The exemption of withholding tax on sale/supply of agricultural produce by a grower/cultivator is still intact under the receently issued SRO1161(I)/2010. Official sources told Business Recorder on Thursday that the exemption of withholding tax on sale/supply of agricultural produce by a grower/cultivator is still intact, and SRO 1161(I)/2010 dated December 31, 2010 has aligned the whole situation in line with the exemption on agricultural income by a grower, as provided in section 41 of the Income Tax Ordinance 2001.
The FBR has strongly dispelled impression created by certain quarters that exemption of 3.5 percent withholding tax on purchase of agricultural produce, has been withdrawn through issuance of Board''s SRO 1161(I)/2010. Through this notification, the Board has restricted the exemption to actual growers/cultivators as prescribed in the law.
Details of the issue revealed that the section 41 of the Income Tax Ordinance 2001 provides exemption to ''agricultural income'' on sale/supply of agricultural produce by a cultivator/grower. Similar exemption was also available in the repealed Income Tax Ordinance 1979.
Earlier through clause (v) of Board''s SRO 586(I)/91 dated 30th June 1991 persons receiving payments from a company or an Association of Persons (AOP) having turnover of Rs 50 million or above exclusively for the supply of agricultural produce which has not been subjected to any process other than that which is ordinarily performed to render such produce fit to be taken to market, was exempted from deduction of withholding tax @ 3.5 percent.
Through Finance Act 2010, the definition of ''prescribed persons'' was amended and "an individual having turnover of Rs 50 million rupees or above" was added in the list of withholding agents, to deduct withholding tax on sales/supplies [section 153(1)(a) of the Income Tax Ordinance 2001].
Afterwards, Board had received various representations requesting to include "an individual having turnover of Rs 50 million rupees or above" in clause (v) of SRO 586(I)/91 of June 30, 1991. The SRO 1161(I)/2010 dated December 31,2010 was issued with approval of competent authority, wherein following amendments were made in clause(v) of SRO 586:-
Firstly, the word "persons" was replaced with the words "growers/producers of agricultural produce", in order to restrict exemption to actual growers/cultivators as prescribed in the law. Secondly, the phrase "an individual having turnover of Rs 50 million rupees or above" was added in the list of prescribed persons, who will not deduct withholding tax from growers on sale/supply of agricultural produce.
Therefore, exemption of withholding tax on sale/supply of agricultural produce by a grower/cultivator is still intact, and SRO 1161(I)/2010 Dated 31st December 2010 has aligned the whole situation in line with the exemption on agricultural income by a grower, as provided in section 41 of the Income Tax Ordinance 2001, official sources added.