It is virtually impossible to impose 3.5 percent withholding tax on agri-trading till the Federal Board of Revenue (FBR) places effective checks to identify whether a seller is a grower or an 'arthi' (commission agent/agri-trader), for the purpose of levy.
A senior financial analyst and tax expert, Ashfaq Yousuf Tola, told Business Recorder here on Tuesday that the FBR has to take immediate measures to ensure genuine identification of seller for proper imposition of 3.5 percent withholding tax on agri-trading.
It is very important to distinguish between the genuine grower and an arthi (commission agent) for the purpose of imposition of 3.5 percent withholding tax. In such a situation, the computerised national identity card number (CNICs) should be obtained from the concerned persons engaged in business transactions of agri-products to ensure identification of the seller. The buyers would provide the CNIC numbers of the persons from whom he would make purchases for identification of the genuine grower.
The main issue which may hinder documentation under SRO 1161(I)/2010 of December 31, 2010 is the identification of seller whether he is a grower or an 'arthi'. If the purchases are made from genuine grower no withholding tax would be charged. However, in case purchases are made from an arthi (agri-trader) then 3.5 percent withholding tax would deducted, he said.
In the present circumstances, the identification is impossible whether the buyer is purchasing from grower or an arthi. Hence, some sort of identification is essential for documentation purposes. To effectively tackle the situation, it is suggested that if such purchases are made from growers, then their CNIC number shall be provided in the relevant returns.
Subsequently, the FBR can cross-verify the same from Nadra record. In this way, the department would know whether the arthi or grower is accurately giving information or not. Ashfaq, who is also a senior chartered accountant and partner of CPA Associate International, world-wide, said that the FBR has to take proper steps to ensure documentation of persons for enforcement of SRO 1161(I)/2010 without delay.