PTBA declares implementing digital payment not practical

PTBA declares implementing digital payment not practical

Pakistan Tax Bar Association (PTBA) has demanded the Federal Board of Revenue (FBR) extend the implementation of digital mode of payment for corporate entities the system is not practical to use at present for many business entities.

The digital mode of payment has been made mandatory from November 01, 2021. The FBR has already made necessary amendments to relevant tax laws to implement the digital payment system.

The PTBA in its letter to FBR chairman Dr. Muhammad Ashfaq on Friday, October 29, 2021, stated that the new provision of law was promulgated through Tax Laws (Third Amendment) Ordinance, 2021, where a new sub-section (la) was inserted in Section 21 of the Income Tax Ordinance, 2001.

“The condition for allowable expenditure through digital mean is a contradiction with the other modes of payment through banking channels, which is historically remained in practice and accepted under the provisions of the Income Tax Ordinance, 2001 and this provision of law is incorporated without taking the stakeholders into confidence and it is not practically possible for many business houses,” the PTBA said.

The apex tax bar pointed out the following reasons that will make the new provision impractical:

(i) It is impossible to make payment to goods carriage/transport sector by the digital means, which will create complete unrest in the goods carriage and transport sector.

(ii) Presently, port terminal charges, wharfage charges, charges for clearance of delivery orders are paid in advance through crossed cheques or payorders. It will not be out of place to mention here that the port terminal operators and shipping lines, are unaware and are not ready for implementation of the ‘digital mode of payment.’

(iii) It is routine business practice that advance against delivery of goods, the buyer submits its payment by way of post-dated cheques, which normally accepted by the other party and inherently a secured way of making payment. We are afraid that this law of ‘digital mode of payment’ is surely going to hamper the business activities, as it does not cater the situation and solution of such transactions.

(iv) The similar issues are likely to arise and are to be faced by the companies for making payments to the growers of various agricultural crops such as fruits, sugarcane, rice, cotton, wheat, etc.

(v) The various banks have fixed their own limitation on the quantity of making digital / online payments in a day and have also fixed the threshold of the amount and they do not allow to exceed the threshold limit fixed by them. In our view, this also needs a proper campaign without which the implementation of the law is not possible.

(vi) The digital mode of payment is also impractical and is likely to affect the business transaction in the cases where petty cash payments, in aggregate exceed millions of rupees, which cannot be made digitally.

(vii) It will not be out of place to mention that online transactions are still considered as unsecured mode, due to various type online frauds and hacking of software.

The PTBA said that in the presence of the conventional banking transactions, the move is likely to create lots of troubles for the corporate sector.

“It is therefore, suggested that the mandatory condition of digital mode of payment for companies should be allowed along with other conventional modes of payment for at least one year and time limit for updation of business bank accounts under Section 114 of the Income Tax Ordinance, 2001 may be extended till June 30, 2022 for the smooth running of businesses.

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