Federation of Pakistan Chambers of Commerce and Industry lament Federal Board of Revenue for increasing withholding tax deduction rate from 1% to 1/5th (20%) of sales tax

Federation of Pakistan Chambers of Commerce and Industry lament Federal Board of Revenue for increasing withholding tax deduction rate from 1% to 1/5th (20%) of sales tax

 

Islamabad, February 25, 2013 (PPI-OT): Haji Fazal Kadir Khan Sherani, President Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and Zakarya Usman Chairman FPCCI Working Group on Federal Budget in a press statement issued have lamented Federal Board of Revenue (FBR) for arbitrarily and exorbitantly increasing the withholding tax deduction rate from 1% to 1/5th (20%) of the sales tax involved vide SRO 98(I) 2013 dated February 14, 2013 and urged to immediately rescind it as it would adversely affect the business activities in organized/documented sector.

They elaborated that in addition to LTU taxpayers now all the companies as defined in Income Tax Ordinance 2001 and registered in Income Tax, Sales Tax or Federal Excise Laws and persons registered as exporters in Sales Tax are required to withheld tax @1/5th or 20% of the amount of Sales Tax shown in invoice issued by a registered persons, which comes to 3.2% based on 16% standard rate of Sales tax.

Referring to commercial importers who pay advance value added tax at import stage, the FPCCI Chief said that they might not be in a position to absorb such additional amount of input tax arrived in shape of withholding and thus accumulation of tax credit would leads to accrual of refund and open the flood gate of corruption. Moreover, “According to a FBR clarification, the commercial importers are restricted from claiming refund and such the anomaly may be removed from by excluding them from the preview of the SRO”, he proposed.

Mr. Zakarya Usman explained that the provisions of section 8-B of the Sales Tax Act., restricts registered persons from adjustment of input tax over 90% of output tax. it means that the lesser adjustment of 10% u/s 8-B followed by 20% withholding make their input tax increased to the extent of 30% and thus they need to secure at-least 30% value addition to achieve self adjustment, otherwise accumulation of input tax eventually force the such person to seek refunds.

He said that SRO would also come in the way of documentation of the economy because either the manufacturers or importers would start making supplies to unregistered persons or to such registered persons who are not withholding agents. On the other hand, he said, the withholding agents would also be facing great difficulties in getting raw material from registered persons. Therefore, these withholding agents would change their status from companies to AOPs or to Sole Proprietorship.

Referring to the energy and gas crisis and Law and Order situation in the country, Zakarya Usman said, “We need business-friendly policies to boost our businesses but it is unfortunate that the authorities at the helm of affairs are creating more irritants to retard the economy.” He said those changes would not add revenue to the government exchequer rather they would create hardship for smooth running of businesses that were already suffering from liquidity crunch.

For more information, contact:
Syed Masood Alam Rizvi
Secretary General
Federation of Pakistan Chambers of Commerce and Industry (FPCCI)
B-1, Federation House, Main Clifton Road,
Shahra-e-Firdousi,
Karachi-75600, Pakistan
Tel: 0092-21-35873691, 93-94
Fax: +9221 3587 4332
Email: info@fpcci.com.pk
URL: www.fpcci.com.pk

 
 
 

0 Comments

You can be the first one to leave a comment.

 
 

Leave a Comment

 

You must be logged in to post a comment.