New import income tax regime should be abolished

New import income tax regime should be abolished

KARACHI: The tax authorities have been urged to abolish the advance income tax regime at import stage and reinstate the previous regime through budget 2022/2023.

Karachi Tax Bar Association (KTBA) in its proposals for budget 2022/2023, recommended the Federal Board of Revenue (FBR) to amend advance tax at import stage under Section 148 of the Income Tax Ordinance, 2001.

READ MORE: Adjustable advance tax proposed for corporate services

The tax bar said the scheme of tax to be collected at import stage has been revamped in Finance Act 2020 as follows: All imports have been categorized as Part I, Part II and Part III of the Twelfth Schedule chargeable at the rate of 1 per cent, 2 per cent and 5.5 per cent, respectively; the advance tax collected under section 148 of Income Tax Ordinance, 2001 is treated as minimum tax except in case of Industrial undertaking for their own use and falling in Part I, and II of Twelfth Schedule.

In case of goods classified under Part III of the Twelfth Schedule which are used both as raw material and finished goods, the Board may by notification in the official Gazette, specify that goods imported by a person or class of persons as raw material for its own use shall be treated as classified under Part II of the Twelfth Schedule, subject to such conditions and procedure as may be prescribed.

READ MORE: FBR proposed to restore group taxation in original form

Besides, exemption procedure under clause 72B Part IV 2nd schedule revoked.

Onerous requirement for Industrial undertakings felt under Part III for e.g. Automobile sector engaged in Assembly/ Manufacturing and falling within mischief of Part III.

The regime resulted in staggering of refunds particularly if taxpayer has discharged his tax liability for obtaining exemption U/s. 153 of the Ordinance and Increased cost of doing business for service sectors.

READ MORE: Taxpayers should not be penalized for dealers’ fault

The KTBA recommended that twelfth schedule should be abolished, and all imports should be categorized as industrial undertakings or in other respective categories as it stood prior to amendment vide Finance Act 2020.

It is further recommended that exemption procedure under clause 72B Part IV 2nd Schedule that was revoked should be restored. Rate of tax should be reduced from 5.5 per cent to 1 per cent for all Industrial Undertakings to be adjustable tax.

READ MORE: FBR urged to restore first year allowance

Separate scheme should be introduced for service sector allowing collection of tax at import stage to be adjustable tax i.e. enabling exemption from this collection of tax.

Addressing the unnecessary hassle particularly for industrial undertaking.

Reinstatement of exemption to curtail staggering refund and bring recipe for taxpayers. To address the issue faced by the service sector.