The Federal Board of Revenue (FBR) will constitute a taskforce, comprising Regional Commissioners, for accurately calculating withholding tax of cotton ginning sector. The Directorate General of Withholding Taxes on Friday submitted a detailed report to FBR on improving withholding tax collection on local supply of cotton lint.
In the first phase, the FBR has asked all Directors-General of Regional Tax Offices (RTOs) to conduct sectoral analysis in their respective jurisdiction. The analysis would be done on the basis of a report compiled by the income tax department in Multan.
An analysis of cotton lint produced/ginned during the cotton season 2007-08 has been made by the D-G, RTO Multan. The country-wide data collected from Pakistan Cotton Ginners Association (PCGA) for the current and immediately preceding year has been finalised.
Legally, the sale of cotton lint is subject to 1 percent withholding tax on local supplies as provided under clause (a) of sub-section (1) of Section 153 of the Income Tax Ordinance 2001 read with SRO 600(I)/91. Tax so deducted is treated as final tax as per sub-section (6) of Section 153 of the Income Tax Ordinance, 2001.
Income tax contributed by the cotton ginning sector has been worked out on the basis of average rate. The estimates showed that the average weight per bale is normally 150, kg which is equivalent to 4.029 maunds. The approximate amount of tax involved would, therefore, be worked out under the said formula.
During the current cotton season, income tax collection of nearly Rs 297.104 million has been received against projected revenue of Rs 754.935 million in major growing areas falling in the jurisdiction of Regional Tax Office, Multan. Exact amount of tax worked out on above formula could not be realised due to many reasons, which need to be examined.
The FBR has faced problems at the level of commissionerates for reconciliation of payments and deductions at national level. A task force of different Income Tax Regions needs to be constituted to develop ways and means to realise full collection. Besides, the matter should be co-ordinated with Pakistan Cotton Association, Pakistan Cotton Growers Association, Aptma etc, the FBR added.
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