Following the resolution of a dispute between the Federal Board of Revenue (FBR) and the Sindh government, whereby FBR agreed to pay the initially deducted amount of over Rs. 8 billion back to the Sindh government, the latter has agreed to collect withholding tax (WHT) on the registration of motor vehicles at FBR’s behest.
Reports suggest that the Pakistan People’s Party (PPP)-led government denied the FBR’s orders to collect WHT on registration of new vehicles in July 2020, after the FBR had deducted the aforementioned amount from the provincial bank account maintained at a federal level.
The central government tried to persuade the Sindh government repeatedly to collect WHT on the registration of new vehicles. The Sindh government responded that they would not comply with those orders unless FBR returns the said money.
A senior FBR official confirmed that the first tranche of Rs. 5 billion is set to be transferred soon. He added, “The remaining amount will be paid out in due course.”
Sindh excise and taxation department officials told the media that they had stopped collecting WHT against the registration of vehicles following the orders from the Sindh cabinet. The FBR official stated that the money is being returned to the government due to their uncompromising stance on the affair.
Sindh government had already started collecting WHT since October of 2020. The provincial government assured FBR that they would collect the WHT from July till December of last year.