The Federal Board of Revenue (FBR) has recently announced an update to the rate of income tax on the sale of certain petroleum products for the tax year 2021, spanning from July 01, 2020, to June 30, 2021.
This update, outlined in the Income Tax Ordinance, 2001 (updated up to June 30, 2020), incorporates amendments introduced through the Finance Act, 2020.
Specifically, the FBR has revisited and updated the rate of income tax applicable to the sale of certain petroleum products, as outlined in Section 236HA of the Income Tax Ordinance, 2001. According to the updated ordinance, the rate of collection of tax under Section 236HA stands at 0.5 percent of the ex-depot sale price.
The relevant section, 236HA, stipulates the tax on the sale of certain petroleum products, outlining the conditions and procedures for tax collection. It mandates that 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 the ex-depot sale price of such products. The specified rate for this tax collection is detailed in Division XVA of Part IV of the First Schedule.
Importantly, the tax deducted under this provision is considered a final tax on the income arising from the sale of petroleum products covered by the specified sub-section. This implies that the tax collected at the point of sale represents the complete and final tax liability for the income generated from these transactions, offering a streamlined approach to tax assessment in this specific sector.
The update reflects the FBR’s commitment to keeping tax regulations aligned with economic changes and legislative amendments. By incorporating the changes introduced through the Finance Act, 2020, the FBR aims to provide clarity to stakeholders in the petroleum industry and ensure compliance with the prevailing tax structure.
As the tax year 2021 concludes, businesses involved in the sale of petroleum products will need to adhere to the updated income tax rates outlined by the FBR. This adjustment not only ensures that tax regulations remain current but also contributes to a more transparent and predictable business environment for the petroleum industry in Pakistan. The FBR continues its efforts to create a fair and efficient tax system that meets the needs of both the government and businesses operating in the country.