Distributors, dealers and wholesalers will now not be liable to pay withholding tax and manufacturers will not be liable to collect the tax after the FBR moved to suspend a major tax measure introduced in this year''s budget.
On Saturday, the Federal Board of Revenue (FBR) decided to temporarily suspend Section 153A of the Income Tax Ordinance, 2001 whereby every manufacturer has to collect withholding tax at the time of sale to all distributors, dealers and wholesalers.
Sources told Business Recorder here on Saturday that the FBR would issue a notification under which Section 153A of Ordinance 2001 would be held in abeyance. There is no need to amend Section 153A of the Income Tax Ordinance, 2001, the sources said. The FBR assured representatives of business community to provide a pro-trade policy, enabling the industry to flourish in Pakistan. Any administrative or enforcement measure which would create serious hurdles in the smooth functioning of businesses would be removed.
Members of the business community had raised objections over the implementation of the Section 153A of the Income Tax Ordinance, 2001, saying that it was impossible to provide particulars of unregistered buyers in their monthly sales tax returns. Moreover, unregistered persons were not ready to provide their National Tax Numbers (NTNs) under Section 153A.
Sources said that an encouraging business environment would automatically improve documentation. However, they said, FBR cannot enforce such measures which would stop business activities in the name of documentation. Section 153A of the Income Tax Ordinance, 2001 was inserted in the Finance Act of 2012. This adjustable withholding tax was leviable on gross sales to all dealers, distributors and wholesalers whether they were registered taxpayers with Income Tax or Sales Tax or not. The gross sales were to be inclusive of sales tax and Federal Excise Duty and any trade discount shown on the invoices or bills. Retailers or final consumers were, however, not liable to withholding tax under this section. Commission Agents from whom tax under Section 233 had been withheld were also not liable to collection of tax under Section 153A.