Purchase of agriculture produce: WHT not applicable if directly sold by growers

The withholding agents will not deduct withholding tax on purchase of agricultural produce directly sold by growers/cultivators. The FBR on Saturday issued a circular, No 4 of 2011, on miscellaneous clarifications regarding reduction of tax on sale/purchase of agricultural produce.
According to the circular, 1.5 percent withholding tax is deductible on sale of cotton seed, rice and edible oils, if the sale is made by a person other than a grower/cultivator. The FBR has further decided that deduction of withholding tax under section 153(1)(a) of the Income Tax Ordinance 2001 was deferred till March 31, 2011 on sale/purchase of seed cotton in open market. However, the withholding agents shall be responsible for deduction of withholding tax after March 31, 2011.
The FBR has further said that the withholding agent shall not deduct withholding tax on purchase of agricultural produce which is directly sold by a grower/cultivator of the produce. However, in such a situation the withholding agent shall issue a certificate, in triplicate, to (a) for the grower/cultivator (b) for the concerned Commissioner of Inland Revenue and (c) a copy to be retained for his personal record, in the concerned format.
According to the FBR, the withholding tax is deductible @ 1.5 percent on sale of cotton seed, rice and edible oils, if the sale is made by a person other than a grower/cultivator directly himself. In case sale of seed cotton or other agricultural produce is made by a grower/cultivator through a commission agent, then advance tax is collectible under section 233 of the Ordinance @ 10percent of the gross commission income of the commission agent. It is therefore clarified that in such a case withholding tax is not deductible on the gross amount of sale of cotton seed or such other agricultural produce, the FBR added.