Tax collection from sale of goods, services slides to Rs4.7bln

KARACHI: The collection of income tax on sale of goods and services fell eight percent to Rs4.7 billion during the first two months of the current fiscal year as legal changes pushed up cases of exemptions, sources said on Wednesday.

The Large Taxpayers Office Karachi collected Rs5.1 billion during the July-August period of last fiscal year.

The Federal Board of Revenue (FBR) implemented prompt issuance of exemption certificates, according to sources.

Officials said designated withholding agents are required to collect income withholding tax on sales of goods and services on behalf of the FBR under section 153 of Income Tax Ordinance, 2001.

Through the Finance Act 2020, a major amendment was introduced into the section, which encouraged taxpayers to obtain exemption certificates for either exemption from tax or make payment at a concessional rate of tax on sales of goods and services.

An official at the tax office said amendments have been made in sub-section (4) of section 153 of the Ordinance to facilitate listed public companies and under which it was made mandatory for commissioners to issue exemption certificates to public-listed companies under section 153(1)(a) of the Ordinance as recipients of payments for sale/supply of goods within a maximum period of 15 days from the date of filing of application for such exemption certificate subject to the condition that the company has discharged its advance tax liability.

“If the concerned commissioner fails to issue such exemption certificate within 15 days of receipt of exemption request, the exemption certificate shall be deemed to have been issued upon expiry of 15 days,” said the official. “In that eventuality, the exemption certificate shall be automatically processed and issued by Iris.”

The official said the amendment has been implemented from July 1 and recently the FBR through an income tax circular explained the implementation said changes.

Under section 153 of the Income Tax Ordinance, 2001 different rates of tax are applicable on execution of transactions such as goods and services, contracts and royalty paid to resident persons.

The details showed that income tax collection on sale of goods fell 4 percent to Rs2.1 billion during the first two months of the current fiscal year. That was compared with Rs2.16 billion in the corresponding months of the last fiscal year. Likewise, the collection on sales of services sharply dropped 24 percent to Rs2 billion during the period under review. That was compared with Rs2.6 billion in the same period of the last fiscal year.