The Federal Board of Revenue (FBR) has unveiled the income tax rates applicable to petroleum products for the tax year 2022 under the Second Schedule of the Income Tax Ordinance, 2001.
The updated ordinance, incorporating amendments introduced through the Finance Act, 2021, provides clarity on the rates of income tax applicable to the petroleum sector.
The Income Tax Ordinance, 2001, updated up to June 30, 2021, serves as the regulatory framework for income taxation in Pakistan. The ordinance is periodically updated to accommodate changes in taxation policies and economic dynamics. The recent amendments through the Finance Act, 2021, have now shed light on the income tax rates applicable to petroleum products.
The rates of income tax on petroleum products are specified under Section 156A of the Income Tax Ordinance, 2001. According to this section, the rate of collection of tax under Section 156A shall be 12% of the amount of payment. Section 156A specifically pertains to petroleum products and outlines the mechanism for deducting tax from the commission or discount allowed to petrol pump operators.
The text of Section 156A of the Income Tax Ordinance, 2001, reads as follows:
156A. Petroleum Products.— (1) Every person selling petroleum products to a petrol pump operator shall deduct tax from the amount of commission or discount allowed to the operator at the rate specified in Division VIA of Part III of the First schedule.
(2) The tax deductible under sub-section (1) shall be a final tax on the income arising from the sale of petroleum products to which sub-section (1) applies.
This provision establishes the framework for the deduction of tax from the commission or discount allowed to petrol pump operators in the sale of petroleum products. The rate specified in Division VIA of Part III of the First Schedule is set at 12% of the amount of payment. The deduction of this tax is considered a final tax on the income derived from the sale of the specified petroleum products.
Key points regarding the income tax rates on petroleum products for tax year 2022 under Section 156A include:
1. Applicability to Petroleum Products: Section 156A specifically targets transactions involving the sale of petroleum products to petrol pump operators.
2. Rate of Tax Deduction: The rate of tax deduction is set at 12% of the amount of payment, providing clarity on the percentage of income tax to be withheld.
3. Final Tax on Income: The tax deducted under Section 156A is deemed a final tax on the income arising from the sale of petroleum products. This means that once the tax is deducted at the specified rate, it is considered a conclusive settlement of the tax liability associated with the transaction.
This announcement by the FBR is significant for stakeholders in the petroleum sector, providing them with a clear understanding of the income tax rates applicable to their transactions. The FBR encourages businesses and individuals in the petroleum industry to comply with these specified rates and procedures to ensure seamless and transparent taxation processes.
As part of the broader efforts to streamline taxation policies, the FBR remains committed to providing clarity and consistency in the application of income tax rates, contributing to a more efficient and predictable business environment in Pakistan.
