KARACHI: Federal Board of Revenue (FBR) has been suggested to abolish withholding tax on import stage for corporate manufacturers in order to attract investment in the country.
In its tax proposals for budget 2019/2020, Pakistan Business Council (PBC) has suggested exemption from collection of withholding tax under Section 148 of the Income Tax Ordinance, at import stage and exemption for manufacturing concerns under Section 153 of the Ordinance.
It said that procedures and rules for obtaining exemption certificates for import of plant and machinery and raw material by taxpayers had serious restrictions, which were causing hardship.
Therefore, corporate manufacturing sector should be excluded from the purview of income tax withholding at import stage under section 148 as well as from tax deduction on local supply under section 153.
Similar exemption is already given to the Greenfield industries through Finance Supplementary Second Amendment Act 2019 in March 2019.
The same exemption, however, is not available, for the brownfield expansion.
Moreover, all the companies engaged in manufacturing should be exempt from withholding of tax under Section 153.
Similar exemption is available for sales tax in Sales Tax Special Procedure (Withholding) Rules, 2017 via SRO 586 dated July 01, 2017.
It is further suggested that alternatively issuance of exemption certificate from withholding under Section 148 and 153 should automatically trigger on the FBR portal based on payment of quarterly advance tax under Section 147 to avoid harassment of genuine taxpayers.
“This will enable taxpayers to avoid creating huge tax refunds and focus on more expansion,” the PBC suggested.
It further said: “This would increase the investment for brownfield capacity expansion as well and would provide a meaningful relief (similar to Greenfield expansion) with regard to BMR and extension/expansion.”
Further, it will also attract foreign direct investment in the form of new expansion ventures as well as partnerships and hence will also result in export growth.