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SRB tightens up rules for withholding agents

Business

July 1, 2020

KARACHI: The Sindh government has made it mandatory for withholding agents to maintain record of sales tax collection/deduction of the past eight years in a bid to discourage rampant misappropriations of revenue, The News learnt on Tuesday.

The Sindh Revenue Board (SRB), issued a notification, announcing amendments in the Sindh Sales Tax Special Procedure (Withholding) Rules, 2014.

Under the new amendments, the withholding agent will be required to maintain record for a period of eight

years from the tax period to which it relates.

“Further, the withholding agent shall also maintain, for a period of eight years from the tax period to which it relates, the record of the tax invoices received by him from the service providers and the documents and banking instruments showing the withholding agents’ compliance,” says the notification.

As per Sindh Sales Tax on Services Act, 2011 the provincial government specified individuals and companies to act as withholding agents to collect sales tax on behalf of the provincial tax authority.

However, in the past it was found out that a majority of withholding agents were not depositing all the collected withholding tax into the provincial kitty, causing huge monetary losses to the provincial exchequer.

Sources in SRB said the provincial revenue authority had initiated recovery proceedings in many cases but taxpayers escaped taking advantage of flaws in the tax laws.

However, with the amendments the withholding agents would be required to keep the record for the past eight years of collection and deduction, which would help the provincial tax authorities monitor both the service providers and service recipients, an official at the SRB said.

The provincial government had revised downward the tax collection target for SRB from Rs145 billion to Rs135 billion in fiscal year 2019/20.

The Sindh government also kept Rs135 billion tax target for SRB in fiscal year 2020/21.

The provincial government in budget 2020/21 announced no new tax for the fiscal year. However, through notifications the provincial government announced tax policy changes in order to enhance monitoring and audit of taxpayers during fiscal year 2020/21.

According to another notification, the provincial government made it mandatory for banks to provide details of sales tax on services rendered during a quarter.

The banks will be required to provide quarterly details from July 01, 2020 regarding services rendered by banks on branch banking customer fee and commission, consumer financing fee, card (debit, credit) fee etc. The banks and financial institutions will also be required to provide details of around 29 services on quarterly basis, according to the notification.