The Federal Board of Revenue has categorically said that the steel re rolling mills are required to pay withholding tax on purchase of plates from shipbreaking industry despite payment of withholding tax on the import of ship under Section 148 of the Income Tax Ordinance 2001.
Official sources told Business Recorder here on Wednesday that the shipbreaking industry import ships and pay withholding tax at the import stage under Section 148 of the Income Tax Ordinance 2001.
The withholding tax under Section 153(1) (a) of the Income Tax Ordinance 2001 is not applicable on the sale of goods where goods sold in the same condition as they were when imported. As ships were imported and subsequently dismantled, the local sale and supply of the ship plates would be subjected to withholding tax under Section 153(1)(a) of the Income Tax Ordinance 2001.
Officials said that on the other hand, the industry was of the view that withholding tax is paid on the import of ships and there is no justification of double taxation by charging the same on the local sale of ship plates to steel re rolling units.
The Board has seriously viewed illegal clarifications issued by some field formations to shipbreakers, wherein it has been clarified that withholding tax under Section 153 of the Income Tax Ordinance 2001 was not deductible on sale and supply of parts of imported ship on which advance tax under Section 148 has already been deducted. The matter has been examined in the FBR under the provisions of Clause (a) of Sub-Section (5) of Section 153, which provides that the withholding tax under Section 153(1) (a) is not deductible on sale of goods:
Firstly, where the sale is made by the importer of the goods. Secondly, the tax under Section 148 of the Ordinance 2001 in respect of such goods has been paid and thirdly, the goods sold in the same condition as they were when imported.
Sources said that the shipbreaking industry imports ships and cuts it into plates and supply the plates to re rollers. The imported goods are not supplied in the same condition as they were when imported. Hence the steel re rollers are required to withhold tax on purchases made from shipbreaking industry. It is, therefore, necessary that the provisions of the law should be implemented in letter and spirit in the field formations and wrong interpretations may be withdrawn immediately.
Source: Steel Guru (Sourced from Business Recorder). 7 September 2012http://www.steelguru.com/middle_east_news/Steel_re_rolling_mills_need_to_pay_WT_on_steel_plates_FBR/282296.html