Taking a major step towards simplifying the procedures for registered taxpayers, the Federal Board of Revenue (FBR) has withdrawn provision of sales tax withholding on supplies from registered persons to other registered persons under the Finance Bill 2017-18. Under the Bill, sales tax withholding is proposed to be withdrawn on supplies from registered persons to other registered persons with the exception of advertisement services.
Explaining legal amendment introduced in budget 2017-18, Arshad Shehzad, a prominent tax expert, informed that withholding of sales tax was introduced in 2007 through notification 660(i)/2007, also known as sales tax special procedure for sales tax withholding rules 2007, on purchases from public sector enterprises. Later on its scope was extended to registered organised sector such as companies, Large Taxpayer Unit (LTU) registered taxpayers and exporters.
He said that the FBR last year introduced new sales tax return filing system, ie, STRIVE. Under the system the suppliers were required to first report entire payment of sales tax on their supplies. Therefore the purpose and objective behind sales tax withholding for deduction of certain percentage of sales tax was fully achieved from successfully implementation of STRIVE. As a matter of fact, sales tax deduction is creating problem in smooth functioning of STRIVE. The certain circles and tax experts have, therefore, strongly recommended withdrawal of sales tax withholding.
The FBR has accepted one of the major demands of the business community and has withdrawn provision for sales tax withholding among the sales tax registered persons. The amendment is beneficial in nature for both trade the tax authorities. It will simplify the compliance and remove unnecessary complication and irritants, he said. The provision for sales tax withholding on supplies by unregistered persons and government bodies will remain intact, Shehzad added.
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