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February 28, 2021

FBR rakes in Rs20.4 billion on withholding tax in seven months

Business

February 28, 2021

KARACHI: The Federal Board of Revenue (FBR) pulled in Rs20.4 billion on account of withholding tax on sale of goods and services during the seven-month period, showing a 13 percent growth year on year, as consumer demand is fast returning to the pre-pandemic level, latest official data showed.

The collection of withholding income tax on sale of goods and services increased during the first seven months (July – January) of fiscal year 2020/21 owing to higher demand after resumption of economic activities.

The collection of withholding income tax increased from Rs18 billion in the same period of the last fiscal year, according to official data of Large Taxpayers Office (LTO) Karachi.

The sources said domestic demand increased after ease in restriction related to the coronavirus. Economic activities have demonstrated v-shaped recovery since the easing of lockdown. Though normal economic life is yet to bring into a normal mode, the government is trying to keep economic cycle unaffected of the infection management measures following the disastrous fallout of shutdown last year.

A quarter of inertia debilitated the economy reeling from stabilization program guided by the International Monetary Fund. This blow eroded 0.4 percent of the economy during the last fiscal year. Though the contraction was marginal, its implications are adverse on a developing economy like Pakistan that needs at least 7 to 8 percent growth to accommodate its burgeoning population falling in the employment age.

The official statistics revealed that the collection of withholding income tax on goods grew by 25 percent to Rs8.2 billion during July–January 2020/21 compared with Rs6.5 billion in the corresponding period of the last fiscal year.

The sources said the growth of tax collection on sale of goods during the period was due to the fact that manufacturing and trading activities registered significant increase.

The large scale manufacturing for the July –December period increased 8.1 percent, according to the Pakistan Bureau of Statistics.

On the other hand, the collection of withholding income tax on sale of services registered a decline of 4 percent to Rs9.1 billion during the first seven months of the current fiscal year compared with Rs9.55 billion in the corresponding period of the last fiscal year.

The sources said the services sector witnessed the decline due to enforcement of coronavirus related restrictions that also include work from home. However, the collection under the head is now showing growth on a month on month basis as the government is relaxing the restrictions in phases.

The collection of tax on payment on contracts, however, witnessed 37 percent growth to Rs1.7 billion during the period under review compared with Rs1.27 billion in the same period of the last fiscal year.

The sources attributed the growth to an increase in release of funds under the public sector development programs.