Section 153A of IT Ordinance: 0.5 percent WHT may be reduced to 0.3 or 0.2 percent

The Federal Board of Revenue is seriously examining a proposal to reduce 0.5 percent withholding tax to 0.3 or 0.2 percent at the time of sale made to all distributors, dealers and wholesalers from July 1, 2012. Tax experts told Business Recorder on Saturday that the distributors have made hue and cry on the high rate of 0.5 percent withholding tax under section 153A of the Income Tax Ordinance, 2001.
As the distributors and wholesalers do not operate on a margin more than one percent of their gross sales, 0.5 percent tax is hash and excessive, they added. Keeping practical difficulties being faced by distributors, the FBR has received presentations to further reduce the 0.5 percent withholding tax. Despite the fact that the levy is adjustable and refundable, the rate has been considered high by the business and trade.
The Board is reviewing the proposal to reduce the existing 0.5 percent withholding tax to 0.3 or 0.2 percent under section 153A of the Income Tax Ordinance, 2001. If the proposal has been approved by the Ministry of Finance, the FBR will issue the statutory regulatory order (SRO) to implement the decision. In case such a notification has been issued, it would be an extraordinary relief to the business community, sources added.
Finance Act, 2012 has inserted a new Section 153A of the Income Tax Ordinance, 2001 whereby every manufacturer has to collect withholding tax @ 0.5 percent at the time of sale to all distributors, dealers and wholesalers. This adjustable withholding tax is leviable on the gross sales to all dealers, distributors and wholesalers irrespective of being registered or unregistered taxpayers with Income Tax or Sales Tax.
The gross sales will be inclusive of Sales Tax and Federal Excise Duty and any trade discount is shown on the invoices or bills. The retailers or final consumers will however not be liable to withholding tax under this section. The commission agents from whom tax under section 233 has been withheld shall also not be liable to collection of tax under section 153A.