Abolition of 12 WHTs to dent revenue by Rs15bln annually

ISLAMABAD: In a bid to provide relief to people, the government has abolished 12 Withholding Taxes (WHTs) through Finance Act 2021-22; however, this move is likely to cause Rs15 billion revenue loss annually, The News has learnt.

The government has removed WHTs on banking transactions, air travel, stock exchange, CNG stations, petroleum products, international debit credit card transactions, and extraction of minerals.

In totality, the government slapped additional taxes of Rs116 billion Income Tax through Finance Act 2021-22 and provided relief to the tune of Rs58 billion so net addition is estimated to stand at Rs58 billion in the ongoing financial year. The major relief measures taken by the government was abolishment of 12 WHTs and merger of three more WHTs through Finance Act 2021-22.

The reduction of minimum tax rates from 1.5 percent to 1.25 percent for all persons, refineries from 0.75 percent to 0.5 percent, fast moving goods sold by integrated retailers from 1.5 percent to 0.25 percent, Special Economic Zones (SEZs) enterprises from 1.5 percent to 0 percent and Special Technology Zone (STZ) enterprises from 1.5 percent to 0 percent has also estimated to dent revenue by Rs15 billion on annual basis.

The reduction of WHT rate on mobile phone services from 12.5 percent to 10 percent is figured to deal a blow of Rs 15 billion to revenue. There were 12 WHTs that were abolished through Finance Act 2021-22 and it was one of the major reliefs provided through this newly passed act. The Finance Act, approved by the Parliament, has become effective after the assent of the President of Pakistan from July 1, 2021.

Under section 153B, the collection of WHT on payment of royalty to residents has been abolished. Moreover, WHT on cash withdrawal, under section 231A, has also been deleted, while under section 231AA, WHT on banking instruments has been withdrawn. While under 236P, WHT on banking transactions other than through cash has also been annulled.

Under 236Y, the collection of tax from persons remitting amounts abroad through credit or debit or prepaid cards has been abolished. Under section 236B, tax on domestic air travel has been withdrawn. Under section 236L, WHT on international air travel now stands abolished. Under section 236V, tax on extraction of minerals has been removed.

Under section 233A, WHT collection from members by a stock exchange registered in Pakistan has been abolished. Under section 233AA, tax on marginal financing by NCCPL has been withdrawn. Under section 234A, the collection of tax from CNG stations has been abolished. Under section 236HA, WHT on certain petroleum products has been deleted.

The FBR also merged three withholding taxes with other provisions of Income Tax Law 2001. Under section 150A, the deduction of tax on return on investment in Sukuks has now been merged in section 151 for residents and in section 152 for non-residents which deal with such payments.

Under section 152A, the deduction of tax on payments for foreign produced commercials has been merged with section 152, which deals with payments to non-residents. Under section 236S, the collection of tax on dividend in specie has been merged with section 150 which deals with dividend.