Tax collection under Finance Act 2024: KTBA urges FBR to clarify new amendments

KARACHI: The Karachi Tax Bar Association (KTBA) has called on the Federal Board of Revenue (FBR) to clarify the implementation of latest amendments related to income tax collection introduced under the Finance Act 2024.

The request comes amid growing concerns over ambiguities in applying the new regulations.

In a letter addressed to the FBR’s Member IR, Policy, the KTBA highlighted several areas of uncertainty regarding the expanded scope of income tax collection.

FBR, PRAs at loggerheads over harmonization of tax collection

The Finance Act 2024 has extended mandatory income tax collection from 22 specific industry sectors to all sectors of the economy.

Key points of ambiguity raised by the KTBA include:

1.Direct sales to end consumers by manufacturers or commercial importers

2.Sales to businesses for their consumption rather than further trading

3.Transactions involving toll manufacturers or contract manufacturers

4.Sales to unregistered dealers, distributors, or wholesalers

The KTBA argued that in cases where manufacturers or importers sold directly to end consumers, Sections 236G and 236H of the Ordinance should not apply, as these sales bypass the traditional supply chain of dealers, distributors, and retailers.

Similarly, the KTBA said that businesses purchasing goods for their use, rather than resale, should be considered end consumers and thus exempt from the tax collection requirement.

The letter also sought clarification on toll and contract manufacturers’ status, suggesting that sales between these entities and principal manufacturers should not be subject to the new tax collection rules.

Lastly, the KTBA questioned whether sales to unregistered dealers, distributors, or wholesalers would fall under the purview of the new regulations.

As businesses across Pakistan grapple with interpreting and implementing these new tax collection rules, the KTBA requested for clarification from the FBR to resolve uncertainties and ensure consistent application of the law throughout the economy.

Copyright Business Recorder, 2024