The recently imposed 6 percent withholding tax on services may create problems for already tax payers in the absence of a proper definition of services. Business community said it understands that the objective of 6 percent withholding tax on services is to bring into tax net doctors, lawyers, engineers, consultants and architects whose contribution is very low or rather negligible.
It is feared that in the absence of a proper definition of services, 6 percent tax is being deducted from the industries and manufacturing sectors, which provide value-added services such as tool manufacturing or processing of the materials. These sectors will be on the brink of closure if such huge tax deduction takes place. It simply means that an industry setup providing services amounting to Rs 50 million will be facing a tax deduction of Rs 3 million, which is not acceptable to business community at any condition.
The President of Karachi Chamber of Commerce and Industry (KCCI), Abdul Majid Haji Mohammad, has recommended to the Chairman of Federal Board of Revenue (FBR), Shohail Ahmed, to provide definition of services. He also suggested that 6 percent withholding tax on services should be limited to those services that are not yet in the tax net.