The Federal Board of Revenue (FBR) would calculate withholding tax on commercial imports by adding 2 percent sales tax, payable under SRO.645(I)/2007, which was levied in lieu of sales tax payable on local supplies after "value addition". The FBR has amended sales tax general order (STGO) 3 of 2007 through another STGO issued here on Thursday.
According to the amended STGO, 2 percent sales tax, payable under SRO 645(I)/2007 is in lieu of sales tax payable on local supplies after value addition. However, the FBR has abolished the phrase, "It should not be included in value for calculating withholding income tax" from the relevant STGO. Resultantly, the relevant authorities would withhold income tax on the commercial imports by adding 2 percent additional sales tax.
When contacted, sources said that a correction has been made in the relevant order for proper calculation of withholding tax on commercial imports. For calculation of withholding tax, customs duty, sales tax, including 2 percent tax and value of goods declared/accepted would be taken into account. The value of goods would be subsequently increased as a result of this decision.
It is important to mention that under SRO.645(I)/2007, 2 percent advalorem sales tax is to be levied and collected at import stage on goods imported by commercial importers in addition to the tax chargeable under sub-sections (1) and (2) of section 3 of the Sales Tax Act, 1990. The 2 percent tax shall be paid on the same value on which 15 percent sales tax is determined.
The supplies by the commercial importers to withholding agents, specified under SRO.660(I)/2007 shall be subject to withholding onefifth of sales tax invoice. The commercial importers shall charge sales tax on actual value of supplies. In case, there is any excess deduction, they will be entitled to refund/ adjustment of the same, the procedure added.