The Central Board of Revenue (CBR) has declared government departments/autonomous bodies as withholding agents for deducting 3 percent out of total 15 percent payable sales tax involved in transaction of supplies made to the departments.
The Board on Saturday issued Sales Tax Special Procedure (Withholding) Rules, 2007 to ensure deduction of sales tax on supplies made to government organisations. The new procedure would be applicable from July 1.
Sources told Business Recorder that it was primarily an enforcement measure for compliance by both the withholding agents and the suppliers to government departments. Out of total 15 percent sales tax payable by the suppliers, the government will withhold 3 percent, and the balance amount of 12 percent would be returned to the suppliers for depositing in national kitty.
The rules would apply to all taxable goods and services as are supplied by a supplier to government departments, autonomous bodies and public sector organisations. However, the procedure would not be applicable on supplies and services made or rendered by the companies engaged in distribution of gas and electricity and providing telephone services, including mobile phone services.
Under the procedure, withholding tax agent, intending to make purchases of taxable goods, shall indicate in an advertisement or notice for this purpose that the sales tax to the extent as provided in these rules shall be deducted from the payment to be made to the supplier.
A withholding agent shall deduct an amount equal to one-fifth of the total sales tax shown in the sales tax invoice issued by the supplier and make payment of the balance amount to him.
All withholding agents shall purchase taxable goods from a person duly registered under the Sales Tax Act, 1990. Under unavoidable circumstances, in case the purchases are made from unregistered persons, the withholding agent shall deduct sales tax at 15 percent of the value of taxable supplies made to him from the payment due to the supplier.
The sales tax deducted shall be deposited, by the withholding agent, in the designated branch of National Bank of Pakistan under Head of Account 'B02341-Sales Tax' on sales tax return-cum-payment challan. Provided that a single return can be filed regarding all purchases for which the payment has been made in a month.
In case a withholding agent is also registered under the Sales Tax Act pertaining to taxable supplies provided or services rendered by him, he shall deposit the withheld amount of sales tax in the manner as provided under Chapter II of the Sales Tax Rules, 2006 along with other sales tax liability.
According to the rules, the withholding agent shall furnish to the Collector of Sales Tax having jurisdiction all such information or data as may be requested by him for carrying out the purposes of these rules.
A certificate showing deduction of sales tax shall be issued to the supplier by the withholding agent duly specifying the name and registration number of supplier, description of goods and the amount of sales tax deducted.
As far as responsibility of the supplier is concerned, the supplier shall issue sales tax invoice pertaining to every taxable supply made to a withholding agent. The supplier shall file monthly return as prescribed in the Sales Tax Rules, 2006, and shall adjust total input tax against output tax under sections 7, 8 and 8B of the Sales Tax Act,1990, taking due credit of the sales tax deducted by the withholding agent.
Under the rules, the collector shall keep a list of all withholding agents falling in his jurisdiction and monitor payment of tax deducted by withholding agents falling in his jurisdiction and shall also ensure that the return prescribed under these rules is filed. The collector shall ensure that the return received from the bank is duly fed in the computerised system, the rules added.