Every service provider required to pay six percent minimum tax: Asrar Raouf says....

Additional Secretary Revenue Division Asrar Raouf on Wednesday said every person whether a company, Association of Persons (AOPs) or individual providing or rendering services would pay 'minimum tax' of 6 percent under section 153 (1) (b) of the Income Tax Ordinance 2001.
Giving a comparison of superseded income tax circular 6 of 2009 and FBR clarification on section 153 of the Income Tax Ordinance 2001 dated April 26, 2011, Asrar Raouf said that the previously these persons, who were providing or rendering services, were falling into the Final Tax Regime (FTR) and only liable to file statements. Now, it has been clarified that the companies providing or rendering services would definitely fall into the 'minimum tax' regime and subsequently pay 6 percent tax.
Referring to relevant clauses of Income Tax Ordinance 2001, Additional Secretary Revenue Division dispelled impression that the companies providing or rendering services would not fall into the 'minimum tax' regime after issuance of FBR clarification (C No 1(25) WHT/2009) issued by Chief Income Tax Policy dated April 26, 2011. Legally, it is a wrong interpretation of FBR clarification dated April 26, 2011 that such companies providing or rendering services would remain into the Final Tax Regime. The FBR clarification titled, "Clarification of amendment made in sub-section (6) of section 153 of the Income Tax Ordinance 2001" has been issued to the Chief Commissioners of Inland Revenue of Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs).
He further explained that those persons who operate under the Final Tax Regime have to file statement under section 115 of the Income Tax Ordinance 2001. Under the 'minimum tax', now they would have to file their income tax returns. Every person who is providing or rendering services will pay a minimum tax of 6 percent except transporters in accordance with the Division-III of Part-III of First Schedule of the Income Tax Ordinance 2001, Asrar Raouf added.
Under the superseded income tax circular 6 of 2009, certain representations received from various taxpayers showed that the amendments, introduced in section 153 of the Income Tax Ordinance, 2001 through Finance Act, 2009, are being construed as to mean that all services rendered, whether by corporate taxpayers or otherwise, now fall in the scope of minimum tax regime in terms of sub-section (6) thereof and as such the eligibility of the corporate sector to obtain exemption certificate from the applicability of these provision stands abolished.
The matter was examined in the light of relevant provisions of law and it was clarified that this interpretation was not based on correct interpretation of law. The amendments, made vide Finance Act, 2009, in section 153, modify the provisions of second proviso to sub-section (6) to the effect that henceforth the services rendered by the non-corporate taxpayers stand excluded from the ambit of final tax regime and through another proviso the tax deducted under section 153(1)(b) is to be treated as minimum tax. Previously such services remained subject to final tax pursuant to exclusion of corporate sector from its ambit through first proviso to sub-section (6). The position for services rendered by the corporate sector remains unchanged even after the recent amendments as services rendered/provided by corporate sector remain outside the scope of both the final tax regime as well as the minimum tax regime of section 153 of the Income Tax Ordinance.
The minimum tax as provided under section 113 was therefore applicable to the resident companies accordingly, superseded income tax circular 6 of 2009 added. Through FBR clarification of Income Tax Policy dated April 26 2011, the FBR further clarified that the provisions of sub-section (6) of section 153 of the Income Tax Ordinance, 2001 had been amended through Finance Act 2009 had been amended through Finance Act 2009 by adding sub clause (iii) and provision thereto, which read as under:-
"(iii) the rendering of or providing of services referred to in sub clause (b) of sub-section (1): Provided the tax deducted under sub clause (b) of sub section (1) of section 153 shall be minimum tax". These amendments are aimed at excluding the tax chargeable on services from the ambit of "Final Tax Regime". However, it has been observed that various interpretations as to the treatment of tax on services, after its exclusion from "Final Tax Regime" are being adopted.
The matter has been examined again and in order to ensure a correct and uniform treatment, in supersession of earlier instructions issued through Circular No 6 of 2009 dated August 18, 2009, it is clarified that in view of the amendments made through Finance Act, 2009 as referred above, tax deducted on payments made for rendering or providing of services is to be treated "minimum tax" and henceforth taxpayer falling in the ambit of section 153(1)(b) shall file return of income instead of a statement under Final Tax Regime. Necessary action may be ensured accordingly, the FBR instructions added.