Distributors urge FBR to reduce WHT to 0.25%

Say if 2.5% WHT imposed, they will wind up their businesses

ISLAMABAD: A segment of the distributors responsible for supplying goods of multinational companies across the country has urged the Federal Board of Revenue (FBR) to reduce the 2.5% withholding tax (WHT), which has been implemented from October 1, to 0.25%, saying if the measure is not taken they would be forced to wind up their businesses.

“When the handling distributors get 1.5% margin of which 1% is the operational cost and 0.5% profit, how can they pay 2.5% WHT,” said Distributors Association head Izhar Ahmed Abbasi while talking to The Express Tribune the other day.

Abbasi said that he had written a letter to the FBR chairman to hold a meeting with them (heads of distributor bodies) in order to find a way out of this predicament, “but no reply has been received so far”.

The FBR had made an amendment to the Finance Act 2019 under which 2.5% WHT was supposed to be implemented at the start of the new fiscal year July 1, 2019, but due to the outcry by the business community, the decision had been put off for three months till October 1. Apart from this, the suppliers are declaring Computerised National Identity Cards (CNIC)/National Tax Numbers of every unregistered person so that they become registered under the Income Tax Ordinance 2001 and Sales Tax Act 1990 and enter the tax net.
Abbasi said with the closure of “our business”, the business of the multinational companies in the world would be affected and over 3,000 people in the country would be laid off.

He said there were a total of around one-and-a-half-dozen distributors who supplied items of multinational companies to faraway areas.

According to the copy of the two-page letter available with The Express Tribune, eight distributors - Younis and Associates, Abbasi Distributors, Pak Marketing Services, Khawer Traders, Shan Marketing Services, Bilal Traders, Qureshi Distributors, and Shafi and Sons - have expressed their reservations.

The letter stated that the majority of the distributors who supplied items of the multinational companies were not registered under the Income Tax Ordinance 2001 and Sales Tax Act 1990.

According to the letter, under Section 153(7) of the Income Tax Ordinance, 2001, a person registered under the Sales Tax Act, 1990 or having an annual turnover of Rs50 million shall become the withholding agent. The withholding agent shall withhold a 2.5% tax of the gross amount payable under Section 153(1) (a) read with Division III of Part III of the First Schedule of the Income Tax Ordinance, 2001.