The Federal Board of Revenue (FBR) has rejected 'withholding tax audit plan for 2014' of the Regional Tax Office-III (RTO) Karachi, directing the concerned Chief Commissioner to chalk out a special plan of action for handling government department (withholding agents).
Sources told Business Recorder on Monday that the FBR has issued instructions to the Chief Commissioner of the Regional Tax Office-III (RTO) Karachi regarding 'withholding tax audit plan for 2014'. In view of huge potential of RTO-III, FBR Karachi has directed the Chief Commissioner to forward a focused well thought-out Withholding Audit Plan by mentioning the names of all the potential withholding agents to be monitored/desk audited in a specified time, the FBR added.
According to the FBR, the Withholding Audit Plan (WAP) submitted by the Regional Tax Office-III (RTO) Karachi has been analysed and the same has been found quite generic and vague. The importance of withholding tax in respect of RTO-III Karachi is evident from the share of withholding taxes in the overall budgetary target that is 91 percent. Therefore, this regime needs special attention for the effective monitoring.
A WAP is a document that reflects the cases involving high-risk areas selected after thorough deliberations. Maximum government department falls in the jurisdiction of RTO-III Karachi which requires Real Time Monitoring (RTM) for quick collection of tax. A separate plan of action for handling government department needs to be devised. The FBR has directed the RTO-III Karachi to resubmit the WAP in respect of potential withholding agents with the time line for the completion of audit.
The Withholding Audit Plan forwarded by the RTO-III Karachi was analyzed and following observations on the plan are conveyed to the Chief Commissioner of the Regional Tax Office-III (RTO) Karachi: Firstly, as per RTO-III Karachi, the audit of 208 withholding agents could not be completed in the previous financial year was to be completed by 31-10-2014. The FBR has asked the RTO to submit a report to this effect covering name of withholding agent; section and period involved; default amount created and amount collected.
Secondly, regarding the audit of 236-K no time line has been given. The earlier report contains only the names of 26 withholding agents the Registrars and sub-registrars. The FBR has directed the RTO to submit an updated report on the results of monitoring of these 26 withholding agents.
Thirdly, similarly the collection under section 236-D in the first quarter is only Rs 21 million which is far less than the potential of Karachi. The reason for this low collection is that no extra effort has been made by Commissioner withholding zone on collecting the information in respect of marriage halls. In this connection a report was forwarded to RTO office on account of non-compilers and gross under reporting u/s 236-D, however so far no response has been received on the report. The FBR has requested the RTO to forward complete list of marriage halls depositing tax u/s 236-D and the list of marriage halls falling in the territorial jurisdiction of RTO-III, Karachi along with plan to conduct their audit.
Fourthly, in respect of extremely important sections 149, 236-H, 236-I and about the sales tax withholding no specific plan has been given, It is once again reiterated the generic statements do not bring in taxes. Regarding effective monitoring of 236-I RTO should follow the suggestions given in the letter dated 21st October, 2014.
Fifthly, the FBR has further directed the Chief Commissioner RTO-III, Karachi to send a specific program to conduct desk and field audit of withholding agents deducting tax u/s 149, 236-H and 236-I. For effective monitoring of deduction of tax u/s 153 another letter was issued for which the report is still awaited.
The FBR has directed the concerned RTO to submit progress on the tax recovered from Market Committees. The collection in this head is extremely low. Keeping in view the huge potential of RTO-III Karachi, the FBR has asked the Chief Commissioner to forward a focused well thought WAP by mentioning the names of all the potential Withholding Agents to be monitored/desk audited in a specified time, the FBR added.
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