Withholding tax to be reduced to 3pc: Raw material import
By Parvaiz Ishfaq Rana
KARACHI, May 28: The Central Board of Revenue (CBR) is working on options for reducing taxes to help cut cost of doing business and provide relief to industrialists and exporters so that country’s products can compete in the world market.
In one such move, the CBR is considering introducing uniform rate of three per cent of withholding tax on import of industrial raw material, official sources said on Monday.
Presently withholding tax (income tax) at import stage is being charged at six per cent from commercial importers and manufacturers who import raw material exclusively for their own use and are liable to pay advance tax under section 148 on the value of goods determined under section 25 of the Customs Act, 1969.
However, as per sub-section(3), (4) and (4A) of section 148 manufacturers who import raw material exclusively for their own use and who are liable to pay advance tax under section 147 have been allowed exemption from withholding tax on production of exemption certificate issued by the income tax commissioner.
The commercial importers of raw materials, however, have to pay withholding tax at six per cent at import stage. The exemption given to the industry on import of raw material is to encourage value-addition in goods which are primarily meant for export. In the forthcoming budget 2007-08, the CBR is expected to propose uniform rate of withholding tax at import stage for commercial and industrial importers of raw material. It is also being suggested that such tax may be made adjustable against final tax liability in case of manufacturers, sources said.
The CBR sources said this step is being taken to check misuse of exemption facility because evidences indicate that fairly large quantity of raw material imported by manufacturers finds its way to local market. Consequently the CBR is expected to withdraw all sorts of exemptions available to such manufacturers in the next budget.
Official sources believe that by doing so the CBR would firstly manage to check misuse of exemptions given to industrial importers of raw material and secondly it would enable the Board to hold three per cent withholding tax for a period of one year as it would be adjusted against final tax liability.
The commercial importers had been complaining that raw material imported by industrial consumers on getting exemption certificate from six per cent withholding tax finds its way in the domestic market which results in losses to commercial importers who have to pay the tax.
