Five leading export sectors: WHT rate may be enhanced for local sales, services

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The Federal Board of Revenue has drafted a proposal to enhance one percent reduced rate of withholding tax on local sales, supplies and services provided or rendered to five leading export sectors - textile, carpets, leather, surgical and sports.

Sources told Business Recorder here on Tuesday that the FBR is examining all aspects of enhancing withholding tax rate for local sales, supplies and services provided or rendered to five leading export-oriented sector. It is expected that the proposal would be discussed in the meeting of sub-group of the Tax Reform Co-ordination Group (TRCG) to be held on Wednesday (January 23).

The sub-group of the TRCG would also discuss new taxation measures and enforcement/administrative strategy to meet the revenue collection target for 2012-2013. The sub-group of the TRCG has been convened to review two major issues, ie, review of FBR revenue collection and update on IMF talk. The meeting would be held at the FBR House on Wednesday.

According to sources, if the policymakers agrees with the proposal of abolishing one percent reduced rate of withholding tax for five export sectors, this would require amendment in the SRO.333(I)/2011 or issuance of the new notification. With the approval of Ministry of Finance, the FBR can rescind the SRO.333(I)/2011 or issue a fresh SRO.

The notification said that the rate of deduction of withholding tax under clauses (a) and (b) of sub-section (i) of Section 153 shall be one percent on local sales, supplies and services provided or rendered to the following categories of sales tax zero-rated taxpayers, namely textile and articles thereof; carpets; leather and articles thereof including artificial leather footwear; surgical goods and sports goods. Provided that withholding tax under clauses (a) and (b) of sub-section (i) of Section 153 shall not be deducted from sales, supplies and services made by traders of yarn to the mentioned categories of taxpayers. Such traders of yarn shall pay minimum tax 0.1 percent on their annual turnover on monthly basis on 30th day of each month and monthly withholding tax statement shall be e-filed under the provisions of Section 165 of Ordinance 2001. The provisions of clause (a) of sub-section (i) of Section 111 of Income Tax Ordinance shall not apply to the amounts credited in the books of account maintained for the period ending on the 30th June 2011, by the sellers suppliers, service providers to the categories of sales tax zero-rated taxpayers, as mentioned in sub-clause (a). The provisions of sub-clauses (a) and (b) shall be applicable only to the cases of sellers, suppliers, service providers of the above mentioned categories of sales tax zero-rated taxpayers, who are already registered and to those taxpayers who get themselves registered by June 30, 2011.

Courtesy: Business Recorder


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