Services providers: FBR makes six percent WHT adjustable

The Board-in-Council of the Federal Board of Revenue (FBR) took a major decision on Wednesday to make 6 percent withholding tax adjustable for services providers falling within the corporate sector under section 153 (1)(b) of the Income Tax Ordinance 2001.
Sources told Business Recorder here that the FBR Board-in-Council meeting, chaired by FBR Chairman Salman Siddique, outrightly rejected the proposal to reduce the rate of 6 percent withholding tax on services to one percent. It has been agreed in principle that the tax withheld from corporate sector providing services under section 153 (1)(b) of the Income Tax Ordinance 2001 shall now be adjustable tax as against minimum tax.
This will restore the original status prior to amendment made to Finance Act 2011. Resultantly, the corporate service providers would have to pay normal tax on the income or minimum tax under section 113 of the Income Tax Ordinance 2001 at the rate of one percent of the total turnover. This decision of the Board has removed anomaly of charging two minimum taxes on the corporate sector.
Sources said that the Board-in-Council also decided to introduce a single rate of 5 percent on local stage of five sales tax zero-rated sectors including textile, leather, surgical, carpets and sports goods. The FBR will combine the existing rate of 4-6 percent on the local supplies to un-registered persons of five leading export sectors.
Sources said that the Board-in-Council also reviewed recovery of illegal sales tax input adjustments. The tax officials were divided over the figure of Rs 80-100 billion pertaining to illegal input tax adjustments. The figures are based on the computer-generated reports of the FBR Taxpayer''s Audit Wing. The concerned Wing which worked out the figures for inadmissible tax adjustments should also be engaged in recovery of the same. Through audit, the FBR is trying to recover the amount from the claimants of illegal input tax adjustments.
Muhammad Anees FBR Member Taxpayers Audit Wing and head of the investigation committee gave an update on the latest position of the missing containers case. He informed the Council about FIRs registered against the involved officers in the missing containers scam. Aminullah Khan FBR Member Enforcement and Accounting made a detailed presentation on Public Accounts Committee matters to improve compliance of the FBR before the PAC.
FBR Member Legal Muhammad Aqil Usman gave a presentation on recovery of arrears stuck up in courts and results of disposal of cases through special benches in High Courts. It was reiterated that the FBR should strongly pursue the cases where 6 months have passed after obtaining stay orders in courts.