ISLAMABAD: A registered person, who is not an active taxpayer, may not avail benefit of reduced rate of withholding sales tax after amendment made through Finance Act, 2020.
Sources in Federal Board of Revenue (FBR) said that amendments have been made to Eleventh Schedule of Sales Tax Act, 1990 through Finance Act, 2020 under which the active taxpayers would be eligible to avail reduced rate of withholding sales tax at the time of supplies.
Prior to this amendment registered persons were enjoying the reduced rate at the time of supply but now the registered persons, if not active taxpayers, shall pay full amount of sales tax.
According to the amendment the withholding agents including federal and provincial government departments; autonomous bodies; and public sector organizations; companies as defined in the Income Tax Ordinance, 2001 shall collect/deduct 1/5th of sales tax as shown on invoice from those persons, who are active taxpayers.
Similarly, person registered, but no active taxpayer, as a wholesaler, dealer or distributor are required to pay full amount of sales tax instead of reduced rate.
Prior to the amendment, the withholding agents including federal and provincial government departments; autonomous bodies; and public sector organizations; companies as defined in the Income Tax Ordinance, 2001 were required to collect/deduct 1/10th of sales tax as shown on invoice from person registered as a wholesaler, dealer or distributor.
In serial No. 03 of the Schedule, the Federal and provincial government departments; autonomous bodies; and public sector organizations are required to collect/deduct whole of the tax involved or as applicable to supplies on the basis of gross value of supplies form person other than active taxpayer.
Similarly in Serial No. 04, the companies as defined in the Income Tax Ordinance, 2001 are required to collect/deduct five percent of gross value of supplies from persons other than active taxpayers.
In serial number 06 the registered persons purchasing cane molasses are required to collect/deduct whole of sales tax applicable from persons other than active taxpayers.
Active Taxpayer has been defined under Sales Tax Act, 1990 as a registered person who does not fall in any of the following categories, namely:-
(a) who is blacklisted or whose registration is suspended in terms of section 21;
(b) fails to file the return under section 26 by the due date for two consecutive tax periods;
(c) who fails to file an Income Tax return under section 114 or statement under section 115, of the Income Tax Ordinance, 2001(XLIX of 2001), by the due date; and
(d) who fails to file quarterly or an annual withholding tax statement under section 165 of the Income Tax Ordinance, 2001.
