Withholding agents to be liable to pay tax on failure to deduct Sindh sales tax

Withholding agents to be liable to pay tax on failure to deduct Sindh sales tax

KARACHI: The Sindh government has proposed legislation to make withholding agents responsible to pay tax on which he fails to deduct or fails to deposit deducted amount to provincial kitty.

The Sindh Finance Bill 2019 proposed that the withholding agent is personally liable if he either fails to deduct tax or having deducted tax fails to deposit the tax in the government treasury which is revocable along with default surcharge, according to a commentary on Sindh Budget 2019/2020 released by PwC A F Ferguson Chartered Accountants.

They said that it may be noted that Section 47(1B) already provides for collection of any tax short withheld or collected from the withholding agent which has been challenged in courts on various grounds.

“Hence, the apparent purpose of bringing the said provision within Section 13 in this Finance Bill may also be examined in that context,” they said.

The government while imposing liability on withholding agents needs to cover a situation where the person from whom tax was not deducted has already paid the tax before initiation of recovery from the withholding agent.

In such situation, there should be no recovery of principal amount of tax from the withholding agent who failed to deduct the tax from the payment.

A clarification to this effect is required to be inserted by way of an explanation so that such amendment would avoid unnecessary litigation as to the double recovery of tax from the withholding agent as well from the registered service provider, they said.