FBR working to raise WHT on services to 10 percent

The Federal Board of Revenue (FBR) is reviewing a budgetary proposal to increase the rate of withholding tax on services provided or rendered, from 6 percent to 10 percent, in the budget for 2011-12. Sources told Business Recorder here on Tuesday that at present services provided or rendered under section 153 of the Income Tax Ordinance 2001 are liable to 6 percent withholding tax.
The FBR is examining a proposal to enhance the rate from 6 percent to 10 percent under section 153 of the Income Tax Ordinance 2001. In case the FBR finalises the budget proposal, it would be another revenue generation measure. It is being examined whether 6 percent rate under section 153 of the Income Tax Ordinance 2001 is less as compared to 10 percent withholding tax rate applicable on commission, profit of debt and dividend, etc. In case of commission, the rate of withholding tax is 10 percent and the proposal seemed to bring the withholding tax rate of services provided or rendered at par with the commission.
When contacted, a tax expert said that the tax on services cannot be equated with the tax on profit on debt, commission and dividend as the tax on services of individuals and AOPs falls under the minimum tax regime, whereas the tax on dividend, profit on debt and commission falls under the final tax regime. If the tax on services is being enhanced, the same should be brought into the final tax regime.
The FBR is also planning to bring a few sectors of the Presumptive Tax Regime (PTR) into the minimum tax regime to ensure filing of returns and payment of the due amount of taxes. Similarly, some sectors of the final tax regime (FTR) would be brought into the minimum tax regime. It will result in filing of income tax returns by these sectors under section 114 of the Income Tax Ordinance 2001as against statements under section 115 of the Income Tax Ordinance 2001. Resultantly, their tax returns would be subject to audit and examination of books of accounts. The FBR has proposed that the sectors covered under the final tax regime include exporters, dividend income, profit on debt, commercial importers, suppliers, contractors and others to be brought into the minimum tax regime.