Professional Tax....................................COMPILED ASHRAF ASMI ADVOCATE

Professional Tax

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Introduction to Professional Tax

The Professional Tax is administered under the provisions of The Punjab Finance Act 1977 and the Punjab Professions and Trade Tax Rules 1977. This tax is levied and collected on/from the persons or class of persons engaged in a profession, trade, calling or employment in the Province of the Punjab and it shall come into force on and from the first day of July under section 1 (3) of the Punjab Finance Act, 1977.

History of Professional Tax

It was properly levied in 1964 as Rs. 30/- for every Profession, Trade, Calling and Employment under Punjab Finance Act, 1964 but it was made a proper shape under the Punjab Finance Act, 1977 and 6 different categories were defined first time. The maximum limit of the levy-able tax was Rs. 5000/-. But the latest position of the said tax was finalized in 1999, as follows:

The amendment in the Limitation Act, 1941 made by Federal Parliament, vide section 2 of the Federal Finance Act, 1999, the amendment made in the second schedule to the Punjab Finance Act,1977  vide section 6 of the Punjab Finance Act, 1977 had become redundant. Therefore, the Government of Punjab had stopped making assessment and recovery of professional tax once levied on the basis of payable income tax @ 1% under the provision of section 6 of the Punjab Finance Act, 1977 and had reverted back to the previous schedule forming the basis of assessment of professional tax in accordance with the amendment made by the Federal Parliament in the Limitation Act of 1941 vide section 2 of the Federal Finance Act of 1999 and subsequent enactment to this effect from 01.07.1977 instead of 01.07.1999 by the Punjab Government in complete adherence to the provision of section 4 of the Federal Finance Act, 2006. Under Article 163 of the constitution of 1973, Tax on professions, trade, callings or employment is a provincial levy. Therefore all functional establishments/units of the registered in business/professional activities in the province of Punjab are liable to be assessed to professional Tax under Section 3 of the Punjab Finance Act, 1977 and the second schedule made there under. In this context it is further submitted that vide section 4 of the Federal Finance Act of 2006 the Federal parliament has given effect to the said amendment in the Limitation Act of 1941 from 01.07.1977 instead of 01.07.1999. Therefore, the charge of professional tax upto the limit of Rs. 100,000/- in respect of assesses has been lawfully held valid with effect from 01.07.1977.

Modes of Professional Tax

 

1. Companies registered under Companies Ordinance, 1984

2. Factories as defined under the Factories Act,1932

3. Commercial Establishments other than the above said two categories

4. Importers and Exporters

5. Government Contractors 

6. Government Builders 

7. Government Property Developers

8. Service Providers

• Property Dealers
• Motor Car Dealers
• Motor Cycle Dealer
• Employees
• Doctors
• Hakeems or Ayuervedics
• Auditing Firms
• Engineers 
• Tax consultants
• Architects
• Lawyers
• Member of Stock Exchange
• Money Changers
• Recruiting Agents
• Carriage of Goods and Passengers
• Health Clubs
• Jewellers
• Departmental Stores
• Electronic goods Stores
• Cable Operators
• Printing Presses
• Pesticide Dealers
• Tobacco Whole Sellers

Assessment Criteria
All the heads of Professional Tax are assessed under the following criteria:
Companies	on Paid Up Capital
Factories	on Numbers of Employees
Commercial Establishments	on Number of Employees except retailers  and Whole sellers
Importers and Exporters	on the Value of Goods Imported or Exported
Government Contractors	on the Value of Services Given
Government Builders	on the Value of Contract
Government Property Developers	on the Value of Services
Service Providers	Fixed
Class of Persons	Rate of Tax Per annum
1. Companies registered under Companies Ordinance, 1984 with paid up capital
i) Up to rupees 5 million	5000/-
ii) Exceeding rupees 5 million but not exceeding rupees 50 million.	20,000/-
iii) Exceeding rupees 50 million but not exceeding rupees 100 million.	50,000/-
iv) Exceeding rupees 100 million but not exceeding rupees 200 million.	75,000/-
v) Exceeding rupees 200 million.	1,00,000/-
2. Persons other than companies, owning factories as defined under the Factories Act, 1932 and having
i) Employees not exceeding 10.	1000/-
ii) Employees exceeding 10 but not exceeding 25.	2000/-
iii) Employees exceeding 25.	5000/-
3. Persons other than companies owning commercial establishments having 10 or more employees
i) a) Within Metropolitan and Municipal Corporation limits.	3000/-
b) Others.	2000/-
ii) All other commercial establishments other than wholesalers and retailers.	1000/-
3-A. Persons engaged in the import or export of goods who, during the preceding financial year, imported or exported goods of the value:-
i)   Exceeding rupees 1 lac but not exceeding rupees 1 million.	2000/-
ii)  Exceeding rupees 1 million but not exceeding rupees 5 million.	3000/-
iii) Exceeding rupees 5 million.	5000/-
4. Persons who are engaged in a profession, trade, calling or employment either wholly or partly within the Province of the Punjab, who were assessed to pay income tax during the preceding financial year.	200/-
5. Contractors, builders and property developers. who during the preceding financial year supplied to the Federal or the Provincial Government or a company or a factory or a commercial establishment or an autonomous or a semi autonomous organization or any Local Authority; goods, commodities and services of the value:
i)   Not exceeding rupees 1 million.	500/-
ii)  Exceeding rupees 1 million but not exceeding rupees 10 million.	3000/-
iii) Exceeding rupees 10 million but not exceeding rupees 50 million.	5000/-
iv) Exceeding rupees 50 million.	10,000/-
6. Persons engaged in various professions and providing different services such as
i)   Medical consultants or specialists/dental surgeons	1000/-
ii)  Registered medical practitioners	1000/-
iii) Others including Homeopaths, Hakeems and Ayuervedics	1000/-
a) Within Metropolitan and Municipal Corporation limits	500/-
b) Others
iv) Auditing firms (per professionally qualified persons)
a) Within Metropolitan and Municipal Corporation limits	3000/-
b) Others	2000/-
v) Management and Tax Consultants Architects, Engineering, Technical and Scientific Consultants
a) Within Metropolitan and Municipal Corporations limit	3000/-
b) Others	2000/-
vi) Lawyers	1000/-
vii) a) Members of Stock Exchanges	5000/-
b) Money changers:
i) Within Metropolitan and Municipal Corporation limits	3000/-
ii) Others	1000/-
c) Motor Cycle/Scooter dealers:
i) Within Metropolitan and Municipal Corporation limits	5000/-
ii) Others	3000/-
d) Motor Car Dealers and Real Estate Agents:
i) Within Metropolitan and Municipal Corporation limits	10,000/-
ii) Others	5000/-
e) Recruiting Agents:
i) Within Metropolitan and Municipal Corporation limits	10,000/-
ii) Others	5000/-
viii) Carriage of goods and passengers by road
i) Within Metropolitan and municipal Corporation limits	2000/-
ii) Others	1000/-
ix) Health Clubs and Gymnasiums
i) Within Metropolitan and municipal Corporation limits	2000/-
ii) Others	1000/-
x) Jewellers, Departmental stores, electronic goods stores, cable operators, printing presses and pesticide dealers.	1000/-
xi) Tobacco vendors - wholesalers.	2000/-
Taxing from a person engaged more than one profession
If a person is engaged in more than one profession, trade calling or employment, he shall pay the tax only in respect of one such profession, trade, calling or employment for which rate of tax is the highest, under section 3 (2) of Punjab Finance Act, 1977.
Procedure of Survey
Most of the survey was made by personal visits to the allotted circles by the Inspector, which is conventional but most authentic source of survey and still in use, because of movability of the units time to time. But new ways were adopted during the last couple of years:
Directory of Industrial Establishments Punjab Yellow Pages SECP List of registered companies List from Chamber of Commerce Lists from Educational Departments etc.
Serving of Notices
Three types of initial notices are served to assessees, described below:
1. First Notice
Following information and documents are demanded from the assessee, for the assessment of tax under section 3 of Punjab Finance Act, 1977 amended in 1999 and 2000 within the mention period:
Date of opening of the office with documentary evidence. Photo copy of incorporation certificate if it is an incorporated company. Paid-up capital of the company with documentary evidence i.e. form "A" acknowledged by SECP. Value of import / export during the years to be taxed with documentary evidence (P-Copy of Income Tax returns for the said years) Year wise value of work done / Services / Supplied goods to the Federal/Provincial/Semi Government department or a company or a Factory or a commercial establishment or an autonomous or semi autonomous or semi autonomous organization or any local authority, with documentary evidence. Number of employees. Ist and last income tax returns, acknowledge by Income Tax Department. Professional Tax receipts if paid any, during last years.
2. Second Notice
Reminder of the first notice, on the expiration of stipulated period.
3. Third Notice
Reminder of the above two notices and final opportunity is given to the assessee to be heard. Some "Special Notices" are also served:
4. Final Call Notice
5. Ex-parte Decision
The section 4 (2) of Punjab Profession & Trade Tax Rules, 1977, give the Assessing Authority, District Excise & Taxation Officer, ability to decide the matter exparte on maximum taxation with 100% penalty.
6. Demand Notice
Demand notice is issued against those assessees, who are already assessed or decided exparte with the 32-A Challan form, within the period not less than 30 days after serving the notice under section 6 of the Punjab Professions & Trade Tax Rules, 1977.  If assessee does not make any action for the payment of assessed tax following procedure is adopted under Land Revenue Act, 1967, vide the Section 6 of Punjab Finance Act, 1977.
7. Notice before Arrest Warrants or Attachment
Under section 81/82 of the Punjab Land Revenue Act, 1967
8. Arrest Warrants or Attachment Orders
Under Punjab Land Revenue Act, 1967
Appeal
If assesse has any objection about the assessment, he has right to appeal before Director Excise & Taxation under section 4 (3) of Punjab Profession & Trade Tax Rules, 1977 within 30 days and the Appellate Authority can order to charge the whole tax or to refund.
Demand Register
All the assessed units are written in the Demand Register, in which all the paid amounts as well as arrears are maintained as record under section 11 of the Punjab Professions & Trade Tax Rules, 1977 in Form P.F.T-3.
Taxing Year
Taxing year is from 1st July to 30th June (Fiscal Year), under section 1 (3) of the Punjab Finance Act, 1977
Payment Duration
Every person liable to pay the tax shall before the 31st day of August, in each calendar year, furnish to the District and Taxation Officer a statement giving his name, address, nature of his profession, trade calling or employment.
Crediting of amount
Every person shall credit the amount of the tax in the nearest treasury in Form P.R.T-2 or send the same to District Excise and Taxation Officer by postal order by a cheque on the State Bank of Pakistan, National Bank of Pakistan or any other bank having clearing accounts with either of these banks.
Deleting of Demand
If any person liable to pay tax discontinuous the trade, profession, employment or calling on the basis of which he is liable to pay the tax such person shall within 30 days of his discontinuing such trade, profession, employment or calling notify the fact to the District Excise and Taxation Officer, under section 10 of the Punjab Professions & Trade Tax Rules, 1977.