The concessionary rate of 3 percent withholding tax applicable on industrial import of edible oil has been withdrawn through SRO.140 (I)/2013 dated February 26, 2013. After the omission of clause (9A) of Second Schedule of Income Tax Ordinance, 2001, now the standard rate of 5 percent tax will be applied on industrial import of edible oil in ”Minimum Tax Mode”.
Sharing implications of SRO140(I)/2013 on the edible oil industry, experts told Business Recorder here on Thursday that sub-section (8) was inserted in section 148 of the Income Tax Ordinance 2001, which is edible oil import specific, accordingly the withholding tax (WHT) levied and collected at import stage on industrial imports is in ”Minimum Mode”. Now after the omission of clause (9A) ie reduced rate facility for industrial concern, the ”Minimum Mode” is still intact whereas the withholding tax has been enhanced from 3 to 5 percent.
On the other hand, the commercial import of edible oil under sub-section (7) of section 148 is enjoying concession subsequent to the insertion of clause (41A) in part IV of Second Schedule, through Finance Act 2012. According to which an option has been provided to commercial importer to be taxed on net income basis over & above 60 percent along with certain conditions as explained in income tax circular number 02 of 2012. Prior to such amendment through Finance Act 2012, commercial imports of edible oil were in presumptive tax regime and tax collected or deducted at import stage was treated as a final tax liability, experts said.
The concerned ghee and cooking oil industry has informed the FBR that even income tax @ 3 percent is very high, since it translates up to 80% of their income as against 35 percent tax on the net income. Now after the raise of another 2 percent, the levied income tax would become even more then the actual net income.
The scenario developed after the issuance of S.R.O140 has incentivised the commercial imports by putting industry at disadvantage, which is against the national policy of promoting industrial activities, they added. Meanwhile, the FBR has been approached by the PVMA with a proposal to tax the industry on ”net income basis” since the manufacturers are facing serious cash flow deficiency and liquidity problems, which may perhaps result in shortage of this food item. In this regard PVMA chairman Khawaja Arif Qasim has also made representations to the Ministry of Finance and FBR for taking up the issue of withholding tax regime on the import of edible oil under S.R.O140(I)/2013.
It is important to mention that that the FBR has applied a uniform rate of 5 percent withholding tax on the imports made by industrial undertakings and commercial importers under the government policy of bringing uniformity in the tax rates to avoid discrimination. To avoid multiplicity of rates, sales tax rates were already reduced to a standard rate of 16 percent and same policy has been adopted for withholding taxes at the import stage.
