WITHHOLDING TAX ON GOODS AND SERVICES TAX YEAR 2011 (1st July 2011 to 30th June 2012) [Provisions applicable w.e.f. 1.7.2011 onwards] 1) Section 153(1) of the Income Tax Ordinance, 2001 provides that every prescribed person making a payment in full or part including a payment by way of advance to a resident person or permanent establishment in Pakistan of a non-resident person: (a) (b) (c) for sale of goods; for rendering of or providing of services; or the execution of a contract, other than a contract for the sale of goods or rendering of or providing of services, SHALL, AT THE TIME OF MAKING THE PAYMENT, DEDUCT TAX FROM THE GROSS AMOUNT PAYABLE (including Sale Tax) AT THE RATE SPECEFIED IN DIVISION III OF PART III OF THE FIRST SCHEDULE. 2) EVERY EXPORTER OR AN EXPORT HOUSE making a payment in full or part including a payment by way of advance to a resident person or permanent establishment in Pakistan of a non-resident person for rendering of or providing of services of STICHING, DYING, PRINTING, EMBROIDERY, WASHING, SIZING AND WEAVING, shall at the time of making the payment, deduct tax from the gross amount payable at the rate specified in Division IV of the Part III of the First Schedule. [Sub-section (2) of section 153] o The following terms are defined in sub-section (7) of section 153 are as under: “PRESCRIBED PERSON” means: a) b) c) d) e) f) g) h) i) Federal Government A company An association of persons constituted by or under law. A non-profit organization A foreign Consultant and Contractor A Consortium or Joint Venture An exporter or an Export House for the purpose of Sub-Section (2) An association of persons having turnover of Rs.50 million or above in tax year 2007 or in any subsequent tax year or An individual having turnover of Rs.50 million or above in the tax year 2009 or in any subsequent year.
“SERVICES” includes the services of accountant, architect, dentist, doctors, engineers, interior decorator and lawyers otherwise than as an employee. Page 1 of 10
SULTAN TAX ASSOCIATES TAX YEAR TAXATION OF WITHHOLDING TAX ON GOODS AND SERVICES 2012
“SALE OF GOODS” includes a Sale of goods for cash or on credit, whether under written contract or not... *AOP Constituted by or under A Law: The Central Board of Revenue through their letter no. (17) WHT-IT/91-Pt, dated 2-11-2002 has clarified that a partnership constituted through an instrument of partnership deed and registered with the Registrar of Firms under the Partnership Act, 1932 does not fall within the meaning of the Prescribed Persons as given in section 153(9) of the Ordinance. Further, the CBR under their letter C.No1 (17) WHT/91-Pt, dated 29-92002 has clarified that an ordinary Association of Persons (AOP) which is created by an agreement, does not also fall within the definition of the “prescribed person”. 4) Commissioner of Income Tax on application by a recipient is authorized to allow any person to make payment without deduction or deduction at a lower rate. [Sub-section (4) of section 153] The section of withholding tax on goods and services is not applicable to: (a) A sale of goods where the sale is made by the importer of the goods and the importer has paid tax under section 148 in respect of the goods; and the goods are sold in same condition they were in when imported. Payments made to traders of yarn by the tax payers specified in the Zero-rated regime of Sales Tax (as provided under clause (45A) of Part-IV of the Second Schedule) A refund of any security Deposit A payment made by the Federal Government, a Provincial Government of or local authority to a contractor for construction material supplied to the contractor by the said Government or the authority A cotton Ginner who deposit an amount equal to the amount of tax deductible on the payment being made to him, and evidence is provided to the “Prescribed Person” The purchase of an asset...