KARACHI: Islamic banks have shown their reservations over imposition of one percent minimum turnover tax on loss-making Islamic mode of financing.
In a recent communication sent to the ministry of finance, the Islamic banking industry had raised concerns, considering murabaha transactions, including commodity murabaha as normal sales transaction.
Under Section 113 of the Income Tax Ordinance, 2001, the minimum turnover tax is required to be paid by those companies and banks, which are incurring losses.
Sources in the banking sector said the Federal Board of Revenue (FBR) issued notices to an Islamic bank for payment of one percent turnover tax, while treating gross value of murabaha transactions as sales turnover of the bank.
The sources informed the ministry that as per the Rule 3 of the Seventh Schedule of the Income Tax Ordinance, 2001, which is exclusively for the banking industry, the Islamic banking industry is to be treated at par with the conventional banks for the purposes of calculating income and tax liability.
“It implies that murabaha transactions conducted by an IBI will be considered as financing rather than sale of goods for the calculation of income and tax liability,” the communication added.
