Tax Deduction at source

[Sh.Mohsin]

Any One please solve this problem


Here is a company which provide catering services and hotling and other club services. This company does not deduct advacne tax @ 3.5% from supplier at the time of payment. Please explain me whether this company is required to deduct tax at the time of payment if

1. this company is registered as Guarantee limited co.
2. It is an association of persons.

Thanks

[danishayub_76]

Dear Mohsin.

As per Section 153 of Income Tax ordinance 2001 every person who make any payment on account of supply of goods, or for services rendered he must deduct the tax at source before making the payment. The rates are
Services 6% (Exempted upto Rs.10,000 per annum)
Supplies 3.5%(Exempted upto Rs.25,000per annum)

hope the answer suffice
Best wishes

[LapTop]

Any with holding Agent liable to deduct duration at source at the time of making payment for Supplies of Goods U/S 153. If They are,
Government.
Company registered by company Ordinance.
Association Of Persons, Constituted by Law.
Foreign Contractor or Consultant.
Consortium or Joint Venture.

[kamranACA]

Dear,

It shall with-hold the tax if it is company regardless of anything.

However, if it is AOP it will not deduct the tax at source unless its annual tunrover is or exceeds Rupees 50 million {section 153(9)(g)}. If it exceeds this figure, it will become the with-holding agent.

AOP formed under law is something different.


Regards,


KAMRAN.

[Sh.Mohsin]

Thanks Mr. Kamran

Your reply has solved my problem.

[imrank]

Hi,

What happens if an AOP should withhold tax but did not withhold tax? Are they are personally liable? Also, if an AOP is not eligible to withhold, what will be tax treatment for the supplier who has received untaxed income (if it is also an AOP)?

Thanks,

Imran

[kamranACA]

Dear

You may have to study the penal clauses and the conditions which make some one assesse in default.

However, if some one (supplier) gets the un-taxed gross payment then it may not become an issue for him if his own taxation does not fall under presumptive regime.

However, if his income is taxed under presumptive provisions, he can do the following

- he can request the payer to deduct the tax amount (remained undeducted) from any next payment received by him from the payer, if it is possible.

- if not, he can get the NTN number of payer, prepare a cheque and tax payment challan mentioning NTN number of the payer, and pay the required amount at his own.

This way he can manage to keep his-self within presumptive regime.

However, sometimes people deduct more than required amount of tax. If some one's tax has been deducted on some of the payments in excess of the required amount, he should assess what he should deposit at his own. Means he should adjust the excess amount against the amounts which remained undeducted and then deposit the balance amount.

This is a critical issue. I mentioned only what one can manage to do in such circumstances.


Regards,


KAMRAN.

[imrank]

Kamran,


Thanks for your reply. I was reading somewhere that if the witholder has not withheld the tax from the payment to the supplier, then the withholder/payer is personally liable to pay. If that's the case, then shouldn't the supplier assume that this will be dealt with and the appropriate tax should/would be paid by the payer? If the supplier also pays, then there might be double tax collected by the Government.

Also, if the AOP did not withhold as it was required not to, then would the supplier, assuming that it falls under FTR, be assessed on the rate applicable for the block, e.g. 3.5% for materials supplied?

Thanks,

Imran

[kamranACA]

Dear

Such "assesse in default" status become crystalized if the amount could not be received from the person whose liability it was. Normally this does not happen. However, there are penal clauses which also become applicable if some tax authority scrutinize the details.

The supplier should deposit the amounts under FTR as I mentioned in previous post. He will not be assessed since he is in FTR.

Regards,


KAMRAN.

[imrank]

Kamran,

You have been very helpful, thanks.

Another one for you or anyone else. What if I am an AOP supplying goods locally, thus all my income is taxed @ 3.5% FTR. If I am registered for Sales Tax, my client will withhold 3.5% of the total invoice value, thus making the effective rate of tax more than 3.5%. If my client does not withhold any tax, then, as you advised, I will have to pay 3.5% tax on any untaxed element, correct? Would the untaxed element include sales tax or it would be without sales tax?

Look forward to hear back soon.

Thanks a lot,

Imra

[kamranACA]

Dear,

Since law requires that tax has to be deducted on the amount including sales tax, to my apprehension, the amount to be deposited should include it. I mean tax wil be calculated and deposited on gross amount including sales tax.

Regards,


KAMRAN.

[Kamran_Fasih]

What is the rate of tax on payment of commission

[danishayub_76]

It's 6% (Services).

[imrank]

I think the tax rate on commission payment is 10%. Please fell free to correct me if I am wrong.

Imran

[LapTop]

yes, U/S-233. Brokerage and Commission, withholding rate is 10%,
and U/S 153 withholding tax @ 3.5% gross amount Inclusiv sales Tax liable to deduct