FBR slashes minimum tax under Section 113

RECORDER REPORT

ISLAMABAD: The Federal Board of Revenue (FBR) has reduced minimum tax under Section 113 of the Income Tax Ordinance, 2001 for motorcycle dealers, steel melters & steel re-rolling mills and slashed withholding tax payment u/s 153(1)(a) of the Ordinance 2001 for steel melters and steel re-rolling mills.

In this connection, the FBR has issued SRO.549(I)/2012 and SRO.550(I)/2012 here on Wednesday to amend the Second Schedule of the Income Tax Ordinance 2001.

Details of the notifications revealed that the FBR has given deadline of June 30, 2012 to the motorcycle dealers for payment of minimum tax on turnover for availing reduction of 50% minimum tax for Tax Year 2011. The FBR has given deadline of May 31, 2012 to the steel melters for payment of minimum tax. In case of withholding tax payment under u/s 153(1)(a) of the Ordinance, the steel melters have to deposit the tax by the deadline of June 30, 2012. For the steel re-rolling mills, minimum tax has to be deposit by May 31, 2012 and withholding tax payment under u/s 153(1)(a) has to be deposited by June 30, 2012.

The FBR has issued SRO. 549(I)2012 wherein conditional reduction in payment of minimum tax u/s 113 of the Income Tax Ordinance has been allowed by adding clause 15 under Part-III of the Second Schedule to the Income Tax Ordinance, 2001. For motorcycle dealers registered under the Sales Tax Act, 1990 for Tax Year 2011 it would be reduced up to 50% of the tax payable and for Tax Year 2012 it would be reduced by 75% of the minimum tax payable u/s 113 of the Ordinance. At present minimum tax u/s 113 is payable at the standard rate of 1% of the total turnover of a taxpayer.

As per notification S.R.O. 550 in case of steel melters and steel re-rolling mills, who have opted under Sales Tax Special Procedure Rules, 2007, conditional payment of minimum tax u/s 113 and reduction in withholding tax payment u/s 153(1)(a) of the Ordinance, has been allowed. A new clause 24B has been inducted under Part II of the Second Schedule to the Income Tax Ordinance, 2001.   

According to the SRO 549(I)/2012, the rate of minimum tax under section 113 for the motorcycle dealers registered under the Sales Tax Act, 1990 shall be reduced by fifty per cent for the Tax Year 2011 provided that they deposit their minimum tax on turnover by June 30, 2012 and for the Tax Year 2012 onwards, the rate of minimum tax would be reduced by 75 percent.

Through S.R.O. 550(I)/2012, in case of steel melters, who have opted under the Sales tax Special Procedure Rules 2007 for the Tax Year 2011 the rate of minimum tax under subsection (1) of section 113 shall be 0.5% of turnover or Rs.280 per Metric Ton, whichever is higher, provided that the consequent tax liability is deposited by May 31, 2012. For Tax Years 2008 to 2010, the rate of withholding tax under section 153(i)(a) on purchase of steel scrap shall be 1% of value of purchases or Rs.300 per Metric Ton, whichever is higher provided that the consequent tax liability is deposited by June 30, 2012. For Tax Years 2011 and 2012, the rate of withholding tax under section 153(1)(a) on purchase of steel scrap shall be one percent of value of purchases or Rs.400 per Metric ion, whichever is higher, provided that the consequent tax liability for the tax year 2011 is deposited by June 30, 2012.

In case of steel re-rolling mills, who have opted under the Sales tax Special Procedure Rules 2007, for the Tax Year 2011, the rate of minimum tax under subsection (1) of section 113 shall be 0.5% of turnover or Rs.315 per Metric Ton, whichever is higher, provided that the consequent tax liability is deposited by May 31, 2012. For the tax years 2008 to 2010, the rate of withholding tax under section 153(1)(a) on purchase of ingots and billets shall be 1% of value of purchases or Rs.400 per Metric Ton, whichever is higher, provided that the consequent tax liability is deposited by June 30, 2012.

For the Tax Years 2011 and 2012, the rate of withholding tax under section 153(1)(a) on purchase of ingots and billets shall be one percent of the value of purchases or Rs.450 per Metric Ton, whichever is higher, provided that the consequent tax liability for the tax year 2011 is deposited by June 30, 2012.

Clause 12(c) in Part IV has been omitted which provide rate of withholding tax at the rate of 1 percent, notification further added.