The Federal Board of Revenue has imposed 5 percent withholding tax on the imports made by large trading houses under SRO 140(I)/2013. Explaining the SRO 140(I)/2013 dated February 26, 2013, tax expert said on Saturday that previously no withholding tax was applicable on the imports made by the Large Trading Houses. Now five percent withholding tax would be applicable on the imports made by the Large Trading Houses.
The exemptions from Minimum Turnover Tax for 10 years under section 113 of Income Tax Ordinance, 2001 and withholding tax under section 148 of ITO available to Trading Houses registered as Companies as defined in clause 57 of Part IV of 2nd Schedule of Ordinance 2001 has been withdrawn.
Through the promulgation of SRO 140(I)/2013, the FBR has made significant amendments to Ordinance 2001 and following sections/parts and clauses of 2nd Schedule have been omitted and/or modified: Section 113 of ITO regarding Minimum Turnover Tax; section 148 of ITO apropos Advance/Withholding Tax at the Import Stage; clauses 9, 9(a), and 13 (g) of Part II of 2nd Schedule of ITO enlarging reduced rate of deduction under section 148 of ITO, and clause 57 of Part IV of ITO describing concessions extended to the Large Trading Houses (companies).
The significant amendments in the notification revealed that the Withholding Tax Rate ("WTR") on import of all fibers, yarns, and fabrics in addition to goods covered by zero rating regime of sales tax, ie, textiles, leather, sports goods, carpets, and surgical goods; as enlisted in SROs 1125(I)/2011 dated December 31, 2011 and 638(I)/2005 dated June 27, 2005 have been enhanced from 1 percent to 5 percent, by deleting clause 9 of Part II of 2nd Schedule of ITO.
The disparity of WTR between industrial and commercial importers has been removed i.e. WTR of industrial importers has been increased from 3 percent to 5 percent by deleting clause 9(A) of Part II of 2nd Schedule of ITO, _ WTR on the import of gold, silver and mobile phones have been increased from 1 percent to 5 percent consequent to the deletion of clause 13(G) of Part II of 2nd Schedule of Ordinance 2001, tax experts added.