Income tax rate on traders slashed to 0.25 percent

KARACHI: The Federal Board of Revenue (FBR) has reduced income tax rate for dealers and sub-dealers of sugar, cement and edible oils to 0.25 percent, sources said on Tuesday.

The rate of tax has been reduced through promulgation of Tax Laws (Amendment) Ordinance, 2021 dated February 12, 2021. The FBR sources said prior to the amendment the tax rate for dealers was 1.5 percent.

The reduced rate of tax has also been extended to wholesalers and retailers. Further, the concessional rate would also cover fertilizer and fast-moving consumer goods.

The term ‘fast moving consumer goods” has been defined to mean consumer goods, which are supplied in retail marketing as per daily demand of a consumer excluding durable goods.

The sources said the concession would be available only if the dealer and sub-dealer, wholesaler or retailer is already registered under the Sales Tax Act, 1990 or get themselves registered within sixty days of the promulgation of the Amendment Ordinance, 2021.

Tax experts at PwC A. F. Ferguson Chartered Accountants said that dealers and sub-dealers of sugar, cement and edible oils are allowed minimum tax rate of 0.25 percent under section 113 of Income Tax Ordinance, 2001, provided they are active taxpayers in terms of relevant provisions of both the Income Tax Ordinance 2001 and Sales Tax Act 1990.

Every manufacturer or commercial importer of fertilisers is required to collect advance tax from distributors, dealers and wholesalers under section 236G of the Ordinance at the rate of 0.7 percent.

The tax experts said the rate has been reduced to 0.25 percent if the distributor / dealer / wholesaler is already registered under the Sales Tax Act, 1990 or get themselves registered within sixty days of the promulgation of the Amendment Ordinance, 2021 i.e. by April 11, 2021.

Those registered after April 11, 2021 will be subject to advance tax at the rate of 0.7 percent.

Tax collection under section 236G is adjustable for dealer, distributor and wholesaler of the specified sectors.

The tax incentive came on the heels of tax demand created against sugar mills. The Large Taxpayers Office Karachi has created Rs500 billion worth of tax demand against sugar mills during an audit exercise. The LTO Karachi has jurisdiction over 29 sugar mills. The tax offices started a composite audit of income tax and sales tax of sugar mills in June last year.