KARACHI: The Federal Board of Revenue (FBR) and the Sindh government have reached an agreement on recovery of advance income tax, also called withholding tax (WHT), on motor vehicle registration.
Excise and Taxation Secretary Abdul Majeed Pathan told Dawn on Saturday that the collection of advance income tax at enhanced rates would start immediately after the FBR refunds the withheld amount of Rs330 million, out of Rs700m detained by the board.
It was also agreed that the excise and taxation department will recover arrears of withholding tax from owners of vehicles registered during July-September 2014, the period defined by the FBR as non-implementation of Finance Act, 2014.
The agreement was reached during a meeting between Lubna Farrukh Mirza, Chief Commissioner Inland Revenue, FBR, and the Sindh excise secretary.
The excise secretary informed the FBR commissioner that the withholding tax rates in the new Finance Act were too exorbitant which would erode revenue of the Sindh government. Besides the introduction of withholding tax on transfer of vehicles would slow registration of motor vehicles.
He further informed the meeting that the said provisions of the Finance Act, 2014 have also not been implemented by the Punjab and KP governments.
The meeting was informed by an FBR official that on account of non-implementation of Finance Act an estimated default of about Rse330m under Section 213B and 234 and Rs19m on account of illegal retention of service charges by the motor vehicle registration wing has been worked out and is recoverable.
He said that as a gesture of mutual cooperation, the excise department got the MVR wing software amended to comply with the provisions of the Finance Act, 2014.
It was also agreed that the Commissioner Withholding Tax will obtain information regarding motor vehicles registered and transferred between July 1 ando Sept 30 and will calculate the actual default due to non-compliance of the Finance Act.
After the adjustment of demand, the FBR would immediately issue the balance refund.
The Commissioner WHT will work out modalities to enable MVR to transfer arrears recovered from owners of motor vehicles which will be paid through adjustment from the refund amount.
Published in Dawn, November 23rd, 2014
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