Exam paper marking work: FTO terms 10pc WHT on teaching community ‘discriminatory’

ISLAMABAD: The Federal Tax Ombudsman (FTO) has declared that the imposition of 10 percent withholding tax by the Federal Board of Revenue (FBR) on the low-paid teaching community for providing their services for paper marking is discriminatory.

According to an order issued by the FTO against the FBR, during the investigations on a teacher’s complaint, FTO has observed that levying 10 per cent withholding tax on teachers for providing their services for paper marking is discriminatory.

Due to the peculiar nature of their job and role in nation-building, the teaching community as a whole deserves kind and compassionate tax treatment; at least non-discriminatory, the FTO further added.

Brief facts of the case are that the complainant being a teacher complained that her withholding tax @ 10 per cent is deducted on the services provided in the shape of marking of examination papers and that this rate is excessive and causes economic suffering. Further, sales tax is also charged on the services provided @ 16 per cent by the Punjab Revenue Authority (PRA).

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In response to the FTO’s notice, the FBR averred that withholding tax on services is fixed @ 10 per cent by the Parliament. Further withholding tax @16 per cent on services is charged by the PRA and the FBR has no jurisdiction over it.

In its findings, the FTO has remarked that the marking of examination papers constitutes an additional source of income in the hands of teaching community. Though the amount so received is generally meagre yet the payers (Education Boards/ Universities) being 3rd party, other than employer, the receipt cannot be held as salary income.

The FBR’s withholding rates on services u/s 153(1) (b) of Income Tax Ordinance, 2001 create distinction between certain specified services and other services with tax rates ranging from 1.5 per cent to 10 per cent.

While the FBR provides at least threshold of Rs30,000, the PRA and other provincial tax authorities do not provide such a limit, meaning thereby an unjust taxation prevails on ground.

Due to its peculiar nature of job and role in nation building, the teaching community as a whole deserves kind and compassionate tax treatment; at least non discriminatory.

In view of the above current tax withholding rates on marking services is discriminatory and needs to be reviewed by the FBR.

While concluding the proceedings, the FTO has recommended the FBR to review the current tax withholding on marking services and the same may be rationalized in the following manner: i. By making marking services part of specified services having three per cent tax rate; ii. By increasing the existing basic threshold of Rs30,000 to Rs100,000/ 200,000 per annum; iii. By making marking services as “income tax from other sources” u/s 39(1) of Income Tax Ordinance, 2001.

Further, the Tax Ombudsman has also requested the PRA to rationalize the current tax regime on services, by providing some basic annual threshold so as to provide some cushion to the low-paid teaching community.

Copyright Business Recorder, 2022