Withdrawal of Section 153A, cut in ST on steel: two notifications cleared by law ministry

The Ministry of Law and Justice has given clearance to two notifications to be issued by the Federal Board of Revenue next week for withdrawal of Section 153A of the Income Tax Ordinance, 2001 and reduction in sales tax for steel sector. Sources told Business Recorder here on Saturday that the FBR has drafted two separate notifications on the Section 153A of the Income Tax Ordinance, 2001 and made amendment to the Sales Tax Special Procedure Rules 2007.
The competent authority would sign both these notifications to be issued next week by the FBR. The first statutory regulatory order (SRO) would abolish Section 153A of the Income Tax Ordinance, 2001 whereby every manufacturer has to collect withholding tax at the time of sale to all distributors, dealers and wholesalers. The business community as well as iron and steel sector are desperately waiting for the issuance of these SROs. The FBR will issue these SROs next week following signing by the concerned officials.
One of the major objections of the business community is that the implementation of the section 153A of the Income Tax Ordinance, 2001 is very difficult as it is impossible to give particulars of unregistered buyers in the monthly sales tax returns. Moreover, unregistered persons are not ready to provide their National Tax Numbers (NTNs) under Section 153A of the Income Tax Ordinance 2001.
Finance Act, 2012 had inserted a new Section 153A of the Income Tax Ordinance, 2001 whereby every manufacturer has to collect withholding tax at the time of sale to all distributors, dealers and wholesalers. This adjustable withholding tax was leviable on the gross sales to all dealers, distributors and wholesalers irrespective of whether they are 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 shown on the invoices or bills. Retailers or final consumers will however not be liable to withholding tax under this section. Commission Agents from whom tax under section 233 has been withheld shall also not be liable to collection of tax under section 153A.
Through the second SRO to be issued by FBR, the Board may impose sales tax on the import of iron and steel scrap. The sales tax would be chargeable on the basis of value of the imported iron and steel scrap. The sales tax would be adjustable against power bills being paid by steel-melting and steel re-rolling units.
The FBR has also decided to reduce sales tax on the steel-melting and steel re-rolling units being collected on the basis of per unit of electricity consumed by the steel manufactures. The sales tax is expected to be brought down from Rs 7 to Rs 4 per unit of electricity.
Sources added that the cost of doing business is very high for the steel sector. The loadshedding of electricity and gas has also adversely affected the manufacturing of the steel sector. As major input of steel sector is electricity, the shortage has created serious problems for the entire industry. Therefore, the Board would reduce sales tax on the steel-melting and steel re-rolling units being collected on the basis of per unit of electricity.