Reduced rate of WHT at import stage: Wholesalers availing concessionary regime to face action

SOHAIL SARFRAZ

ISLAMABAD: The Federal Board of Revenue has directed customs officials to take strict legal action against those wholesalers who have availed concessionary regime only available to manufacturers by paying reduced rate of 3 percent withholding tax on the import of raw material instead of 5 percent tax applicable at the import stage.

Sources told Business Recorder here on Saturday that the FBR has issued instructions to the Collectors of Customs, Model Customs Collectorates (MCCs) to immediately take action to collect due amount of withholding tax at the import stage under section 148 of the Income Tax Ordinance 2001.

The FBR has also referred to a previous letter of the Chief Commissioner Inland Revenue Regional Tax Office Karachi on the collection of advance tax under section 148 of the Income Tax Ordinance 2001. All Collectorates are advised to take necessary measures proposed in the letter for collection of due amount of withholding tax at import stage, FBR’s instructions added.

According to sources, some wholesalers have availed reduced rate of 3% that is applicable to manufacturers and by doing so not paid correct amount of tax at import stage. It is requested that the concerned field offices may be directed to recover the evaded amount of tax.

The Collectors of Customs should prevent misuse of the aforementioned facility of reduced rate of 3 percent on the value of imports by verifying whether the importer is registered as a manufacturer or not at the time of deduction of the said tax. The Collectors of Customs have been directed to deduct advance tax under section 148 of the Income Tax Ordinance, 2001 on the above mentioned lines.

Details of the issue revealed that the FBR has assigned the task of monitoring of withholding taxes at import stage under section 148 of the Income Tax Ordinance 200 to the Regional Tax Office, Karachi. In this connection, the import data of six months (March 2011 to August 2011) was obtained from Customs House, Karachi. During the scrutiny of data, it has been observed that 28 importers of RTO – Peshawar have imported goods of Rs.3729.96 millions and claimed exemption of withholding tax U/S. 148 of the Income Tax Ordinance, 2001 on the basis of SRO 754(I)/2010 dated 9th August, 2010. The Chief Commissioner Peshawar was requested to confirm the issuance of exemption certificates to these importers who confirmed that only 22 exemption certificates were issued. It shows that 06 importers have availed the facility without exemption certificates and imported the goods worth Rs.166.168 millions without payment of advance income tax. Besides, four importers have availed this facility and imported goods of Rs.703.793 millions on expired exemption certificates. This fact has also been communicated to Collector PaCCS Karachi by Commissioner Zone-I.

It is also pertinent to mention that import data of importers belonging to RTO, Karachi have also been examined which revealed that 8 wholesalers have also availed facility of importing raw materials at reduced rate of 3 percent instead of 5 percent applicable to commercial importers. Steps are being taken to recover balance tax, which have been short paid by them as identified by commissioner Zone-I and Zone-II of this RTO. The department has also obtained data of RTO-Peshawar importers who have made imports without getting exemption certificates/using certificates even after expiry of said certificate and wholesalers of RTO Karachi, sources said.

After taking up issue with Chief Collector (Customs), Karachi for ensuring that import of raw material for self use to industrial undertakings be not allowed until said importer produce reduced rate certificate from Commissioner concerned as envisaged by provisions of Section 159 read with clause (9A) of Part-II of second Schedule to Income Tax Ordinance, 2001, various trade bodies as well as learned counsels of taxpayer, have agitated that requirement of obtaining lower rate certificates by all importers or raw material for self use, be dispensed with. As per legal advisors of these importers, such requirement will not only render Second Scheduled to Income Tax Ordinance redundant but also cause delay in clearance of consignments.

The RTO Karachi is also collecting and communicating data of raw material imports at reduced rate, to concerned RTOs for retrieval of short paid tax, wherever applicable, sources added.