20000316

Withholding tax

for indenting

firms cut

MUZAFFAR QURESHI

KARACHI: The Central Board of Revenue (CBR) has reduced the rate of withholding tax from 10 percent to 0.50 percent or 0.75 percent or 1 percent for export indenting agents and export buying houses depending on the goods exported to which such commission relates. The move is aimed at encouraging local export agents to promote exports.

The CBR has issued a circular No. 83 of 2000 (Income Tax) on Withholding of Income Tax under sub section (5) of section of Income tax Ordinance, 1979. It says: In continuation of the Board's circular No. 18 of 1999 dated 25-8-1999, it is clarified that clause (2A) inserted in Part II of the Second Schedule to the Income Tax Ordinance, 1979, vide SRO 1052(1)/99 dated 17-09-1999 and subsequently amended vide SRO 1313(1)99 dated 30-11-1999, provides that the tax chargeable in respect of commission received by an export indenting agent or an export buying house shall be at the rate equal to the rate of tax applicable to the exporter on export of goods to which such commission relates.

The circular further says, "In view of the foregoing, the general rate of withholding tax for indenting commission remains 10 percent as per paragraph CCCC of Part 1 of the First Schedule to the Ordinance, but the reduced rate applicable in respect of commission received by an export indenting agent or an export buying house shall be 0.50 percent or 0.75 percent or 1 percent depending on the goods exported to which such commission relates".

The Pakistan Cloth Merchants Association (PCMA) has welcomed the CBR circular which has reduced the rate of withholding tax for export indenting agents and export buying houses and brought it at par with the tax charged from direct exporters. This will encourage local exporting agents to promote exports whole heartedly.

M. Iqbal Mangrani, Chairman, PCMA, Sindh and Balochistan Zone in a statement has suggested that indenting commission earned by import indentors may also be exempted from income tax totally and should be given the same immunity which is given on foreign remittances made by overseas Pakistanis.

He said that the step would greatly help to earn substantial foreign exchange through bank channels which is presently channeled through unofficial means.