Plea to charge tax on import value rejected

The Central Board of Revenue (CBR) has turned down a photographic products importers' plea to charge income tax on the basis of import value, excluding sales tax, as it would burden the industry with double tax.
The income tax department, strongly opposing the idea, said that any move to grant special exemption at the import stage would create ambiguity in the tax law.
The photographic goods importers group (PGIG), Karachi, contested that income tax on import of photographic products is currently charged on import value, inclusive of sales tax, which amounts to double tax; hence sales tax be excluded therefrom.
Moreover, it argued that income tax is charged illegally on supplies by some departments and tax deduction certificate is not issued on time.
The CBR was of the view that income tax on imports is withheld on the 'value of goods' as determined under sub-section (9) of section 148 of Income Tax Ordinance 2001 including import value as increased by custom duty and sales tax, if any, payable thereon. This provision of law is applicable on all imports across the board.
The CBR observed that PGIG's contention is incorrect, as it is not double taxation. The proposal, if entertained, would create discrimination in charging tax.
It would also require a specific exemption through amendment in law, which is not in line with the current policy of the government.
The CBR further informed the PGIG that commercial importers are liable to income tax at import stage at the rate of 6 percent on the value of goods. However, under the repealed Income Tax Ordinance 1979, the tax was also deductible @ 3.5 percent on supplies made out of such commercial imports.
The difficulty of the importers-cum-suppliers was removed by amending the relevant provision of the repealed Ordinance on February 12, 2002.
The position was further explained through circular No 5 of 2002 of April 11, 2002, which specified that no exemption certificate pertaining to tax deduction on supplies out of commercial imports, is required from the Commissioner of Income Tax (CIT).
Existing law contains specific provision, stipulating under sub-section (5) of section 153 of the Income Tax Ordinance 2001 that tax is not deductible on the supplies made out of imports that were already subjected to tax at import stage.
On a similar presentation from the PGIG received earlier in the Board, it was informed that, in view of the legal position, the CBR was not in a position to amend law on withholding tax on imports.
Regarding not furnishing of certificate by any withholding agent/payer for tax deduction wherever made in respect of supplies, the importers of photographic goods should meet the respective Regional Commissioner of Income Tax (RCIT) for redressal of their grievance, it said.