Govt. agrees to abolish withholding tax on cash withdrawal: KCCI

KARACHI: The government has agreed to abolish the withholding tax on cash withdrawals from bank accounts by filers.

This decision follows a meeting between a delegation from the Karachi Chamber of Commerce and Industry (KCCI) and Minister of State for Revenue, Hammad Azhar, in Islamabad.

The meeting primarily focused on discussing KCCI’s recommendations for the forthcoming Finance Bill, which is scheduled to be announced on January 23. During the discussions, the minister expressed a willingness to incorporate several suggestions aimed at improving the business environment.

One of the major decisions to emerge from the meeting was the agreement to abolish withholding tax (WHT) on cash withdrawals from bank accounts by filers. This measure is intended to promote ease of doing business and reduce the tax burden on individuals and businesses.

Acting President of KCCI, Khurram Shahzad, also highlighted other positive outcomes from the meeting. He mentioned that the minister agreed to withdraw Sales Tax and WHT on the sale of used or second-hand capital goods and textile machinery by manufacturers and local traders. This move is expected to encourage the growth of the manufacturing sector and facilitate the purchase and sale of machinery.

Another significant commitment made by the minister was to restore the Final Tax Regime (FTR) for commercial importers in the upcoming Finance Bill. This is expected to simplify the taxation process for importers and reduce compliance burdens.

Furthermore, Khurram Shahzad noted that the minister agreed to withdraw notices for mandatory audits under section 214D for late filers of returns. This decision will provide relief to businesses and individuals who may have faced unnecessary audits due to delayed filing.

The meeting also addressed the exercise of powers under various sections of the Sales Tax Act, with the agreement that these powers would only be exercised after prior approval by the Member of the Federal Board of Revenue (FBR) and above. This decision is aimed at enhancing transparency and accountability in the taxation process, with the involvement of representatives from relevant chambers and associations during tax-related actions.

In addition, the meeting discussed the issue of taxes and penalties related to declarations filed under the amnesty scheme. The government agreed to accept taxes and penalties for declarations filed within the due date but received late due to technical reasons. This step is intended to facilitate those who participated in the amnesty scheme and faced difficulties with payment timing.

Regarding withholding taxes on large import houses, it was agreed in principle to withdraw exemptions provided under Section 148 I, Sub-Section 7, Sub-Clause D of the Income Tax Ordinance. This decision will ensure a level playing field for all importers and harmonize tax treatment in the sector.

Furthermore, the ceiling for Associations of Persons (AOPs) and individuals to be treated as withholding agents will be increased for those with a turnover exceeding Rs. 200 million. This is expected to simplify tax compliance for smaller businesses, particularly in comparison to the 2013 regulations.

In conclusion, the decisions and commitments made during the meeting with the state minister are seen as positive steps toward creating a more business-friendly environment. These measures aim to remove distortions in the tax regime, promote ease of doing business, and boost government revenues. The Karachi Chamber of Commerce and Industry hopes that these proposals will be fully implemented in line with the agreements reached during discussions with the state minister and the finance minister, ensuring a more favorable business landscape for individuals and businesses alike.