WHT agents to directly deposit tax in govt account

FBR proposes new rules to increase revenue collection, promote documentation

Irshad Ansari December 24, 2023
The government has mandated the task force to review the FBR’s tax collection data, its performance indicators and reporting mechanisms, and identify the areas of revenue performance and potential. photo: file


To prevent withholding tax (WHT) evasion and promote documentation, the federal government has decided to make it mandatory for withholding agents to immediately and directly deposit the tax collected from suppliers of goods and services in national coffers.

The Federal Board of Revenue (FBR) has developed a swift payment receipt system for immediately depositing the deducted withholding tax in the government exchequer instead of keeping the revenue with it.

For implementation of the decision, the FBR has prepared draft amendments to the Income Tax Rules 2002 and released them for inviting suggestions from the stakeholders. The stakeholders have been given seven days for coming up with objections and recommendations in relation to the new proposed rules.

After the deadline, the income tax amendment rules will be enforced through a notification. According to FBR’s officials, the implementation of the new system will lead to an increase in WHT collection and promote further documentation of the economy.

Thus far, the withholding agents had been keeping the tax received from suppliers and were depositing it at the time of filing withholding tax statements and returns with the FBR.

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However, under the new proposed system, as soon as these agents produce an invoice, WHT will be sent directly to the government account. In addition, withholding agents will also have to provide details of suppliers and buyers who pay the tax.

Also, the FBR will be able to learn about details of the purchase and sale made by vendors as well as the goods supplied by the suppliers. This will help stop WHT evasion and unearth cases of unpaid tax on the supply, purchase and sale of goods. According to a copy of the draft rules prepared by the FBR, a new chapter called “Part Four” has been added after Part Three in Chapter 9 of the Income Tax Rules 2002.

All the agents notified by the FBR will have to meet requirements of the new chapter introduced in the rules. These agents will need to install a Point of Sale (POS) system acquired from an FBR-licensed person and company, and connect it to the FBR’s network. Under this system, the agents will be able to issue digital invoices through the FBR’s web-based portal or the computerised system integrated with the FBR.

Through the issuance of digital invoices, the WHT collected on all transactions will go directly into the government account while the remaining principal amount will be left with the agent.

As per the proposed rules, each agent will be issued an ID and they will have to update their profile. The ID will be mentioned on the electronic payment receipt issued under this system.

Published in The Express Tribune, December 24th, 2023.

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