Pakistani Tax Authority Insists Steel Industry Must Comply

by Mary Swire, Tax-News.com, Hong Kong

15 April 2009

Pakistan's Federal Board of Revenue has told the country’s steel industry that the withholding tax on electricity, gas, telephone bills and imports is imposed by an act of parliament, and that the industry’s claim that it is being coerced into paying a 3% tax on its purchases is 'wrong'.

In a statement the FBR explained that: "Steel mills managed by Associations of Persons (AOPs) have to withhold 3% of the tax from payments owed to their suppliers and such withholding tax has nothing to do with the steel mills’ own liability."

The FBR maintains that the steel industry has to discharge its obligations including the withholding of tax from payments owed to their suppliers under the Income Tax Ordinance, 2001, like all other sectors. No other sector has contested the withholding of tax on payments owed to suppliers, so far, says the FBR.

The statement explained further that: "The FBR also contends that tax withheld under section 235 of the Income Tax Ordinance 2001 constitutes a discharge of final tax liability in the cases of suppliers doing business in the status of individuals and AOPs, and is a measure to ensure that all supplies are brought into the tax net. According to the FBR, the steel sector has agitated about the withholding tax on suppliers without proper appreciation of legal provisions."

Lastly, the FBR added that such issues have been discussed time and again with the representatives of steel industry, and as such their demands are inadmissible under the law, and cannot be accepted.

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