KARACHI: Karachi Chamber of Commerce and Industry (KCCI) President Iftikhar Ahmed Vohra, while urging the Sindh government to withdraw the proposed service tax of 14 percent on Indenters in Sindh Budget 2015-16, said that most of the indenting agents will move their activities outside of Sindh and register in other provinces if the 14 percent service tax is imposed, which would be a loss for the province in economic terms.
In a letter to Murad Ali Shah, Sindh Minister for Finance, the KCCI president pointed out that a number of industries and businesses have already moved out of Sindh due to law and order, and harassment by tax authorities under various pretexts.
“It is also likely that many indenters will retain a major part of their earnings outside Pakistan, which will be a loss of foreign exchange for the country and also a loss in WHT collection”, he added.
Iftikhar Vohra was of the view that Indenters are not liable to pay service tax because they are not providing any local services. Rather the indenters are engaged in export of service to foreign principals and paying 5 percent withholding Tax to the Federal Government on such export earnings. “The earning of Indenting Agents is considered as export earnings which do not come under the purview of service tax by the province”, he added.
He further mentioned that Indenters work on a very low rate of commission and face fierce competition. They negotiate with foreign suppliers for the most competitive prices of raw materials and other products, at a commission as low as 0.5 percent to 1.0 percent. Within this meagre income they have to meet their operating expenses and travel expenses as well. A service tax of 14 percent over and above the 5 percent withholding tax (Income Tax) is therefore impossible to pay for indenters, he stressed.
President KCCI further stated that no service was being provided by Indenters within or outside the province of Sindh. Services are provided by them are outside Pakistan, therefore do not fall within the preview of Sindh Services Tax Act, he reiterated and urged the authorities to withdraw the proposed service tax of 14 percent on Indenters in the Provincial Budget 2015-16.
