Sales made to unregistered dealers: Manufacturers bound to collect 0.5pc tax from July 1

Saturday, 30 June 2012 10:16

Posted by Imaduddin

582

SOHAIL SARFRAZ

ISLAMABAD: Manufacturers, including sugar mills, flour mills and ghee/cooking oil units, would be legally bound to collect 0.5 percent tax against the sales made to un-registered dealers, distributors and wholesalers from July 1, 2012 onwards.

Responding to rumors that sugar mills, flour mills and ghee/cooking oil units have been exempted from this major documentation measure of budget (2012-13), sources told Business Recorder here on Friday that the decision to collect 0.5 percent tax from these sectors would remain intact and the Federal Board of Revenue (FBR) had not exempted manufacturers of sugar, flour and vegetable ghee/cooking oil from collection of 0.5 percent tax from their un-registered dealers, distributors and wholesalers. Similarly, manufacturers of fertilizers, pesticides and other sectors would also be liable to deduct the 0.5 percent tax from their un-registered dealers/distributors etc. However, the FBR will further clarify the issue through clarification/instructions to be issued here on Saturday (June 29).

Sources rejected rumors that the sugar mills, flour mills and ghee/cooking oil units have been exempted from this documentation measure to be implemented from next fiscal.

When asked that how a Challan would be generated for deduction of tax from the un-registered persons, sources said that the purpose of the whole exercise is to document these un-registered persons within the supply chain to expand the tax net. The manufacturers can obtain the computerized national identity card numbers (CNICs) or National Tax Numbers of these persons for documentation.

Sources stated, Finance Act 2011 has made it mandatory for the manufacturers to collect 0.5 percent tax on sales made to dealers, distributors and wholesalers. In budget (2012-13), the FBR had proposed one percent tax to be collected by manufacturers to their un-registered distributors and wholesalers. Through the amended Finance Bill (2012-13), the rate of tax has been slashed from one to 0.5 percent. Therefore, the manufacturers would have to deduct the 0.5 percent tax from the dealers, distributors and wholesalers under the Finance Act 2011.

To ensure documentation of the economy and to bring traders/distributors on tax roll, the manufacturers have been made withholding agents to collect 0.5 percent tax against the sales made to traders/distributors. However, the tax so collected shall be adjustable against their income.

A major amendment was done in the Finance Bill (2012-2013) by reducing the tax rate of from 1 percent to 0.50 percent to be withheld by the manufacturers on sales to distributors, dealers and wholesalers through the amended Finance Bill.

Sources said that the FBR has no objection to bring down the one percent tax to 0.50 percent. In budget (2012-13), it was proposed that the manufacturers shall be made withholding agents to collect one percent tax against the sales made to traders/distributors. Keeping in view of the recommendations of the Senate, the amended Finance Bill has incorporated the proposal to make 50 percent reduction in the rate of the tax to be withheld by the manufacturers against supplies to the distributors, dealers and wholesalers.

Under Finance Bill (2012-13), every manufacturer, at the time of sale to distributors, dealers and wholesalers, shall collect tax at the rate specified in Part IIA of the First Schedule, from the aforesaid persons, to whom such sales have been made. (2) Tax credit for the tax collected under sub-section (1) shall be allowed in computing the tax due by the person on the taxable income for the tax year in which the tax was collected, it added.