This blog is written by Mr. Daniyal Naeem. Please read this blog and provide your valued comments
Sales Tax defined under Sales Tax Act, 1990 as:
(a) the tax, additional tax, or default surcharge levied,
(b) a fine, penalty or fee imposed or charged, and
(c) any other sum payable under the provisions of this Act or the rules made thereunder.
Withholding Tax:
An amount which is paid to Government treasury by withholding agent.
Collector: means the collector of Sales Tax having jurisdiction.
INTRODUCTION:
Withholding Tax is a global phenomenon and in Pakistan, the significant wellspring of the Federal income gathered on the public level. Government of Pakistan has jurisdictionally made policies for collection of withholding tax under Income Tax Ordinance, 2001 Sales Tax Act, 1990 respectively. People in today’s world don’t bother to put attention upon withholding tax. As it is burden for general public in comparison with government who get ultimate benefit from collection of withholding tax.
Retaining Taxes system in either way is essential for charge framework since the time burden of direct duties by the administrations and citizens on two scores;
- To the legislature, gives income routinely during the time for its consumption and activities.
- To the citizens, gives an occasion to release their commitments in sensible portions.
Lately, globalization has constrained numerous nations to change their economies to blend charge polices and arrangement thereof with new exchange and venture approaches exemplified in the international alliances. The idea of “Hang Together” is more pertinent today than any other time in recent memory. Nations can neither close their fringes nor their economies. Duty arrangements cannot be disconnected from the worldwide economies either. Taking into account such serious climate there was a need to have an association to screen and deal with the arrangement of Withholding Tax Regime, consequently the Directorate General of Withholding Taxes was made through Finance Act of 2008 under area 230A of the Income Tax Ordinance 2001.
WITHHOLDING TAXES IN PAKISTAN
- Income Tax
- Sales Tax
**This blog deals with Withholding Tax on Sales Tax only. **
Withholding Agents under each Withholding Section:
| S# | Section | Withholding Agent |
| 1 | 148 Imports | Collector of Customs |
| 2 | 149 Salary | Employer / Person responsible for paying salary |
| 3 | 150 Dividend | Every Person |
| 4 | 151Profit on debt
151(1)(a) |
Every Person Making Payment |
| 5 | 151(1)(b) | Banking Company or Financial Institution |
| 6 | 151(1)( c) | Federal / Provincial Govt/ Local authority |
| 7 | 151(1)(d) | Banking company, a financial institution, a company or finance society |
| 8 | 152
Payments to non-resident 152(1) |
Every prescribed person |
| 9 | 152(1A) | Every person |
| 10 | 152(1AA) | Every Person |
| 11 | 152(1AAA) | Every Person |
| 12 | 152(2) | Every Person |
| 13 | 152(2A) | Every Prescribed person: –
i. The Federal Government. ii. A Company. iii. An Association of persons constituted by, or under law. iv. A non-profit Organization. v. A Foreign Contractor or consultant. vi. A consortium or Joint venture. vii. An exporter or an export house for the purpose of sub section (2) viii. An association of persons having turnover of fifty million rupees or above in tax year 2007 or in any subsequent tax year. ix. An individual having turnover of fifty million rupees or above in the tax year 2009 or in any subsequent year. x. A person registered under the Sales Tax Act, 1990 |
| 14 | 153
Payment for goods & services 153(1)(a) 153(1)(b) 153(1)(c) |
Every Prescribed Person: –
i. The Federal Government. ii. A Company. iii. An Association of persons constituted by, or under law. iv. A non-profit Organization. v. A Foreign Contractor or consultant. vi. A consortium or Joint venture. vii. An exporter or an export house for the purpose of sub section (2) viii. An association of persons having turnover of fifty million rupees or above in tax year 2007 or in any subsequent tax year. ix. An individual having turnover of fifty million rupees or above in the tax year 2009 or in any subsequent year. x. A person registered under the Sales Tax Act, 1990 |
| 15 | 153(2) | Exporter/Export House |
| 16 | 154
Export and foreign indenting commission 154(1) 154(2) 154(3) |
Authorized dealer/Banking Company |
| 17 | 154(3A) | EPZ Authority |
| 18 | 154(3B) | Direct exporters / export house registered under
DTRE rules, 2001. |
| 19 | 154(3C) | Collector of custom |
| 20 | 155
Income from Property |
Every Prescribed Person: –
i. The Federal Government. ii. A Provincial Government. iii. Local Government. iv. A Company. v. A non-profit Organization (or a Charitable Institution). vi. A Diplomatic mission of a foreign state. vii. A private educational institution, a boutique, a beauty parlour, a hospital, a clinic or a maternity home. viii. Individuals or association of persons paying gross rent of rupees on and a half million and above in a year. |
| 21 | 156
Prizes and winnings |
Every Person |
| 22 | 156 A
Petroleum Products |
Every Person |
| 23 | 156B
Withdrawal of balance under pension fund |
Pension fund manager |
| 24 | 231A
Cash Withdrawal from a Bank |
Every Banking Company |
| 25 | 231AA
Advance tax on transaction in bank |
Every banking company non-banking financial institution , exchange company or any authorized dealer of foreign exchange |
| 26 | 231B
Purchase of Motor car |
Motor vehicle registration authority |
| 27 | 233
Brokerage & Commission |
Federal Government, Provincial Government, Local
authority, Company AOP constituted by or under any law. |
| 28 | 233A
Collection of tax by stock exchange |
Stock Exchange Registered in Pakistan |
| 29 | 233AA | NCCPL(National Clearing Company of Pakistan Limited) |
| 30 | 234
Tax on Motor Vehicle |
Person collecting motor vehicle tax |
| 31 | 234A
CNG Station |
Person preparing gas consumption bill |
| 32 | 235
Electricity |
Person preparing electricity bill |
| 33 | 236
Telephone |
Person preparing telephone bill / issuing or selling prepared card for mobile phones |
| 34 | 236A | Every person |
| 35 | 236B
Advance tax on purchase of Air Ticket |
Person preparing air ticket |
| 36 | 236C Immoveable property | Every person Registering or attesting Transfer. |
| 37 | 236D
Advance Tax on Function & Gatherings |
Owner, Manager& operator of the Marriage Hall, Club, Hotel, Marquee etc. |
| 38 | 236E
Advance Tax on Foreign Produced TV Plays & Serials |
Any licensing Authority |
| 39 | 236F
Advance Tax on Cable Operators & other Electronics |
PEMRA |
| 40 | 236G
Advance Tax on sales to distributors, dealers & wholesaler |
Every Manufacture or Commercial importer of electronics sugar, cement, iron & steel products, motorcycles, pesticides, Cigarettes glass, textile, beverages, paint or foam sector |
| 41 | 236H
Advance Tax on sales to Retailers |
Every Manufacture, distributor, dealer, wholesaler or Commercial importer of electronics, sugar, cement, iron & steel products, motorcycles, pesticides,
Cigarettes glass, textile, beverages, paint or foam sector |
| 42 | 236I
Collection of Advance Tax by Educational Institution |
The person preparing fee voucher or challan |
| 43 | 236J
Advance Tax on dealers, commission agents and arhtis |
Every Market Committee or any commodity regulatory authority |
Responsibility of a withholding agent:
- The withholding agent, intending to make purchases of taxable goods, shall indicate in an advertisement or notice for this purpose that the sales tax to the extent as provided in these rules shall be deducted from the payment to be made to the supplier.
- A withholding agent shall deduct an amount equal to one fifth of the total sales tax shown in the sales tax invoice issued by the supplier and make payment of the balance amount to him.
- All withholding agents shall make purchases of taxable goods from a person duly registered under the Sales Tax Act, 1990, provided that under unavoidable circumstances and for reasons to be recorded in writing, purchases are made from unregistered persons, the withholding agent shall deduct sales tax at 15% of the value of taxable supplies made to him from the payment due to the supplier.
- The sales tax so deducted shall be deposited by the withholding agent in the designated branch of National Bank of Pakistan under Head of Account “B02341-Sales Tax” on sales tax return-cum-payment challan in the form set out at Annexure to these rules, by 15th of the month following the month during which payment has been made to the supplier: Provided that a single return-cum-challan can be filed in respect of all purchases for which the payment has been made in a month: Provided further that in case the withholding agent, is also registered under the Sales Tax Act, 1990, with respect to the taxable supplies provided or services rendered by him, he shall deposit the withheld amount of sales tax in the manner as provided under Chapter II of the Sales Tax Rules, 2006, along with other sales tax liability. In such case the Annexure to these rules shall be submitted to the Collector having jurisdiction.
- The Annexure to these rules, shall be prepared and deposited with the bank in triplicate and the bank shall send the original to the Collectorate of Sales Tax having jurisdiction, return the duplicate to the depositor and retain the triplicate for its own record.
- The withholding agent shall furnish to the Collector of Sales Tax having jurisdiction all such information or data as may be requested by him for carrying out the purposes of these rules.
- A certificate showing deduction of sales tax shall be issued to the supplier by the withholding agent duly specifying the name and registration number of supplier, description of goods and the amount of sales tax deducted.
Responsibility of the supplier:
- The supplier shall issue sales tax invoice as stipulated in section 23 of the Sales Tax Act, 1990, in respect of every taxable supply made to a withholding agent.
- The supplier shall file monthly return as prescribed in the Sales Tax Rules, 2006, and shall adjust total input tax against output tax under sections 7, 8 and 8B of the Sales Tax Act,1990, taking due credit of the sales tax deducted by the withholding agent, in the manner as prescribed in the return under Chapter II of the Sales Tax Rules, 2006.
Responsibility of the Collector:
- The Collector shall keep a list of all withholding agents falling in his jurisdiction and monitor payment of tax deducted by withholding agents falling in his jurisdiction and shall also ensure that the return prescribed under these rules is filed.
- The Collector shall ensure that the return received from the bank is duly fed in the computerized system as referred to in clause (5AA) of section 2 of the Sales Tax Act,1990.
- The Collector shall periodically ensure that the suppliers mentioned in the return filed by the withholding agents, as fall under his jurisdiction, are filing returns under section 26 of the Sales Tax Act, 1990, read with Chapter II of the Sales Tax Rules, 2006, and are duly declaring the supplies made to withholding agents.
Sales Tax: Sales Tax Act of 1990 likewise accommodates system of Withholding.
Vide SRO No. 660(1)/2007 dated 30th June 2007 extraordinary method under the title of Sales Tax exceptional technique (Withholding Tax) Rules 2007, was presented. In spite of the fact that inside the Sales Tax structure portion of Withholding Tax is very minor and its extension is restricted. Yet there is further space for expanding its base.
Daniyal Naeem
November 6, 2020
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