Withholding Tax Deduction

[tech01]

Is the withholding tax under S50 of the Income Tax Ordinance to be deducted from the amount payable including Sales Tax? Or should it be deducted on the amount of Invoice net of Sales Tax?

[AB]

WHT is deducted on the amount inclusive of GST

[tech01]

Thank you for the response. I was wondering if there is any reference in the Sales Tax laws or Circulars that addresses this issue specifically?

[ayub]

As per Section 153(2) of the Income Tax Ordianance 2001, Whithholding Tax to be Deducted on gross amount paid, i.e. inclusive of GST.

[tech01]

As further information on this topic recently ICI was exempted from S153 on certain payments, as per CBR circular.

[ehtesham ul haq]

I have observed that a large number of organizations deduct withholding tax on amount net of sales tax. Can you people provide me with some references in law?

[Atif Mufassir]

This issue was debateble before the promulgation of new Income Tax Ordinance, 2001 since in the previous Ordinance, this matter was not dealt with in section 50(4). At that time two confilcting decisions of Income Tax Appellate Tribunal were available. One Tribunal held that tax has to be withheld on the amount inclusive sales tax and the other Tribunal held that tax shold be withheld on the amount exclusive of sales tax. In the said scenario, the tax payer could take relief from the decision of the Supreme Court of Pakistan wherein it has been held that whenever more than one interpretation of law is possible then one favouring the tax payer shall prevail.

However, the new Ordinance is quite clear on this issue and it has been provided in section 153 that ( from July 01, 2002 and onwards)tax shall be deducted on the gross amount. The gross amount payable is defined to include the sales tax, if any payable in respect of the sale.

I hope that the above clarification will serve your purpose.


atif m

Edited by - Atif Mufassir on Sep 17 2003 40610 PM

[babar]

<BLOCKQUOTE id=quote><font size=1 face="Verdana" id=quote>quote<hr height=1 noshade id=quote>
As per Section 153(2) of the Income Tax Ordianance 2001, Whithholding Tax to be Deducted on gross amount paid, i.e. inclusive of GST.


<hr height=1 noshade id=quote></BLOCKQUOTE id=quote></font id=quote><font face="Verdana" size=2 id=quote>absolutely right, dear ayub