Islamabad: The Federal Board of Revenue (FBR) is likely to issue a clarification on the queries relating to the Tax Laws (3rd Amendment) Ordinance, 2021, including those related to digital mode of payment by the corporate sector.
Sources told Business Recorder that the FBR is expected to clarify the issues raised by the corporate sector in the coming days.
The corporate sector is waiting for the issuance of the income tax circular by the FBR to clarify the type of transactions covered under digital mode for making payments on expenditures exceeding Rs250,000. Tax experts informed that the FBR has granted a 40-day grace period up to November 1, 2021 to corporate taxpayers to switch over to the digital mode of payments under Tax Laws (3rd Amendment) Ordinance, 2021.
However, no income tax circular has been issued by the FBR so far. They said that there are various types of digital transactions including clearances of cheques through swift mode. Whether the clearances of cheques through swift mode is covered under the transactions of the digital mode.
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Moreover, it is very important that the FBR must specify and clarify what kind of transactions are covered under the digital mode. When payment is made through the digital mode under the Tax Laws (3rd Amendment) Ordinance, 2021, banks may claim charges for that, which would increase the cost of doing business of the corporate sector, a tax expert opined.
The new Ordinance has restricted the scope of payments via traditional banking channels on account of expenditures exceeding Rs250,000 to the taxpayers other than companies.
Consequently, clause (la) in Section 21 has been inserted in the Ordinance, whereby, it is now mandatory for companies to make payments on expenditures exceeding Rs250, 000 through digital mode only.
However, expenditures on account of utility bills, freight charges, travel fare, and payment of taxes and fines would continue to be admissible either paid in cash or traditional banking instruments. The purpose behind this legislative enactment is to encourage digital payments and discourage traditional mode of transactions by the corporate sector in the first phase.
Copyright Business Recorder, 2021