Home »Taxation » Pakistan » New industrial undertakings: FBR may issue policy guidelines to field formations on uniform mechanism

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  • Aug 31st, 2017
  • Comments Off on New industrial undertakings: FBR may issue policy guidelines to field formations on uniform mechanism
The Federal Board of Revenue (FBR) is expected to issue policy guidelines to the field formations on a uniform mechanism for new industrial undertakings installed in Pakistan seeking tax credit and exemption certificate from collection of withholding tax under section 148 of the Income Tax Ordinance 2001.

Sources told Business Recorder here on Wednesday that FBR is planning to respond to the legal issues raised by Chief Commissioner Corporate Regional Tax Office Lahore on exemption from collection of tax under sub-section (1) of section 148 of the Income Tax Ordinance, 2001 in the cases having tax credit u/s 65D of the Ordinance.

The issue revealed that at present exemption from collection of tax u/s 148(1) for import of raw material is available only under Clause 72B of Part-IV of the Second Schedule to the income Tax Ordinance, 2001. The first proviso to the said Clause 72B lays down that quantity of the raw material, sought to be exempted should not exceed 125 percent of the quantity of the raw material imported and consumed during the previous tax year. The taxpayers importing raw material for self consumption in excess of the prescribed quantity, have to bear tax collection u/s 148(1).

Section 65D of the Income Tax Ordinance, 2001, provides for tax credit, including on minimum and final taxes to the eligible industrial undertakings as per the formula provided in Section 65D(1A). The said industrial undertakings apply for exemption from deduction of tax u/s 148 of the Commissioner concerned, when raw material for self-consumption is imported, on the strength of judgment of the Lahore High Court and ICA No. 799/2013 being in term and not in persona as already circulated by the Board vide C.No.1(11)TP&IT/2015/edox-142274-R, dated 16.10.2015.

Commissioner CRTO Lahore said that an issue has been raised through applications u/s 122B contending that on account of certain reasons, comparison of quantity imported/ consumed in the previous year, for the purpose of limiting the quantity of import under exemption in the following tax year creates a hardship case when during the previous year, they imported/consumed raw material for less than the capacity of the unit (ie when the mills were operated for a small fraction or the year). It is further contended that since they enjoy 100 percent tax credit u/s 65D, their import of raw material for self-consumption, even beyond the quantity prescribed in Clausc-72B, qualities for grant of exemption from collection of tax at Port clearance stage.

The issue needs kind attention of the Board for issuance of guidance, for a uniform working in the field formations across the board, as to whether a taxpayer being a freshly installed industrial undertaking, qualifying for tax credit u/s 65D and seeking processing of exemption certificate from collection of tax u/s 148, is hit by the capping imposed vide the proviso to Clause 72B of the Ordinance, Chief Commissioner CRTO Lahore added.



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