The Federal Board of Revenue (FBR) has expressed serious concern over the poor collection of withholding tax from functions/gatherings, marriage halls/lawns during 2015-16 and directed all Regional Tax Offices (RTOs) to improve collection of tax on functions and gatherings under section 236D of the Income Tax Ordinance 2001.
In this regard, the FBR has issued instructions to the field formations while appreciating the performance of the RTO Rawalpindi in this regard. The FBR has carried out a comparison of the RTOs and appreciated that the RTO Rawalpindi has shown better performance in collection of withholding tax on functions and gatherings under section 236D of the Income Tax Ordinance 2001.
According to the FBR, referring to decision taken in the Chief Commissioners Conference held on 7-8 January, 2016 and Chairman FBR has expressed his concern over low collection under Section 236D (Advance tax on functions and gathering). Tax authorities have attributed the low collection under this head to ineffective monitoring by the field formations.
The FBR said that a comparison of collection under this head from July to December, 2015-16 between Regional Tax Office, Rawalpindi and Regional Tax Office-III, Karachi was carried out to understand the trend of collection. This analysis revealed that RTO Rawalpindi collected an amount of Rs 37.59 million whereas RTO-III, Karachi collected only 39.9 million in the same period. It is clearly noticeable that RTO-III, Karachi has a massive tax base and the number of functions/gatherings marriage halls/lawns are not comparable with RTO, Rawalpindi. This reiterates the fact that a comprehensive strategy and all out efforts are needed to enhance collection under this head. Chairman, FBR also asserted that the collection under this head will be a performance indicator for the RTOs. RTOs are, therefore, requested to focus on section 236D for maximization of the collection in the remaining two quarters of the current financial year, FBR instructions added.
Through Finance Act,2013 a new section 236D was introduced which provides for collection of adjustable income tax from a person arranging or holding a function in a marriage hail, marquee, hotel, restaurant, commercial lawn, club, a community place or any other place used for such purpose. Where food, service or any other facility is provided by the same place the prescribed person shall collect the income tax at the rate of 10% on the total amount of bill from the person arranging such function.
However, where the food, service or any other facility is provided by any other person, the prescribed person shall also collect advance income tax at the rate of 10% on the payment for such food, service or facility from the person arranging or holding the function.
The prescribed person for the purposes of this provision includes the owner, a lease-holder, an operator or a manager of a marriage hall, marquee, hotel, restaurant, commercial lawn, club, a community place or any other place used for such purpose. An inclusive definition of the term functions has also been provided which includes any wedding related event, a seminar, a workshop, a session, an exhibition, a concert, a show, a party or any other gathering. The prescribed person is also liable to file withholding statement under section 165 of the Ordinance, FBR added.
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