FBR urged to allow different modes of payment for one year

KARACHI: Karachi Tax Bar Association (KTBA) has urged the Federal Board of Revenue (FBR) to allow conventional modes of payments along with the mandatory condition of "digital mode of payment" for companies for at least a year.

In a letter sent to the chairman FBR, the KTBA said that the recently inserted sub-section (la) in section 21 of the Income Tax Ordinance, 2001, whereby in the cases of the Companies, it has been made mandatory to incur business expenditures for its admissibility broadly via digital means. This new provision of law promulgated through Tax laws (Third Amendment) Ordinance, 2021 is required to be implemented from November 01, 2021.

It said that the condition was remarkably in contradiction with other modes of payment through banking channels, which was historically remained in practice and was widely accepted under the provisions of the Income Tax Ordinance, 2001.

KTBA termed this provision of law as anti-business, saying that it was incorporated without due diligence and without taking the stakeholders into confidence. Additionally, it is not practical for many business houses.

It said that this law of "digital mode of payment" was surely going to hamper the business activities as it did not cater to the situation and solution of such transactions and added that presently, the businesses, including but not limited to Port Terminal Operators and Shipping Lines, were unaware and were not ready for this "digital mode of payment".

Furthermore, it said that similar issues were likely to be faced by the companies for making payments to the growers of various agricultural crops such as sugarcane, rice, cotton, wheat, etc.

It said that this "digital mode of payment" was likely to affect the business transactions in the cases where petty cash payments, in aggregate exceed millions of rupees, which cannot be made digitally.

It said: "We understand that various banks have fixed their own limitation on the quantity of making digital/online payments in a day and have also fixed the threshold of the amount and they do not allow exceeding the threshold limit fixed by them. In our view, this also needs a proper campaign without which the implementation of the law is not possible.

We strongly believe that, unless there is a wide off the mark in conventional banking transaction, this move is likely to create lots of trouble for the Corporate Sector".

Keeping the said in view, KTBA has suggested that the mandatory condition of "digital mode of payment" for companies as envisaged under section 21 (la) of the Income Tax Ordinance, 2001, should be allowed to run simultaneously with other conventional modes of payments for at least a year for smooth business affairs till they were aware of this change in the mode of payment.

Copyright Business Recorder, 2021