FBR agrees to return Rs1bln to Sindh in tax controversy

KARACHI: The Federal Board of Revenue (FBR) agreed to return Rs1 billion deducted from the Sindh treasury, making the provincial government pliant to resume collection of withholding tax on motor vehicle registration after three-month break, sources said on Thursday.

The sources said the Sindh Excise and Taxation Department resumed collection of withholding tax on registration of motor vehicles after the FBR agreed to return the amount as the first tranche of Rs5 billion.

The Sindh government stopped the collection of withholding tax at the time of registration of new motor vehicles in July last year after the FBR recovered an amount of Rs5 billion from the provincial bank account maintained at the federal level.

The federal government made all efforts to convince the provincial government to resume collection as a withholding agent. However, the provincial government had a clear stance that the collection would not be started until the money was returned that was allegedly recovered by the FBR from its account.

The provincial department collects withholding tax under sections (231B and 234 of Income Tax Ordinance 2001).

The provincial excise and taxation department stopped the withholding tax collection, while referring to a decision of the Sindh cabinet. The province decided to discontinue the collection of withholding tax on behalf of the FBR, collected by excise, taxation and narcotics control department. The decision was taken in the light of the decision of the Sindh Cabinet held in February last year.

After the unbendable stance of the province, the FBR was compelled to return the amount to the provincial government, according the FBR officials.

A senior FBR official confirmed with The News the revenue body is paying one billion rupees out of the claimed Rs5 billion and payment challan is ready to transfer.

“The remaining amount will be paid out in due course of time,” the official said.

The Sindh excise and taxation department started collection of withholding tax from October last. The FBR official said the provincial department assured the apex tax authority about collection on registration of motor vehicles during the months of July to September.

The Regional Tax Office Karachi received Rs222 million under the section 231B in December, significantly 222 percent higher when compared with Rs69 million in the same month of the last year. Similarly, the tax office received Rs207 million under the section 234 in December, 15 percent higher when compared with Rs181 million in the same month of the last year.