Provincial sales tax registered persons liable to pay advance income tax

Provincial sales tax registered persons liable to pay advance income tax

KARACHI – The Federal Board of Revenue (FBR) has announced that sales tax registered individuals with the provinces are now required to pay adjustable advance income tax, as per the recently updated Income Tax Ordinance, 2001.

The introduction of Section 147A through the Finance Act of 2016 outlines the mode of payment for provincial sales tax registered persons.

Section 147A: Advance Tax from Provincial Sales Tax Registered Person

Sub-Section (1): According to this provision, every provincial sales tax registered person is now liable to pay adjustable advance tax at a rate of three percent of the turnover declared before the provincial revenue authority.

Sub-Section (2): The advance tax, as specified in Sub-Section (1), is required to be paid monthly at the time when the sales tax return is filed with the provincial revenue authority.

Sub-Section (3): Advance tax paid under this section may be taken into account while calculating the advance tax payable under Section 147.

Sub-Section (4): The provisions of this Ordinance shall apply to any advance tax due under this section as if the amount due were tax due under an assessment order.

Sub-Section (5): A taxpayer who has paid advance tax under this section for a tax year shall be allowed a tax credit for that tax in computing the tax due by the taxpayer on the taxable income for that year.

Sub-Section (6): The tax credit allowed for advance tax paid under this section shall be applied in accordance with Sub-Section (3) of Section 4.

Sub-Section (7): A tax credit or part of a tax credit allowed under this section for a tax year that is not able to be credited under Sub-Section (3) of Section 4 for the year shall be refunded to the taxpayer in accordance with Section 170.

Sub-Section (8): Notably, this section shall not apply to a person who was a filer on the thirtieth day of June of the previous tax year.

This move by the FBR aims to streamline and formalize the taxation process for sales tax registered individuals in the provinces. The imposition of adjustable advance income tax is expected to enhance revenue collection, ensure compliance, and contribute to the overall efficiency of the taxation system.

Businesses and individuals falling under the purview of provincial sales tax registration are urged to familiarize themselves with the updated regulations and fulfill their tax obligations in a timely manner. The implementation of such measures aligns with broader efforts to modernize and strengthen the taxation framework in Pakistan, promoting financial transparency and accountability.