Islamabad: Tax experts and business community have warned that implementation of newly-introduced provision, binding the corporate sector to make payments of over Rs0.25 million of any expenditure through digital mode, will result in an inevitable collapse of the entire business market system based on credit and post-dated cross cheques.
The Tax Laws (Third) Amendment Ordinance 2021 has introduced a provision that stipulates any expenditure in excess of Rs0.25 million aggregate in financial year by the corporate sector to be inadmissible, if not paid through digital mode.
Tax experts told Business Recorder that mostly payments are made through crossed cheques or post-dated crossed-cheques for transactions involving supplies on credit in the market.
This new condition enforced from September 15, 2021 would collapse the entire business system. Practically, all businesses in the market work on credit that is secured in the form of post-dated cheques. After this new amendment, every payment above Rs0.25 million of any expenditure would be made through the digital mode. It would collapse the entire system.
They added that an amendment is urgently required to introduce an option for the corporate sector to either make payment through digital mode or cross cheques.
When contacted, a top official of the Federal Board of Revenue (FBR) told this scribe that no amendment is under consideration in this regard.
Tax lawyer Waheed Shahzad Butt said that the said measure is difficult to be implemented in the absence of definition of the "digital mode" in the Income Tax Ordinance 2001 or income tax rules.
President SHC Bar Association Salahuddin Ahamd said that the Ordinance can be challenged in the court and the court may pass order against it and set it aside. He said that the Ordinance life is four months and if that is not passed by the Parliament then there may be a crisis-like situation.
Copyright Business Recorder, 2021