The withholding tax collected on the import of edible oil, packaging material, paper/paper board, and plastics by the industrial undertakings/commercial importers has been made minimum tax from July 1, 2022.
The FBR has issued circular No. 15 of 2022 to explain withholding tax on imports for industrial undertakings. Under the Finance Act 2022, some changes have been incorporated with regard to WHT on imports under section 148 of the Income Tax Ordinance 2001.
Firstly, the withholding tax on imports collected at 1 percent and 2 percent on goods falling under Part I and II of the Twelfth Schedule to the Ordinance respectively is adjustable for an industrial undertaking if goods have been imported for own use. In numerous circumstances, goods imported by an industrial undertaking for own use may fall under Part III of the Twelfth Schedule to the Ordinance on which tax at 5.5 percent is collectible at the import stage.
This resulted in a situation whereby tax collected at 5.5 percent on the import of goods by an industrial undertaking for its own use became a minimum tax. For the purpose of streamlining, tax collectible from an industrial 13 undertaking on import of all goods for own use has been made adjustable.
Secondly, the tax collectible under section 148 on import of edible oil, packaging material, paper and paper board, and plastics has been made minimum tax whether imported by an industrial undertaking for own use or by a commercial importer.
Thirdly, the rate of withholding tax on import of goods falling in Part II of the Twelfth Schedule of the Ordinance has been enhanced from 2 percent to 3.5 percent for commercial importers, which shall be the minimum tax.
Fourthly, certain goods have been shifted from Part II to Part I of the Twelfth Schedule. The goods included in Part I are subject to tax @ 1 percent irrespective of import by industrial undertaking or commercial importers.
