Tax collection from services sector sharply falls 20pc in March

KARACHI: Income tax collection from services sector sharply fell 20 percent year-on-year in March as unprecedented lockdown exacerbated the already deteriorating economic health, official data showed on Saturday.

The statistics showed that the collection of income tax from services sector dropped to Rs1.1 billion in March compared with Rs1.4 billion in the corresponding month of the last year. The services sector that has the biggest contribution to GDP was badly hit by lockdown. Sources in Large Taxpayers Unit (LTU) Karachi said the services sector is one of the major revenue spinners. However, halt in business activities due to lockdown resulted in sharp revenue decline.

The sources said the 20 percent decline in revenue was initial shock of coronavirus as the lockdown was imposed from March 23. “Major dip in revenue collection is to be seen in coming months,” a source said.

The FBR collects income tax at three percent as withholding tax on services rendered by transport, freight forwarding, air cargo, courier, man power outsourcing, hotel, security guard, software development, information technology and IT-enabled, tracking, advertising (other than by print or electronic media), share registrar, engineering, car rental, building maintenance, inspection, certification, testing and training services and services rendered by Pakistan Stock Exchange and Pakistan Mercantile Exchange. However, the rate of tax is six percent if service providers are not on the active taxpayers list. Overall revenue growth under the head was recorded at five percent. The LTU Karachi collected Rs12.04 billion from services sector during July-March 2019/20 compared with Rs11.5 billion in the corresponding period of the last fiscal year.

The collection of income tax from sale of services and goods under Section 153 of Income Tax Ordinance, 2001 by the LTU Karachi fell 17 percent to Rs1.98 billion March compared with Rs2.4 billion in the same month of the last year.

The overall collection under the head registered a flat growth during first nine months of current fiscal year.

The income tax collection from sale of services and goods was recorded at Rs22.3 billion in the July-March period compared with Rs22.2 billion in the corresponding period of the last fiscal year. The FBR has been assigned a revised downward target of Rs3.9 trillion for the current fiscal year after the outbreak of coronavirus. The pre-Covid19 revenue collection estimate was Rs4.8 trillion. The actual FBR’s collection target for the current fiscal year was set at Rs5.6 trillion, which was first reduced to Rs5.2 trillion. However, the latest International Monetary Fund (IMF) report on Pakistan showed revenue collection estimate of Rs4.8 trillion in pre-coronavirus era. IMF said Pakistan is facing unprecedented health and economic shocks from the rapid propagation of the COVID-19 outbreak. Growth is expected to contract sharply by negative 1.5 percent in FY2020, as the economy is buffeted by demand and supply shocks.