WHT on passenger transport vehicles: FBR issues ‘legal’ clarification

ISLAMABAD: Taking prompt action on transporters’ complaints, the Federal Board of Revenue (FBR) Wednesday night clarified to the Provincial Excise and Taxation authorities to deduct reduced rate of withholding tax on Passenger Transport Vehicles under the Tax Laws (Second Amendment) Ordinance, 2022. In this connection, the FBR has issued a legal clarification to the Directorate General Withholding Taxes and all Provincial Excise and Taxation authorities late Wednesday night.

In the absence of the explanatory circular or clarification of the Tax Laws (Second Amendment) Ordinance, 2022 by the Federal Board of Revenue (FBR), the Excise and Taxation authorities are not ready to accept the lower rates as notified by the said Ordinance retrospectively from July 1, 2022.

Irfan Khan Niazi, president Islamabad Transport Owners and Passengers Welfare Association told Business Recorder at the FBR Headquarters on Wednesday that through the Finance Act, 2022, the government had increased the advance tax rate on passenger transport vehicles. The rates were brought down through the Tax Laws (Second Amendment) Ordinance, 2022.

Presently, the advance tax on passenger transport vehicles plying for hire is collected on the basis of seating capacity of vehicles by the Excise and Taxation authorities. The rates of adjustable advance tax on such vehicles provided in Division III of Part IV of the First Schedule of the Income Tax Ordinance were enhanced by substituting the relevant table.

The said president of the association remained in the FBR House the whole day and informed the practical difficulties faced by the transporters in depositing of reduced rate of tax from July 1, 2022.

“The entire transport sector is confused as the Provincial Excise and Taxation authorities are not ready to follow the simple text of the Tax Laws (Second Amendment) Ordinance, 2022”, he stated.

Under the Tax Laws (Second Amendment) Ordinance, 2022, the advance tax has been reduced on vehicles having a capacity of four or more persons; 10 or more persons but less than 20 persons and vetches having the capacity of 20 persons or more. For example, the annual advance tax rate was reduced from Rs2,500 per seat (non-air conditioned) to Rs1,000 per seat (non-air conditioned). The advance tax was reduced from Rs4,000 per seat (air-conditioned) to Rs1,500 per seat (air-conditioned), Irfan stated.

The issue is that the Provincial Excise and Taxation authorities are not themselves interpreting the Tax Laws (Second Amendment) Ordinance, 2022, but need the FBR’s letter/clarification/circular on the said issue.

He met almost all the FBR Members and senior officials and explained the whole situation that the tax cannot be deposited in the last date of August 31, 2022, at the reduced rates till the Provincial Excise and Taxation authorities receives a clarification from the FBR, he added. In August 2022, the transporters observed a nationwide strike against tax increases, leaving thousands of passengers stranded across the country. The public transport action committee ended a three-day strike due to flooding. Transport owners were voicing their concerns after the government had increased the tax from Rs300 to Rs4,000 and Rs8,000. “It will not be possible to operate public transport after the heavy taxation,” the owners added.

The transport owners also demanded the government to give public transport the status of an industry. The transporters also demanded the government to reduce diesel prices.

Copyright Business Recorder, 2022