President Dr. Arif Alvi has signed the Tax Laws (Second) Amendment Ordinance 2022 for additional taxation of Rs. 36 billion on the tobacco industry and the withdrawal of fixed tax on retailers imposed through the electricity bills under the Finance Act 2022.
In this connection, the Tax Laws (Second) Amendment Ordinance 2022 has been promulgated today.
The Ordinance amends provisions of the Finance Act 2022 to make necessary changes in the income tax, sales tax, and Federal Excise Duty (FED) laws. The Ordinance has amended the Income Tax Ordinance 2001, Sales Tax Act 1990, and Federal Excise Act 2005.
Under the Ordinance, the capital value tax (CVT) on commercial vehicles has been withdrawn. The Federal Board of Revenue (FBR) will charge variable taxes to traders, starting with a 5 percent sales tax and a 7.5 percent income tax. This will remain in place for three months for all traders.
From October 1, 2022, these taxes would be on consumption of 50 units, after which these taxes would gradually increase for higher consumption units. Instead of a fixed tax on retailers that will reduce the revenue by Rs. 42 billion, the government will now revert to the old system of ad valorem tax. This will result in a reduction in FBR revenue of Rs. 15 billion. The amount will be recouped by imposing taxes on tobacco and cigarettes worth Rs. 36 billion.
