Budget proposal 2014-2015: STWH rules be withdrawn or one percent tax rate recommended

KARACHI: The business community has recommended that either Sales Tax Withholding (STWH) rules should be withdrawn for all the taxpayers or to reduce the tax rate to one percent from 3.40 percent with other legal formalities.
The business community said that presently there are two STWH rules are in operation, which is needed to be revisited.
It is suggested that STWH rules may either be withdrawn for all taxpayers or registered persons in a Large Taxpayer Unit (LTU), who purchases goods from a registered person, other than a one registered in an LTU, shall deduct and withhold one percent of value of taxable supplies received by him as sales tax from the payment due to the supplier.
The business community also recommended that taxpayer registered in Regional Tax Office (RTO) should not deduct STWH of taxpayers registered in LTU and tax rate may also be reduced to one percent from preset 3.40 percent.
In the current scenario, all companies whether registered in LTU and RTO are required to withhold sales tax of 3.40 percent, according to the SRO 98(I)2013.
However, in SRO 704(I)2009 the Federal Board of Revenue (FBR) introduced concept of sales tax withholding for the first time, which is demanded back by the business community in the upcoming budget 2014-2015.
It is highlighted that it will increase the work load of persons registered in LTU as they are now required to collect STWH information and challans from their buyers registered with the LTU while on the other hand their funds are usually being tied-up.
The business community said that LTU registered parties being large taxpayer of the country are timely discharging their all tax liabilities and furthermore STWH being adjustable tax, FBR cannot benefit from any STWH from LTU parties.

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