Section 153 Payment for Goods and Services
Every prescribed person making a payment in full or part including a payment by way of advance to a resident person
- for the sale of goods;
- for the rendering of or providing of services,
- on the execution of a contract, including contract signed by a sportsperson but not including a contract for the sale of goods or the rendering of or providing of services,
- shall. at the time of making the payment, deduct tax from the gross amount payable (including sales tax, if any)
- Every exporter or an export house making a payment in full or part including a payment by way of advance to a resident person or permanent establishment in Pakistan of a non-resident person for rendering of or providing of services of stitching, dying, printing, embroidery, washing, sizing and weaving, shall at the time of making the payment, deduct tax from the gross amount payable.
The tax deductible for sale of goods and execution of contracts shall be final tax.
Exceptions to the above rules
The tax deducted in case of sale of goods shall be adjustable
- where payments are received on sale or supply of goods, by a company being a manufacturer of such goods;
- or public company listed on a registered stock exchange in Pakistan;
The tax deducted against execution of contracts shall be adjustable if payments are received
by a public company listed on a registered stock exchange in Pakistan, on account of execution of contracts.
Tax deducted in respect of a contracts of sportsperson shall be final tax with effect from tax year 2013,
Tax deducted by person against services provided by electronic and print media for advertising services shall be final tax with effect from the 1st July, 2016.
PROVISIONS RELATING TO EXEMPTION CERTIFICATE
The Commissioner may, on application made by the recipient of a payment referred to in sub-section (1) and after making such inquiry as the Commissioner thinks fit, may allow in cases where tax deductible under sub-section (1) is adjustable, by an order in writing. any person to make the payment,—
- without deduction of tax; or
- deduction of tax at a reduced rate.
Key point to remember is that exemption certificate can only be issued in cases where tax is adjustable.
Clause 94 Second Schedule
(94) The provisions of clause (b) of the proviso to sub-section (3) of section 153 shall not apply for the period beginning on the first day of July, 2015 and ending on the thirtieth day of June, 2018 to a company being a filer and
engaged in providing or rendering freight forwarding services, air cargo services, courier services, manpower outsourcing services,hotel services, security guard services, software development services, IT services and IT enabled services as defined in clause (133) of Part I of this Schedule tracking services, advertising services (other than by print or electronic media), share registrar services, engineering services, car rental services ,building maintenance services, services rendered by Pakistan Stock Exchange Limited and Pakistan Mercantile Exchange Limited:
Provided that the tax payable or paid on the income from providing or rendering aforesaid services shall not be less than two percent of the gross amount of turnover from all sources and
that the company furnishes in writing an irrevocable undertaking by the fifteenth day of November, 2015 to present its accounts to the Commissioner within thirty days of filing of return, for audit of its income tax affairs for any of the tax years 2016 to 2018:
Provided further that for tax year 2018, the company shall furnish irrevocable undertaking by November, 2017, to present its accounts to the Commissioner.
GENERAL EXEMPTIONS FROM DEDUCTION OF TAX UNSER SECTION 153
- sale of goods where the sale is made by the importer of the goods and tax under section 148 in respect of such goods has been paid and the goods are sold in the same condition as they were when imported,
- payments made to traders of yarn by the taxpayers specified in the zero-rated regime of sales tax (as provided under clause (45A) of Part-IV of the Second Schedule )
(45A) (a) The rate of deduction of withholding tax under clauses (a) and (b) of sub-section (1) of section 153 shall be one per cent on local sales, supplies and services provided or rendered to the 1[taxpayers falling in the]following categories 2[ ] namely:-
(i) textile and articles thereof;
(ii) carpets;
(iii) leather and articles thereof including artificial leather footwear;
(iv) surgical goods; and
(v) sports goods;
Provided that withholding tax under clauses (a) and (b) of sub-section (1) of section 153 shall not be deducted from sales, supplies and services made by traders of yarn to the above mentioned categories of taxpayers. Such traders of yarn shall pay minimum tax @ 0.1% on their annual turnover on monthly basis on 30th day of each month and monthly withholding tax statement shall be e-filed under the provisions of section 165 of this Ordinance.
(b) provisions of clause (a) of sub-section (1) of section 111 of this Ordinance shall not apply to the amounts credited in the books of accounts maintained for the period ending on the 30th June 2011, by the sellers, suppliers, service providers to the categories of sales tax zero-rated taxpayers, as mentioned in sub-clause (a); and
(c) provisions of sub-clauses (a) and (b) shall be applicable only to the cases of sellers, suppliers, service providers of the above mentioned categories of sales tax zero-rated taxpayers, who are already registered and to those taxpayers who get themselves registered by the 30th June, 2011.
- a refund of any security deposit,
- a payment made by the Federal Government, a Provincial Government or a Local Government to a contractor for construction materials supplied to the contractor by the said Government or the authority;
- a cotton ginner who deposits in the Government Treasury, an amount equal to the amount of tax deductible on the payment being made to him, and evidence to this effect is provided to the “prescribed person“
- the purchase of an asset under a lease and buy back agreement by a modaraba, leasing company, banking company or financial institution;
- or any payment for securitization of receivables by a Special Purpose Vehicle to the Originator.
IMPOTANT DEFINITIONS AND CONCEPTS
Prescribed person means,—
(a) the Federal Government;
(b) a company ;
(c) an association of persons constituted by, or under law;
(d) a non-profit organization;
(e) a foreign contractor or consultant;
(f) a consortium or joint venture;
(g) an exporter or an export house for the purpose of subsection
(h) an association of persons, having turnover of fifty million rupees or above in tax year 2007 or in any subsequent tax year;
an individual, having turnover of fifty million rupees or above in the tax year 2009 or in any subsequent year; or
(j) a person registered under the Sales Tax Act, 1990;
turnover means
the gross sales or gross receipts, inclusive of sales tax and federal excise duty or any trade discounts shown on invoices, or bills, derived from the sale of goods; the gross fees for the rendering of services for giving benefits including commissions; the gross receipts from the execution of contracts; and the company’s share of the amounts stated above of any association of persons of which the company is a member.
Important Circulars
The scope of withholding of tax on goods and services has been widened manifold in recent years. The significant points to remember are: Exemption limits of Rs.25,000 on account of supply of goods or execution of contracts and of Rs.10,000 on account of services are still intact [clause (xii) of SRO 586(1)/91 dated 30.6.1991 read with section 239(12)], but the term “supply” has been omitted and now deduction is in respect of “sale of goods” which is explained to mean purchases (whether contractual or not) made by a payer in both cash and credit. The rate of tax to be deducted from a payment referred to in clause (a) of sub-section (1) of section 153 is, in the case of—
i. sale of rice, cotton seed or edible oils, 1.5% of the gross payable:
ii. sale of any other goods, 3.5% of the gross amount payable; or
services
includes the services of accountants, architects, dentists. doctors, engineers, interior decorators and lawyers, otherwise than as an employee;
sale of goods
includes a sale of goods for cash or on credit, whether under written contract or not;
manufacturer
means a person who is engaged in production or manufacturing of goods, which includes- any process in which an article singly or in combination with other articles, material, components, is either converted into another distinct article or product is so changed, transferred, or reshaped that it becomes capable of being put to use differently or distinctly; or a process of assembling, mixing, cutting or preparation of goods in any other manner; and
Important points to remember
Exemption limits of Rs.25,000 on account of supply of goods or execution of contracts and of Rs.10,000 on account of services are still intact [clause (xii) of SRO 586(1)/91 dated 30.6.1991 read with section 239(12),
but the term “supply” has been omitted and now deduction is in respect of “sale of goods” which is explained to mean purchases (whether contractual or not) made by a payer in both cash and credit.
The rate of tax to be deducted from a payment referred to in clause (a) of sub-section (1) of section 153 is, in the case of—
i. sale of rice, cotton seed or edible oils, 1.5% of the gross payable:
ii. sale of any other goods, 3.5% of the gross amount payable; or
Rate of deduction of tax on services
in the case of transport services, 2% of the gross amount payable;
in any other case, 6% of the gross amount payable; or
The rate of tax to be deducted from a payment against contracts is 6% of the gross amount.
Rates of tax Payments for Goods or Services
(1) The rate of tax to be deducted from a payment referred to in clause (a) of sub-section (1) of section 153 shall be –
- in the case of the sale of rice, cotton seed or edible oils, 1.5% of the gross amount payable; or
Explanation.— For removal of doubt, it is clarified that cotton seed and edible oils‖ means cotton seed oil and edible Oils;
(ab) in the case of supplies made by the distributer of fast moving consumer goods,─
- in case of a company, 2% of the gross amount payable; and
- in any other case, 2.5% of the gross amount payable.]
(b) in the case of sale of goods,—
(i) in case of a company, 4% of the gross amount payable, if the company is a filer and 7% if the company is a non-filer; and
(ii) in any other case, 4.5% of the gross amount payable, if the person is a filer and 7.75% if the person is a non-filer;
(2) The rate of tax to be deducted from a payment referred to in clause
(b) of sub-section (1) of section 153 shall be —
(i) in the case of transport services, two per cent of the gross amount payable; or
(ii) in the case of rendering of or providing of services,
- in case of a company, 8% of the gross amount payable, if the company is a filer and 14.5% if the company is anon-filer; and
- in any other case, 10% of the gross amount payable, if the person is a filer and 17.5% if the person is a non-filer;
- in respect of persons making payments to electronic and print media for advertising services,—
- in case of a filer, 1.5% of the gross amount payable; and
- in case of a non-filer, 12% of the gross amount payable, if the non-filer is a company and 15% if the non-filer is other than a company;
- (3) The rate of tax to be deducted from a payment referred to in clause (c) of sub-section (1) of section 153 shall be
- (i) 10% of the gross amount payable in case of sportspersons;
- (ii) in case of a company, 7% of the gross amount payable, if the company is a filer and 12% if the company is a non-filer; and
- (iii) in any other case, 7.5% of the gross amount payable, if the person is a filer and 12.5% if the person is a non-filer.
Section 153: Exemptions P-II Second Schedule
(18) In the case of a modaraba the rate of income tax shall be 25% of total income excluding such part of total income to which Division III of Part I (Dividend) of the First Schedule or section153 or section 154 applies.
(24A) The rate of tax, under clause (a) of sub-section (1) of section 153, from distributors of cigarette and pharmaceutical products and for large distribution houses who fulfill all the conditions for a large import house as laid down under clause (d) of sub-section (7) of section 148, for large import houses, shall be 1% of the gross amount of payments.
Clause (9A) Provisions of clause (a) of sub-section (1) of section 153, shall not apply to steel melters, steel re-rollers, composite steel units, as a payer, in respect of purchase of scrap, provided that tax is collected in accordance with section 235B:
Provided that steel melters, steel re-rollers and composite steel units may opt to pay tax in accordance with section 235B, for tax year 2012 and 2013, if tax liability for the said tax years is paid by the 30th day of June, 2014:
Provided further that where tax has been deducted under clause (a) of sub-section (1) of section 153 or paid under an order under section 161, it shall not be refundable.
Clause (9AA) Provisions of clause (a) of sub-section (1) of section 153, shall not apply to ship breakers as recipient of payment:
Provided that this clause shall only apply for ships imported after the 1st July 2014.
Clause (12) (a) The provisions of clause (l) of section 21 and clause (a) of sub-section (1) of section 153 shall not apply where agricultural produce is purchased directly from the grower of such produce subject to provision of a certificate by the grower to the withholding agent in the following format, namely:—
CERTIFICATE TO BE FILED BY THE GROWER OF
AGRICULTURAL PRODUCE
(b) the provisions of clause (a) of sub-section (1) of section 153 shall not apply only in case of cash payments made for meeting the incidental expenses of a business trip to the crew of oil tanker. This exemption shall not apply in case of any other payments made by owners of oil tankers; and
Clause (42) The provisions of sub-section (3) of section 153 shall not apply in respect of payments received by a resident person for providing services by way of
operation of container or chemical or oil terminal at a sea-port in Pakistan or of an infrastructure project covered by the Government’s Investment Policy, 1997.
Clause (43A) The provisions of sub-section (1) of section 153 shall not apply to payments received by a person on account of supply of petroleum product imported by the same person under the Government of Pakistan’s deregulation policy of POL products;
Clause (43B) The provisions of clause (a) sub-section (1) of section 153 shall not apply to payments received on sale of air tickets by travelling agents, who have paid withholding tax on their commission income.
Clause (43C) The provision of clause (a) of sub-section (1) of section 153 shall not be applicable to any payment received by a petroleum agent or distributor who is registered under Sales Tax Act, 1990 on account of supply of petroleum products.
Clause (16) The provisions of sections 113, 148, 151, 153, 155 and 156 shall not apply to the institutions of the Agha Khan Development Network (Pakistan) listed in Schedule 1 of the Accord and Protocol dated November 13, 1994, executed between the Government of the Islamic Republic of Pakistan and Agha Khan Development Network:
Provided that such institutions shall continue to collect and deduct tax under section 149, 151, 152, 153, 155, 156 or 233] from others persons, wherever required thereunder.
Clause (38) The provisions of section 151, 153 “, 233 and 236Q” shall not apply to special purpose vehicle for the purpose of securitization “or issue of sukuks”.
Clause 38C) The provisions of section 150,] 151, 152, 153 and 233 shall not apply to the Islamic Development Bank.
Clause (43D) The provisions of clause (a) of sub-section (1) of section 153 shall not apply in case of an oil tanker contractor with effect from 1st July 2008, provided that such contractor pays tax @ 2.5%, on the payments for rendering or providing of carriage services w.e.f. tax year 2012.
Clause (43E) The provisions of clause (a) of sub section (1) of section 153 shall not apply in case of goods transport contractors, provided that such contractors pay tax at the rate of 2.5% on payments for rendering or providing of carriage services.
Clause (45) The provisions of sub-section (1) of section 153 shall not apply to any manufacturer-cum-exporter as the prescribed person:
Provided that—
(a) the manufacturer-cum-exporter shall deduct tax from payments made in respect of goods sold in Pakistan;
(b) if tax has not been deducted from payments on account of supply of goods in respect of goods sold in Pakistan, the tax shall be paid by the manufacture-cum-exporter, if the sales in Pakistan are in excess of five per cent of export sales; and
(c) nothing contained in this clause shall apply to payments made on account of purchase of the goods in respect of which special rates of tax deduction have been specified under the provisions of the repealed Ordinance.
Clause (45A) (a) The rate of deduction of withholding tax under clauses (a) and (b) of sub-section (1) of section 153 shall be one per cent on local sales, supplies and services provided or rendered to the taxpayers falling in the]following categories namely:-
(i) textile and articles thereof;
(ii) carpets;
(iii) leather and articles thereof including artificial leather footwear;
(iv) surgical goods; and
(v) sports goods;
Provided that withholding tax under clauses (a) and (b) of sub-section (1) of section 153 shall not be deducted from sales, supplies and services made by traders of yarn to the above mentioned categories of taxpayers. Such traders of yarn shall pay minimum tax @ 0.1% on their annual turnover on monthly basis on 30th day of each month and monthly withholding tax statement shall be e-filed under the provisions of section 165 of this Ordinance.
(b) provisions of clause (a) of sub-section (1) of section 111 of this Ordinance shall not apply to the amounts credited in the books of accounts maintained for the period ending on the 30th June 2011, by the sellers, suppliers, service providers to the categories of sales tax zero-rated taxpayers, as mentioned in sub-clause (a); and
(c) provisions of sub-clauses (a) and (b) shall be applicable only to the cases of sellers, suppliers, service providers of the above mentioned categories of sales tax zero-rated taxpayers, who are already registered and to those taxpayers who get themselves registered by the 30th June, 2011.
Clause (46) The provisions of sub-section (1) of section 153 shall not apply to any payment received by an
oil distribution company or an oil refinery “and provisions of sub-section (2A) of section152 shall not apply to”] Permanent Establishment of Non-resident Petroleum Exploration and Production (E&P) Companies] for supply of its petroleum products.
Clause (46A) the provisions of sub-section (3) of section 153 shall not apply to any payment received by a manufacturer of iron and steel products relating to sale of goods manufactured by him.
Clause (47A) The provisions of section 153 shall not apply in respect of payments received by a resident person for supply of such goods as were imported by the same person and on which tax has been paid under section 148.
Clause (47D) The provisions of clause (a) of sub-section (3) of section 153 shall not apply to cotton ginners.
Clause (56C) The provisions of sub-section (3) of section 153, in respect of sale of goods and clause (a) of sub-section (1) of section 169 shall not apply to a person, if the person opts to file return of total income along with accounts and documents as may be prescribed subject to the condition that minimum tax liability under normal tax regime shall not be less than 3.5% of the gross amount of sales, if the person is a company and 4% otherwise.
Clause (56D) The provisions of sub-section (3) of section 153, in respect of contracts and clause (a) of sub-section (1) of section 169 shall not apply to a person if the person opts to file return of total income along with accounts and documents as may be prescribed subject to the condition that minimum tax liability under normal tax regime shall not be less than 6% of contract receipts, if the person is a company and 6.5 %otherwise.
Clause (56E) The provisions of sub-section (2) of section 153 and clause (a) of sub-section (1) of section 169 shall not apply in respect of a person if the person opts to file return of total income along with accounts and documents as may be prescribed subject to the condition that minimum tax liability under normal tax regime shall not be less than 0.5% of gross amount of services received.
Clause (57) The provisions of section 153 shall not apply to companies operating Trading Houses which—
(i) have paid up capital of exceeding Rs.250 million;
(ii) own fixed assets exceeding Rs.300 million at the close of the Tax Year;
(iii) maintain computerized records of imports and sales of goods;
(iv) maintain a system for issuance of 100% cash receipts on sales;
(v) present accounts for tax audit every year; and
(vi) is registered [516][under the Sales Tax Act, 1990
Provided that the exemption under this clause shall not be available if any of the aforementioned conditions are not fulfilled for a tax year
“Provided further that minimum tax under section 113 shall be 0.5% upto the tax year 2019 and one per cent thereafter.”
Explanation.-(i) For the removal of doubt, exemption under this clause, in respect of section 153, shall only be available as a recipient and not as withholding agent.
“(ii) It is further clarified that in-house preparation and processing of food and allied items for sale to customers shall not disqualify a company from being treated as a Trading House, provided that all the conditions in this clause are fulfilled and sale of such items does not exceed two per cent of the total sales.
Clause (57A) The provisions of sections 153 and 169 shall not apply to large import houses:
Provided that the exemption under this clause shall not be available if any of the conditions provided in section 148 are not fulfilled for a tax year.
Clause (60) The provisions of sections 148 and 153 shall not apply to fully as well partly designed/assembled cypher devices, for use within the country as are verified by Cabinet Division (NTISB)] with reference to design, quality and quantity.
Clause (67) The provisions of sections 150, 151, 152, 153 and 233 shall not apply in respect of payments made to the International Finance Corporation established under the International Finance Corporation Act, 1956 (XXVII of 1956).
Clause (68) The provisions of sections 151, 153 and 155 shall not apply in respect of payments made to the Pakistan Domestic Sukuk Company Ltd.
Clause (69) The provisions of sections 150, 151, 152, 153 and 233 shall not apply in respect of payments made to the Asian Development Bank established under the Asian Development Bank Ordinance, 1971 (IX of 1971).
Clause (72) The provisions of sections 150, 151, 152, 153 and 233 shall not apply in respect of payments made to The ECO Trade and Development Bank.
Clause (77) Provisions of sections 148 and 153 shall not be applicable on import and subsequent supply of items with dedicated use of renewable sources of energy like solar and wind etc., even if locally manufactured, which include induction lamps, SMD, LEDs with or without ballast with fittings and fixtures, wind turbines including alternator and mast, solar torches, “tubular day lighting devices such as sola tube,” lanterns and related instruments, PV modules with or without] the related components including invertors, charge controllers and batteries.
Clause (78) Coal Mining and Coal based Power Generation Projects in Sindh,—
(i) the dividend income of the shareholders of such a project shall be exempt from provisions of section 150 from the date of commencement of business till 30 years from such date; and
(ii) the payments made on account of sale or supply of goods or providing or rendering of services during project construction and operations, shall be exempt from the provisions of section152(2A) and section 153.
Clause (94) The provisions of clause (b) of the proviso to sub-section (3) of section 153 shall not apply for “the period beginning on the first day of July, 2015 and ending on the thirtieth day of June, 2017 to a company being a filer and engaged in providing or rendering freight forwarding services, air cargo services, courier services, manpower outsourcing services, hotel services, security guard services, software development services, “IT services and IT enabled services as defined in clause (133) of Part I of this Schedule” tracking services, advertising services (other than by print or electronic media), share registrar services, engineering services or car rental services:
Provided that the tax payable or paid on the income from providing or rendering aforesaid services shall not be less than two percent of the gross amount of turnover from all sources and that the company furnishes in writing an irrevocable undertaking by the fifteenth day of November, 2015 to present its accounts to the Commissioner within thirty days of filing of return, for audit of its income tax affairs for tax year 2016 “or 2017, as the case may be”
“Provided further that for tax year 2017, the company shall furnish irrevocable undertaking by November, 2016, to present its accounts to the Commissioner.”
Read more blogs
here and to contact FBR
click here
