Traders given tax incentives

Traders given tax incentives

KARACHI: Federal Board of Revenue (FBR) has allowed tax concession to traders to bring them into tax net.

The tax concessions have been granted through Tax Laws (Second Amendment) Ordinance, 2019.

Tax experts at PwC A F Ferguson Chartered Accountants said that pursuant to the agreement between representatives of federal government and trade bodies on October 30, 2019; certain concessions have been allowed to traders through the Second Amendment Ordinance.

The term ‘trader’ has been defined to mean an individual engaged in business of buying and selling of goods in the same state, including a retailer and a wholesaler but excluding a distributor.

The concessions provided to traders are as under:

(i)The general rate of minimum tax payable (under section 113 of the Income Tax Ordinance 2001) has been reduced from 1.5 percent to 0.5 percent for tax year 2020 for traders having turnover up to Rs100 million.

However, for traders who have filed income tax returns for tax year 2018, the tax liability for tax years 2019 and 2020 should not be less than the tax liability for tax year 2018, to become eligible for reduced rate of minimum tax of 0.5 percent.

(ii)Individual having turnover of Rs. 50 million or more in any of the preceding tax years is liable to deduct tax under section 153 while making payments against supply of goods, services and contracts.

Through the Second Amendment Ordinance, traders being individuals having turnover up to Rs100 million have been exempted from deducting tax under section 153 while making payment against supply of goods, services and contracts.

The board is expected to clarify the year with respect to which turnover of Rs100 million will be calculated by the trader.

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