Govt to reduce withholding tax on raw material imports

KARACHI: The government will give a 2.5 percent concession on withholding tax rate on import of raw materials in order to encourage manufacturing activities in the country, industry sources said on Wednesday. 

The sources said the National Assembly Standing Committee on Finance, Revenue and Privatisation, during a recent meeting, agreed to a proposal of the business community to reduce the withholding income tax rate on raw materials imported by commercial importers to four percent from the current 6.5 percent.

Member parliamentarians, representatives of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and officials of the Federal Board of Revenue (FBR) attended the meeting.

Shakeel Dhingrah, chairman of the FPCCI standing committee on FBR, told the NA body that the government had agreed to provide relief to the industry, realising the importance of manufacturing activities for economic growth.

Dhingrah said the rate reduction would curb the malpractices as higher rate on commercial importers results in corruption.

Currently, the FBR categorised industrial and commercial importers for the purpose of levying taxes. The commercial importers are eligible to import everything under import policy. However, the industrial importers are restricted to import only those things that are required for manufacturing. The industrial importers have been allowed to import raw materials at reduced tax rates.

It was agreed that industrial imports would be subject to two percent withholding tax and they would needn’t exemption certificate. Industrial importers are also required to pay 1.5 percent minimum tax on their turnover.  The business community said the commercial importers are also importing various goods ultimately used for manufacturing purpose.

Dhingra said the implementation of reduced rate is subject to an approval from the parliament.  He further said reduced rate of withholding tax would only be available to commercial importers in case of importing raw materials falling under Chapter 25 - 55 of the Pakistan Customs Tariff. “On import of other goods, the withholding tax will remain at 6.5 percent,” he added.

Published in The News, March 02^nd, 2017