Tit for tat: Power supply to ginners hit by 16% sales tax

Government withdraws withholding tax on cotton purchase but ensures its revenues won’t be hit.

ISLAMABAD:

In an apparent trade off the government on Wednesday withdrew withholding tax on sale of agriculture products and in return decided to charge 16 per cent sales tax on supply of electricity to the cotton ginning factories.

The Federal Board of Revenue issued two separate notifications to give effect to these decisions. Under the notification the growers will no more be required to pay 3.5 per cent withholding tax on sale of cotton to the ginning factories. The government has also waived off the tax on sale of wheat, rice, sugarcane and other agriculture products, states the notification.

However, the waiver is only applicable if the ginning factories make direct purchases from growers. Cotton traders will still be subject to the withholding tax payments. In addition to that if the middleman buys cotton from the grower he too will be liable to pay ten per cent withholding tax of the total commission amount.

The FBR also allowed the to pay cash against the commodity by amending the earlier condition of payments only through banks.

However, the exemption is only applicable if the agriculture producers submit a certificate to the agriculture produce buyers. The producer will have to disclose his name, national registration number, quantity being sold, price and the land.

The notification states that tax levy would also not be applicable on cash payments made for meeting the incidental expenses of a business trip to the crew of the oil tanker. However, any other payment to the owners of the oil tanker would be subject to levy.

The cotton ginning factories were observing strikes against the government’s decision of charging withholding tax and forcing them to make payments through banking channels.

Through same notification the government fixed the withholding tax rate at one per cent on local purchase of steel scrap by those steel melters who have opted sales tax special procedures and are compliantly filing returns under the scheme.

Through an amendment to General Sales Tax Order the FBR also withdrew zero rating sales tax facility on supply of electricity to the cotton ginning factories. It has directed Multan Electricity Supply Company to start charging sales tax on the supply of electricity units to the following factories: Hajvary Cotton Factory, Afshan Cotton Factory, Mehar Cotton Factory, Zohaib Model Industries, Madina Cotton Ginning and Processing Factory, Mian Cotton Industries, Quality Cotton Ginners, Al Najaf Cotton Ginning, Gaggoo Cotton Ginning Factory, Mian Cotton Industries, Pak Millat Cotton Ginning Factory and Sheikh Cotton Factory.

Published in The Express Tribune, August 25^th,  2011.