CIRCULAR NO. 11 OF 2004

(Income Tax)

Subject: WITHHOLDING TAX ON INCOME FROM COMMISSION OF THE PETROL PUMP OPERATORS

A new section 156A has been introduced through Finance Act, 2004 requiring every person selling petroleum products to a petrol pump operator to collect tax from the amount of commission or discount allowed with effect from 1^st July, 2004. A corresponding amendment has been made in Part III of the First Schedule to the Ordinance by adding Division VIA, providing the collection of tax @ 10%. The tax so collected shall be the final tax on the income arising from the sale of petroleum products.

2. The provisions of section 156A shall be equally applicable to commission or any discount allowed to the petrol pump operators, whether mentioned in the bills or not. The responsibility to collect such withholding tax lies on “every person”, irrespective of its status. Thus, commission paid or discount allowed to petrol pump operators on purchases of petroleum products from any person including oil companies, wholesalers, distributors or retailers would be liable to withholding tax under this provision of law.

3. Situations may arise wherein petrol pump operators may have to suffer tax deduction under section 153(1)(a) of the Ordinance in respect of the sale of same petroleum products where the commission or discount has already been subjected to withholding tax under section 156A. It is likely to create hardship for such petrol pump operators. To remove this hardship, the Commissioner of Income Tax may issue exemption certificate under section 153 (4) of the Ordinance in cases where tax is being collected @ 10 % under section 156A of the Income Tax Ordinance, 2001.

Muhammad Ashfaq Ahmed

Secretary (WHT)