Restriction on Purchase of Certain Assets (Section 227C)

This blog is written by Mr. Hussain Mehmood, Senior Manager Taxation Advisory Services. Please read this interesting and informative blog and provide your valued comments.

Restriction on Purchase of Certain Assets (Section 227C)

This is with reference to the introduction of a new section numbered as 227C vide Finance Act, 2018 and my earlier blog on the same. The Section is reproduced hereunder:

Quote: “Notwithstanding anything contained in any law, for the time being in force,—

  • any application for booking, registration or purchase of a new locally manufactured motor vehicle or for first registration of an imported vehicle shall not be accepted or processed by any vehicle registering authority of Excise and Taxation Department or a manufacturer of a motor vehicle respectively, unless the person is a filer.;
  • any application or request by a person to any authority responsible for registering, recording or attesting transfer of any immovable property , exceeding five million rupees, for registering or attesting the transfer shall not be accepted or processed by such authority, unless the person is a filer.”;”. Unquote emphasis supplied

As the plain reading of the text makes it obvious that through the this amendment, effectively

a non-filer cannot:

  • book, register or purchase a new locally manufactured motor vehicle; or
  • First register an imported vehicle; and
  • Cannot have register , record ot transfer any immovable property of exceeding Rs. Five million

In the earlier blog, there were some concerns regarding effects on different categories of person earning “exempt income” and absence of a threshold. However in the Finance Supplementary (Amendment) Act, 2018 two proviso have been added which are reproduced hereunder:

Quote: “Provided that the provisions of clause (a) shall not apply in respect of,─

(i) motorcycle having engine capacity of less than 200 cc, motorcycle-rickshaw, agricultural tractor or any other motor vehicle having engine capacity of less than 200 cc; or

(ii) a person holding a Pakistan origin card or a national identity card for overseas Pakistani who produces a certificate from a scheduled bank of receipt of foreign exchange remitted from outside Pakistan through normal banking channels during a period of sixty days prior to the date of booking, registration or purchase of motor vehicle:

Provided further that the provisions of clause (b) shall not apply to,─

(i) a legal heir acquiring property in inheritance; or

(ii) a person holding a Pakistan origin card or a national identity card for overseas Pakistani who produces a certificate from a scheduled bank for receipt of foreign exchange remitted from outside Pakistan through normal banking channels during a period of sixty days prior to the date of registering, recording or attesting transfer.” Unquote

The first proviso excluded motorcycles having engine capacity of less than 200cc, motorcycle-rickshaw, agricultural tractor or any other motor vehicle having engine capacity of less than 200cc.

While second proviso excludes registration/recording/attestation of immovable property (exceeding Rs. Five million) to a legal heir acquiring property in inheritance.

The both proviso excluded non-resident from the application of clause (a) & (b) but subject to following conditions:

  • Holder of Pakistani origin card or a national identity card for overseas Pakistani
  • Produce a certificate from a scheduled bank for receipt of foreign exchange remitted from outside Pakistan through normal banking channels
  • Above certificate mentions time period for such remittance of sixty days prior to the date of registration of vehicle/ property.

Although the above change relating to non-resident is appreciable to the extent that it purports to enhance the transfer of money through banking channel and discourages “hundi, however, restricting the period of sixty days before registration of vehicle/property would mean that the transaction must be correlated with remittance. While in fact, people buy assets at their will as per respective cash flows. Usually, it’s the money invested in some other assets which is utilized for such purposes. Likewise if the money has been remitted through banking channel, but the registration occurs after sixty days, then there is no relief for non-resident. Apparently the underlined condition seems absurd and needs a revision or a clarification may be issued but currently it’s a headache for non-resident Pakistanis to invest in vehicles or immovable property.

Hussain Mehmood