Month: March 2021

KARACHI: Federal Board of Revenue (FBR) has been urged to amend laws to exclude manufacturers of fast moving consumer goods (FMCGs) from application of withholding tax under Section 236G and 236H on Income Tax Ordinance, 2001.

Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2021/2022, stated that manufacturers of electronics, sugar, cement, iron and steel products, fertilizer, motorcycles, pesticides, cigarettes, glass, textile, beverages, paint or foam etc., collect advance tax at 0.1 percent for persons appearing on Active Taxpayers List (ATL) and 0.2 percent for non-ATL and 0.5 percent for ATL and 1 percent for non-ATL of gross of amount of sale to distributors, dealers, wholesalers and retailers.

Most of the goods mentioned above are not fast moving consumer goods. The only FMCG is beverages on which the section 236 G & H are unjustly applied.

This tantamount to discrimination for beverage manufacturers being the only manufacturer of FMCGs manufacturer class liable to above tax.

It is not practically possible for manufacturer of FMCGs to collect income tax from dealers, distributors, wholesalers and retailers and it adds to the cost of consumer products.

The KCCI proposed that the section may be appropriately amended to exclude the manufacturers of FMCGs from being collecting agents under section –236 G & H of the Ordinance.

The chamber said that it would relieve the unjust burden of tax on consumer goods and enable manufacturers of FMCGs to pass the benefit to end-consumers.

KARACHI: The Federal Board of Revenue (FBR) has been suggested to abolish multiple provisions of audit under Income Tax Ordinance, 2001 and simplify procedure for ease of doing business.

Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2021/2022 said that presently audit proceedings can be started u/s 177 as well as through balloting u/s 214C and like-wise enquiries can also be made by the Commissioner u/s 122(5A). There is a concept of a special audit panel u/s 177(11) as well.

Sub-Section 7 is ambiguous and provides the Commissioner and his sub ordinates with a tool to harass, extort and victimize any taxpayer at will.

The Commissioner can re-open the Audit of any person or firm at will on unsubstantiated grounds. SEC.177 SUB-SECTION 4: Any person employed by a firm to conduct audit function may be authorized by the Commissioner to exercise powers under sections 175 and section 176.

The KCCI said that revenue collection through such recovery proceedings is hardly Rs.92.0 Billion whereas the costs due to litigation, involvement of entire tax collection machinery and declining number of tax filers, is far more than the collection.

Multiple audits under various provisions have eroded the trust of tax-payers in the FBR. RTOs and LTUs. Audit functions under various Provisions have created confusion and complexity in Tax regime.

Such provisions are also prone to misuse and a source of harassment.

The chamber proposed that all audit functions should be brought under one provision of Income Tax Ordinance rather than various over-lapping provisions with clear and well defined parameters. Audit Parameters should be transparent and open to taxpayers.

Further, Sub-Section 7 may be deleted.

Powers of the Commissioner and sub-ordinate officials should be curtailed to restore the trust of Tax Payers and encourage broadening of tax-base.

Such Audits should be restricted to specific queries or objections and call for relevant document only rather than opening and re-opening a comprehensive audit every time.

Giving rationale the KCCI said that bring transparency and clarity to audit functions and rules governing the same.

Prevent harassment to tax payers and abuse of powers by Inland Revenue officials. This will also help in broaden tax base by restoring confidence in the system.