KARACHI, Oct 4: The Federal Board of Revenue (FBR) has issued notices to exporters for the recovery of millions of rupees outstanding towards Workers Welfare Fund (WWF).

Exporters had been hitherto remained exempted from 2 per cent WWF levy on paying one per cent withholding tax on exports under presumptive tax regime, which was considered as their final discharge of tax liability.

However, the government in the year 2006 introduced an amendment to section 2 (1) of the Workers Welfare Fund Ordinance, 1971 to include export trade under WWF levy.

The WWF levy charged on total income and not on sales alone could not be imposed on exporters during the subsequent year (2007) as the government did not make corresponding amendment to the charging section 4(1) of the WWF ordinance.

Having realised the legal omission, a further amendment to section 4 (1) was introduced by the government in the ordinance through Finance Act 2008 and thus the WWF levy on exporters became effective from 2008.

Bilal Mulla, chairman Pakistan Readymade Garments Manufacturers and Exporters Association (Prgmea) strongly objecting to the move said that the export trade was paying one per cent withholding tax and needed no assessment as it is taken as a final discharge of tax liability.

Secondly, he said all charging sections were applicable prospectively unless otherwise provided under the law. Therefore, the tax department cannot charge WWF levy retrospectively, he added.

Shabir Ahmed, chairman Pakistan Bedwear Exporters Association (PBEA) said that the WWF ordinance, 1971 did not provide any authority to the collector to charge WWF levy from 2007 and there was a need to make amendment to the charging section 4 (1) of the ordinance.

Naqi Bari, chairman Pakistan Hosiery Manufacturers Association (PHMA) said that already there was a steep fall in exports and the imposition of WWF levy on exporters would further cripple exports and harm country’s ability to earn badly needed foreign exchange.

According to tax consultants under the Income Tax Ordinance, 2001 exporters were not supposed to file income tax returns, which are assessed by the tax department but have to submit statements only under section 115 (4) of the ordinance.

Consequently, payment of one per cent withholding tax on exports under section 154 of the ordinance was considered as a final discharge of tax liability and payment of no further tax was required, they said.

Abdul Qadir Memon, president Income Tax Bar Association Karachi (ITBAK) said that the Income Tax Appellate Tribunal and Sindh High Court had also given their judgments against such levy on exports without making proper legislation.

However, the government, by introducing amendment to WWF ordinance through Finance Act 2008 and by removing anomaly left in the year 2006, has paved the way for imposing two per cent WWF levy on export trade, he added.

Mr Memon said the amendment to the WWF ordinance through finance act, 2008 has omitted the word ‘assessment’, which means exporters’ income could now be assessed.