ISLAMABAD: Pakistan Advertising Association (PAA) and the Pakistan Business Council (PBC) have raised serious issues in the practical implementation of digital mode of payment, which would dismantle existing business practice of using valid banking instrument i.e. post-dated cheques.
The Federal Board of Revenue (FBR) had granted 40 days grace period up to November 1, 2021 to the corporate taxpayers to switch over to the digital mode of payments under Tax Laws (3rd Amendment) Ordinance, 2021.
In separate letters to the Finance Minister, Shaukat Tarin, and Chairman Federal Board of Revenue (FBR) Dr Muhammad Ashfaq Ahmed, both the associations have noted with concern about the imposition of the compulsory digital mode of payment.
The PBC strongly suggested that a precise and concise definition of the term “digital means” needs to be provided by the FBR to avoid ambiguity and interpretational issues.
Currently post-dated-cheques are used as a means to ensure payments due against sales on credit.
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Under the proposed “digital means” it would appear that this security will no longer be available to suppliers, and buyers may have to pay in advance.
This needs to be addressed, the PBC added.
The PAA has shared the advertising industry’s concerns regarding a recent amendment made vide Tax Laws (3rd Amendment) Ordinance, 2021 [the New Ordinance] whereby clause (la) has been inserted in section 21 of the Income Tax Ordinance, 2001 [the Ordinance].
As a consequence of this amendment, all companies, as defined under Section 80)(2)(b) of the Ordinance, are liable to use digital mode for payment to their vendors from business bank account on transactions exceeding Rs250,000, failing which non-digital transactions will not be acceptable as a valid expense.
A 40- day grace period till October 31, 2021 has been given by the FBR for switching to a digital mode of payment.
The PAA informed that the advertising industry is already facing considerable difficulties due to the current economic slowdown and the impact of the last year.
This amendment will only further exacerbate the industry’s issues.
More critically, this amendment would dismantle a business practice that has been working well and serving the needs and exigencies of all industry stakeholders — media, private sector and government — and unsettle a business model that has proven fit-for-purpose as well as being financially/legally robust and transparent.
To elaborate further, within the media industry, business is substantially conducted on credit terms and issuance of post-dated (account payee) cheques (PDCS) is a norm to secure business.
The PDCS are also prevalent for making payment of pre-paid expenses such as rental payments.
Furthermore, advertising agencies issue release orders to broadcasters for placement of advertisements of their clients.
Upon placement of the advertisement, our members issue invoices on a credit term of 60 to 90 days.
This credit period is secured by the PDCS to safeguard the interest of our members.
Therefore, denial of valid banking instruments such as crossed (account payee) cheques would not only cause huge loss to the industry as a whole, but also disrupt business continuity for an already struggling industry.
The PAA would find it difficult to comply with the new requirement and we request to revisit the need to “reinvent the wheel” for advertising payments through this amendment.
According to the presentation of the PBC, reference to the amendment made in clause (l) of section 21 and insertion of the clause (la) in the Income Tax Ordinance, 2001 [Ordinance] through the Tax Laws (Third Amendment) Ordinance, 2021, promulgated on September 15, 2021. However, implementation of both above amendments has been differed till October 31, 2021.
Copyright Business Recorder, 2021
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