The Federal Board of Revenue (FBR) will rectify an error in the Finance Bill (2012-2013) by amending Section 113(2)(b) of the Income Tax Ordinance of 2001 for a reduction in the turnover tax rate from one percent to 0.5 percent as announced in the next year''s budget. Sources told Business Recorder on Sunday that the FBR had "inadvertently" amended the First Schedule (Part-I) of the Income Tax Ordinance 2001 to reduce the rate of the turnover tax from one percent to 0.5 percent.
Section 113A of the Income Tax Ordinance 2001 is related to the turnover tax on retailers having an annual turnover of less than Rs5 million. There was no requirement to amend the section and the amendment was actually needed in Section 113(2)(b) of the Ordinance to reduce the rate of turnover tax.
However, the First Schedule (Part-I) of the Income Tax Ordinance had been proposed to be amended. In Division IA, for the words "one per cent the figure and sign 0.50% shall be substituted", it added.
The budget (2012-13) had announced that the minimum tax was levied at the rate of one percent on the gross turnover through the Finance Act of 2010. Various sectors of economy protested against the enhanced rate of minimum tax. Therefore, in the case of business community, the rate of minimum tax is proposed to be reduced to 0.5% from 1% on gross turnover.
Another amendment has also been made in Section 113 of the Income Tax Ordinance through Finance Bill. In Section 113, after sub-section (1), the following shall be added, namely: Explanation.- For the purpose of this sub-section, the expression ?tax payable or paid does not include tax already paid or payable in respect of deemed income which is assessed as final discharge of the tax liability under section 169 or under any other provision of this Ordinance, proposed amendment added.
Experts said that the amendments had nothing to do with the turnover tax. Unless an amendment was been made in Section 113(2)(b) of the 2001 Ordinance, the turnover tax rate would not be reduced from one percent to 0.5 percent.
When contacted, FBR officials confirmed that the necessary amendment in the Income Tax Ordinance 2001 was missing for a 50 percent reduction in the turnover tax rate. "The relevant section of the Income Tax Ordinance 2001 would be amended to ensure implementation of the major relief measure announced for the business and trade. It is merely an inadvertent mistake which would be rectified soon," they added.