FBR tells ministry: 2.5pc advance tax not applicable to OMCs’ outlets

ISLAMABAD: The Federal Board of Revenue (FBR) Friday conveyed to the Ministry of Energy that the Section 236H (2.5 percent advance tax on sales to retailers) of the Income Tax Ordinance 2001 is not applicable to petrol pumps of Oil Marketing Companies (OMCs).

The dealers/retail outlets of OMCs fall under the purview of Final Tax Regime which is final discharge of tax liability by the dealers/retail outlets of OMCs, the FBR added.

According to a legal clarification issued to the Director General Oil, Ministry of Energy (Petroleum Division) here, the FBR has clarified that the provisions of the tax collection under section 236H of the Income Tax Ordinance 2001 is not applicable on dealers and retail outlets of Oil Marketing Companies.

The FBR stated that refer to OM received from Ministry of Energy (Petroleum Division) seeking clarification from FBR in order to exclude Oil Marketing Companies (OMCs) from the applicability of section 236H.

The perusal of the subject letter revealed that dealers/retail outlets (Petrol Pumps) works on fixed dealer margin which is regulate by government of Pakistan and it is a price regulated sector.

At present tax is being collected under section 156A of the Income Tax Ordinance, 2001 (the Ordinance) which is full and final discharge of their liability.

Through Finance Act 2024, the scope of section 236H ibid is extended to all the sectors of economy and therefore, petroleum dealers/retail outlets are facing undue hardship due to the said amendment in the Ordinance. Hence, the Directorate General Oil sought the clarification.

In view of the above explained position, it is clarified that the provisions of tax collection under section 236H ibid are not applicable on dealers/retail outlets of OMCs as the income of such person fall under the purview of Final Tax Regime in terms of section 169 of the Ordinance and it is final discharge of tax liability by the dealers/retail outlets of OMCs, the FBR added.

Copyright Business Recorder, 2024