Levy of 3.5 percent WHT: Finance minister constitutes nine-member committee

Federal Finance Minister Dr Abdul Hafeez Sheikh has assured to review the levy of 3.5 percent Withholding Tax on agricultural produce and constituted a nine members committee comprising representatives of Ministry of Finance, Federal Board of Revenue and FPCCI to submit its recommendation till January 25th.
Talking to a delegation of Pakistan Cotton Ginners Association (PCGA), which called on Federal Finance Minister Dr Abdul Hafeez Sheikh under the leadership of FPCCI President Ghulam Ali on Saturday and apprised him of their grievances. The PCGA delegation was comprised on PCGA chairman Chaudhry Masood A majeed, Ex Chairman Haji Muhammad Ibrahim and Senior Member Khawaja Muhammad Iqbal.
Vice Chairman of PCGA Shehzad Ali Khan told on phone that delegation informed the federal finance Minister that purchase of "Phutti" would remain suspend till the withdrawal of SRO-1161 because with-holding tax was detrimental to the ginners as well as growers. The delegation said that 3.5 percent WHT would be shifted to growers by the brokers and Arhtis. Over 1,000 ginning units in Pakistan have stopped buying cottonseed to protest against 3.5 percent tax levied from January 1, 2011.
The raw agriculture produce cannot be taxed according to the section 41 of the income tax ordinance 2001, which provides exemption to agricultural income on sale or supply of agricultural produce by a cultivator or grower. "Cottonseed, as a basic raw material for ginning sector comes under non-finished good, which can not be taxed as only semi finished and finished produces are liable to be taxed," The most affected sector will be the farmers and growers of cottonseed, who take banks' loans and fertiliser and pesticides on credit in order to complete their cotton cropping season, Masood "A Majeed lamented.
He said due to unfair tax by FBR, the ginners and growers of cottonseed in the country would face a loss more than Rs 3.5 billion each day due to halt in buying and non availability of cottonseed, he added. Delegation said, the middleman would face a huge financial loss due to levy of 3.5 percent WHT, as he always plays a role for bridging trade relations and agriculture produces supplies between spinners and market players. They said the textile and yarn sector would also face further shortage of raw cotton if the halt in buying and ginning activities continued.