Tax experts have termed Federal Board of Revenue’s (FBR) three budgetary proposals are not practicable. These includes 1- collection of withholding tax on domestic electricity bills, 2- sales tax from sugar on printed retail price basis and 3- additional revenue of Rs 38 billion from crude oil.
Withholding tax on domestic electricity bills
Tax experts told to media here on Sunday that Finance Bill 2021 has proposed 7.5 percent withholding tax on domestic electricity bills exceeding Rs 25,000 per month. This tax collection will from electricity consumers whose names do not appear on the Active Taxpayers List of FBR or in other means who have not filed their tax returns for the latest year.
Problem persists in case of rented houses and apartments. When the connection is in the name of the landlord but the electricity bill is paid by the tenant himself. Even in the case of inherited immovable properties if the connection is in the name of father or even the grandfather of the present resident.
The person actually residing may be a tax filer. But the electricity connection can be in the name of a person who is not on the Active Taxpayers List. But the withholding tax will be charged on the resident.
Sales Tax from Sugar Manufacturers
In Practically, sugar product is not packaged by the manufacturers in retail packing but is packed in 40Kg bags. Whereas the retailers sell it to the consumers in small packs of their own. Thus, how the requirements of the third schedule be implemented? Moreover, this mode of taxation may result in further rise of the price of sugar. There is another issue in the implementation of the said proposal.
Sales Tax Exemption withdrawn on Crude Oil
Thirdly, the government has withdrawn sales tax exemption on crude oil. This measure will bring in an extra Rs38 billion in the next fiscal year. The question arises whether the FBR will be able to collect this Rs38 billion from the charge of the sales tax on crude oil.
Tax experts responded that it will not generate extra revenue. They described that local refineries refines crude oil to produce taxable petroleum products such as diesel, petrol, kerosene oil etc. Sales tax chargeable on all these products and sales tax charges at the specified rate at the time of sales of these products by the refineries and petroleum marketing companies. If sales tax collected on crude oil. It will have to be deducted from the sales tax payable on refined products. Therefore, the sales tax paid on refined products will be reduced by an amount equal to what has been collected from crude oil.
This will also create problems for petroleum exploration companies. Who will now have to pay sales tax on the crude oil sold by them. The zero-rating available to the supplies to petroleum & gas exploration companies also proposed to withdraw, they added.
Budget | Tax Experts | Sugar Industry Sales Tax | Withholding Tax on Electricity | Crude Oil Sales Tax Exemption | FBR | Federal Board of Revenue | Budget Proposals | Income Tax Returns | IRS |