Rate of tax on payments for goods, services

Rate of tax on payments for goods, services

ISLAMABAD: Federal Board of Revenue (FBR) has updated rate of income tax on payments for goods or services during tax year 2021 (July 01, 2020 to June 30, 2021).

The FBR issued income Tax Ordinance, 2001 (updated up to June 30, 2020) after incorporating amendments brought through Finance Act, 2020.

The FBR updated rate of tax on payments for goods or services under Section 153 of the Income Tax Ordinance, 2001 in following manner:

(1) The rate of tax to be deducted from a payment referred to in clause (a) of sub-section (1) of section 153 shall be –

(a) in the case of the sale of rice, cotton seed or edible oils, 1.5 percent of the gross amount payable; or

Explanation.— For removal of doubt, it is clarified that “cotton seed and edible oils” means cotton seed oil and edible oils;

(ab) in the case of supplies made by the distributer of fast moving consumer goods,─

(i) in case of a company, 2 percent of the gross amount payable; and

(ii) in any other case, 2.5 percent of the gross amount payable.

(b) in the case of sale of goods including toll manufacturing,—

(i) in case of a company, 4 percent of the gross amount payable, and

(ii) in any other case, 4.5 percent of the gross amount payable,

(2) The rate of tax to be deducted from a payment referred to in clause (b) of sub-section (1) of section 153 shall be —

(i) 3 percent of the gross amount payable, in the cases of transport services, freight forwarding services, air cargo services, courier services, manpower outsourcing services, hotel services, security guard services, software development services, IT services and IT enabled services as defined in clause (133) of Part I of the Second Schedule, tracking services, advertising services (other than by print or electronic media), share registrar services, engineering services, warehousing services, services rendered by asset management companies, data services provided under license issued by the Pakistan Telecommunication Authority, telecommunication infrastructure (tower) services, car rental services, building maintenance services, services rendered by Pakistan Stock Exchange Limited and Pakistan Mercantile Exchange Limited inspection, certification, testing and training services;

(ii) in case of rendering of or providing of services other than sub-clause (i),-

(a) in case of a company, 8 percent of the gross amount payable;

(b) in any other case, 10 percent of the gross amount payable; and

(c) in respect of persons making payments to electronic and print media for advertising services, 1.5 percent of the gross amount payable.

(3) The rate of tax to be deducted from a payment referred to in clause (c) of sub-section (1) of section 153 shall be –

(i) 10 percent of the gross amount payable in case of sportspersons;

(ii) in case of a company, 7 percent of the gross amount payable; and

(iii) in any other case, 7.5 percent of the gross amount payable.

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