Shift to digital mode of payments: FBR extends deadline to November 30

The Federal Board of Revenue (FBR) has extended the deadline for the corporate sector to switch over to the digital mode of payments to November 30, 2021.

In a circular issued on Monday, the FBR stated that it is aware of various representations filed by the taxpayers, and is "pleased to extend the deadline for digital payments by Corporate Sector stipulated in Section 21(la) of the Ordinance up to November 30th, 2021".

The extension comes after the 40-day grace period granted by the FBR earlier to the corporate sector for switching over to the digital mode of payment expired on October 31, 2021.

Digital mode of payments: FBR examining proposal to further extend deadline

Tax experts had told Business Recorder earlier that the corporate sector cannot practically switch over to the digital mode of payment from November 1 in the absence of a definition of the "digital mode".

The FBR has to clarify the definition of the "digital mode", they argued.

The measure has already come under heavy criticism from various quarters including the Karachi Tax Bar Association (KTBA) and the Federation of Pakistan Chambers of Commerce and Industry (FPCCI).

KTBA calls FBR's digital payments measure 'anti-business, contradictory'

The KTBA said that the measure, which makes it mandatory to incur business expenditures for its admissibility broadly via digital means, “is remarkably in contradiction with other modes of payment through banking channels”.

Similarly, the FPCCI also strongly recommended to the FBR to immediately defer policy of switching over to the digital mode of payments for a four-month period, as it is not possible for the business community to adopt it from November 1, 2021.

Shift to digital mode of payments: FPCCI urges FBR to defer policy immediately

The FPCCI also approached the FBR chairman for constitution of a "committee" on "digital means" and issue definition of "digital means" to avoid ambiguity and interpretation issues.

The KTBA suggested that the mandatory condition of "digital mode of payment” for Companies as envisaged U/s. 21 (la) of the Income Tax Ordinance, 2001, be allowed to run simultaneously with other conventional modes of payments for at least a year so that their business is not affected and is smoothly run till they are aware of this change in the mode of payment.

Under the measure, the FBR had quietly proposed the use of digital means to bring corporates further under the tax ambit, restricting them to make payments beyond Rs250,000 through any means other than digital in order to make the expense deductible.

The measure essentially makes all post-dated cheques or any other paper-based payment system a non-deductible expense for businesses.