KARACHI: Textile sector has urged Federal Board of Revenue (FBR) to extend tax credit to investment in factory building under Section 65E of Income Tax Ordinance, 2001 as it is presently restricted only to plant and machinery.
All Pakistan Textile Mills Association (APTMA) in its proposals for budget 2018/2019, said tax credit under Section 65E is restricted to investment in plant and machinery only (excluding installation charges) of manufacturing concerns registered as Company.
It suggested that the tax credit should also be extended to investment in factory building and manufacturing related infrastructure as appearing as addition in fixed assets.
Expansion of plant or undertaking a new project involves investment in factory building and manufacturing related infrastructure and as such these types of investments should also be made eligible for tax relief.
It further said that ten percent tax credit is admissible under section 65B(1) on amount invested in purchase of plant and machinery for BMR, extension and expansion would expire on June 30, 2019. Whereas twenty percent tax credit under section 65B(4) has expired on June 30, 2016.
It is suggested that both these tax credits are made open-ended without any cut-off date.
The APTMA said that in order to promote industrialization in the country, government should facilitate the investors to invest in the new projects as well as expansion of existing industrial concerns. The incentive should be open ended as any cut-off date has no rationale.
Highlighting another issued, it said through the Finance Act 2014, the rate of initial depreciation allowance on plant and machinery as prescribed under the Third Schedule of Income Tax Ordinance 2001 has been reduced from 50 percent to 25 percent.
Further the rate of initial depreciation allowance on building has been reduced from 25 percent to 15 percent vide Finance Act 2014.
Whereas in the textile export sector since the export proceeds are assessed under the Final Tax Regime therefore the benefit of initial depreciation allowance is not available to the sector.
It is suggested that the initial depreciation allowance rate be restored to 50 percent for plants and machinery as was the case prior to the Finance Act 2014.
The initial depreciation allowance for building also be restored to 25 percent as was the case prior to the Finance Act 2014.
Whereas for the export sector the tax credit under section 65B ought to be doubled for cases whose exports are over 80 percent of their total turnover so that instead of initial depreciation allowance they are entitled to higher tax credit.
To promote industrialization in the country, government should facilitate the investors to invest in the new projects as well as expansion of existing industrial concerns.
Moreover, the taxpayer falling under the presumptive tax regime ought to be compensated for not claiming initial depreciation allowance on additions in fixed assets.
The APTMA pointed out that any salary paid or payable exceeding fifteen thousand rupees per month other than by a cross cheque is not an admissible deduction.
Any salary paid or payable exceeding thirty thousand rupees per month other than by a cross cheque.
Earlier it was substituted for “ten” by Fin Act, 2008. It would facilitate a number of employees engaged in industrial units in area still lacking immediate access to banking facilities.
