A large number of manufacturers and traders engaged in supply chain of consumer goods (non-food items) are expected to submit their withholding tax statements for the first time today (Thursday) under the newly incorporated amendments in the Income Tax Ordinance 2001 through Finance Act 2013.
The Federal Board of Revenue (FBR) is expecting around three million taxpayers would be netted through the newly introduced provisions in the tax law which would help the board to generate Rs25 billion to Rs30 billion additional a year. It has been made mandatory on manufacturers and commercial importers to deduct advance tax at the rate of 0.1 per cent on sales to distributors, dealers and wholesalers, official sources said. Similarly, every manufacturer, distributor, dealer, wholesaler or commercial importer will also have to deduct advance (withholding) tax at the rate of 0.5 per cent while making sales to retailers, shopkeepers and vendors. The successive governments tried to bring retailers, wholesalers and dealers under the tax net but miserably failed though official estimates place their contribution towards the country’s GDP at around 17 per cent.
Official sources said that the country imports goods worth around $45 billion and half of these are imported by commercial importers who supply goods directly to wholesalers, distributors and dealers, who then supply them to retailers, shopkeepers and vendors.
Consequently, the government has made legislation which could help bring distributors, dealers, wholesalers, retailers, shopkeepers and vendors into tax net through advance tax on sales. Therefore, two amendments were made in the Income Tax Ordinance 2001 by incorporating Section 236-H and Section 236-G through Finance Act 2013.
Under section 236-G advance tax at 0.1 per cent will have to be deduced and deposited through withholding tax statements on all transactions (sales) of commercial importers and local manufacturers made to wholesalers, distributors, and dealers. Similarly, under Section 236-H all sales made to retailers, shopkeepers and vendors by distributors, dealers and wholesalers advance tax at the rate of 0.5 per cent will have to be made and withholding tax statement will have to be submitted on 15 of each month.
However, the government has initially included some category of manufacturers, commercial importers, distributors, dealers and wholesalers making sales to retailers, shopkeepers and vendors of electronic goods, sugar, cement, iron and steel products, fertiliser, motorcycles, pesticides, cigarettes, textiles, beverages, paints and rubber foam.
