Section 154 Tax on Exporters
Every authorized dealer in foreign exchange shall at the time of realization of foreign exchange proceeds on account of the export of goods by an exporter, deduct tax from the proceeds at the rate one percent.
Every authorized dealer in foreign exchange shall, at the time of realization of foreign exchange proceeds on account of the commission due to an indenting commission agent, deduct tax from the proceeds at the rate of five percent
Every banking company shall, at the time of realization of the proceeds on account of a sale of goods to an exporter under an inland back-to-back letter of credit or any other arrangement as prescribed by the Board, deduct tax from the amount of the proceeds at the rate one percent.
The Export Processing Zone Authority established under the Export Processing Zone Authority Ordinance,1980 (VI of 1980), shall at the time of export of goods by an industrial undertaking located in the areas declared by the Federal Government to be a Zone within the meaning of the aforesaid Ordinance, collect tax at the rate of one percent.
Every direct exporter and an export house registered under the Duty and Tax Remission for Exports Rules,2001 provided in Sub-Chapter 7 of Chapter XII of the Customs Rules, 2001 shall,at the time of making payment for a firm contract to an indirect exporter defined under the said rules, deduct tax at the rates one percent.
Taxability of Section 154
The tax deducted under this section shall be a final tax on the income arising from the transactions referred to in this section.
FINANCE ACT, 2015 – EXPLANATION REGARDING IMPORTANT AMENDMENTS MADE IN THE INCOME TAX ORDINANCE, 2001.
OPTION TO OPT OUT OF FINAL TAX REGIME FOR EXPORTERS U/S 154
As per provisions of section 154 of the Ordinance, the tax withheld on export proceeds by an exporter is final tax on their income.
Through Finance Act, 2015 a new sub-section (5) has been added in section 154 of the Ordinance whereby the exporters have been given an option from tax year 2015 and onwards to opt out of the final tax regime and file their returns of income under normal tax regime.
However, the taxpayer shall exercise the said option every year at the time of filing of their return of income every year.
Furthermore, the tax deducted under this section on export proceeds shall be treated as minimum tax liability of the taxpayer on export income.
Income from sales, other than exports, will be taxed in normal manner as before. – (2/2015, dated 24.07.2015).
COLLECTION OF TAX FROM EXPORTERS RECEIVING EXPORT PROCEEDS IN CASH. [Section 154 — Division-IV, Part-III of First Schedule]
Under section 154 of the Ordinance, every authorized dealer in foreign exchange is required to deduct tax at the time of realization of foreign exchange proceeds on account of export of goods.
There is a special EXPLANATION REGARDING export of goods to Afghanistan whereby goods are exported without Form”E” and export proceeds are directly received by the exporters in local currency.
Such exports are allowed in terms of para (7) of SRO 759(1)/2008 dated 18.07.2008. Since the export proceeds are not realized in foreign exchange through authorized dealers, therefore, no tax is collected thereon.
In order to cover the above situation, a new sub-section (3C) has been inserted which provides that in respect of goods exported without Form “E” the Collector of Customs shall collect tax @ 1% at the time of clearing such goods for export. Earlier, vide its Circular No. 5 of 2008 dated 5.7.2008.
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