Tax department collects Rs970bln in nine months

KARACHI: Large Taxpayers Unit (LTU) Karachi collected Rs970 billion during the first nine months of the current fiscal year, up 12 percent despite economic slowdown as tough tax measures appeared to yield positive outcome, sources said on Thursday.

LTU Karachi, the major revenue collecting arm of the Federal Board of Revenue, collected Rs862 billion in the corresponding period of the last fiscal year. The unit has jurisdiction over large turnover corporate entities and their profits/losses reflect in the revenue collection. The sources at the LTU Karachi said the contraction in imports and lower industrial output badly hit the revenue growth during the current fiscal year.

The sources attributed the double-digit growth in revenue to the budgetary measures taken in the budget 2019/20. The measures included elimination of sales tax zero-rated regime, imposition of 100 percent withholding tax on taxpayers not appearing on active taxpayers list and uniform rates of sales tax on petroleum products.

However, the tax department issued huge amount of refunds, which resulted in negative growth in collection of direct taxes. The unit collected Rs158.42 billion as income tax during the first nine months of the current fiscal year compared with Rs161 billion in the corresponding period the last fiscal year.

LTU Karachi issued around Rs17.4 billion as income tax refunds and an amount of Rs9.2 billion was allowed as adjustment against taxpayers’ liabilities. Out of total income tax collection, the withholding tax collection posted six percent growth to Rs59 billion during the period under review. That was compared with Rs55 billion in the same period of the last fiscal year. The sources said the growth in withholding tax collection under various heads witnessed decline due to higher number of return filing. However, some heads witnessed significant growth in collection of withholding tax because of imposition of 100 percent additional tax on individuals out of active taxpayers list.

The collection of sales tax posted 17 percent growth to Rs759 billion during July-March compared with Rs650 billion in the same period of the last fiscal year. The sources attributed the growth to elimination of zero-rated sales tax regime during the current fiscal year. They said the sectors subject to zero-rated sales tax are now paying 17 percent sales tax. The unit also issued Rs10 billion as sales tax refunds during the period, 149 percent higher when compared with Rs4.1 billion in the corresponding period of the last fiscal year.

The outbreak of coronavirus also started to affect the revenue collection efforts. According to the Pakistan Bureau of Statistics, the output of large scale manufacturing fell 3.37 percent during July – January of the current fiscal year. Imports registered a decline of 14.42 percent to $34.8 billion during the July-March period. That was compared with $40.68 billion in the corresponding period of the last fiscal year.