 + 15% of amount exceeding Rs.4.8 million Rs.330,000
Import value including customs duty, sales tax and federal excise duty Rs.10,000,000
Tax deducted u/s 148 @ 6% Rs.600,000
Minimum tax @ 5% Rs.500,000
As minimum tax @ 5% is higher than normal tax, minimum tax @ 5% shall be payable.
Example 3
Mr. ABC
Tax Year 2019
Taxable Income Rs.4,800,000
Normal tax @ Rs.60,000+ 10% of amount exceeding Rs.2.4 Million Rs.300,000
Import value including customs duty, sales tax and federal excise duty Rs.4,000,000
Tax deducted u/s 148 @ 6% Rs.240,000
Minimum tax @ 5% Rs.200,000
As minimum tax @ 5% is lower than normal tax, normal tax of Rs.300,000 shall be payable.
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