Income Tax Ordinance 2001: Advance tax on sales to distributors, dealers and wholesalers

KARACHI: Federal Board of Revenue (FBR) has made manufacturers responsible for collecting advance tax on sales to distributors, dealers and wholesalers.

The tax has been imposed under Section 236G of Income Tax Ordinance, 2001.

Section 236G: Advance tax on sales to distributors, dealers and wholesalers

Sub-Section (1): Every manufacturer or commercial importer of electronics, sugar, cement, iron and steel products, fertilizer, motorcycles, pesticides, cigarettes, glass, textile, beverages, paint or foam sector, at the time of sale to distributors, dealers and wholesalers, shall collect advance tax at the rate specified in Division XIV of Part IV of the First Schedule, from the aforesaid person to whom such sales have been made.

The rate of collection of tax under section 236G shall be as follows:-

Category of Sale Rate of Tax
  Filer Non-Filer
Fertilizers 0.7 percent 1.4 percent
Other than Fertilizers 0.1 percent 0.2 percent

Sub-Section (2): Credit for tax collected under sub-section (1) shall be allowed in computing the tax due by the distributor, dealer or wholesaler on the taxable income for the tax year in which the tax was collected.

Section 236H: Advance tax on sales to retailers

Sub-Section (1): Every manufacturer, distributor, dealer, wholesaler or commercial importer of electronics, sugar, cement, iron and steel products, motorcycles, pesticides, cigarettes, glass, textile, beverages, paint or foam sector, at the time of sale to retailers, “and every distributor or dealer to another wholesaler in respect of the said sectors”, shall collect advance tax at the rate specified in Division XV of Part IV of the First Schedule, from the aforesaid person to whom such sales have been made.

The rate of collection of tax under section 236H on the gross amount of sales shall be as follows:-

Category of sale Rate of tax
  Filer Non-Filer
(1) (2) (3)
Electronics 1 percent 1 percent
Others 0.5 percent

Sub-Section (2): Credit for the tax collected under sub-section (1) shall be allowed in computing the tax due by the retailer on the taxable income for the tax year in which the tax was collected.

Section 236HA: Tax on sale of certain petroleum products

Sub-Section (1): Every person selling petroleum products to a petrol pump operator or distributor, where such operator or distributor is not allowed a commission or discount, shall collect advance tax on ex-depot sale price of such products at the rate specified in Division XVA of Part IV of the First schedule.

The rate of collection of tax under section 236HA shall be 0.5 percent of ex-depot sale price for filers and 1 percent for non-filers.

Sub-Section (2): The tax deductible under sub-section (1) shall be a final tax on the income arising from the sale of petroleum products to which sub-section (1) applies.

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