Advance rate tax on large passenger vehicles with more seating capacity has been reduced and so the provincial departments have asked the transporters to reduce the fare for common people.
The advance tax has been reduced on vehicles with a capacity of four or more persons; vehicles with a capacity of 10 or more persons but less than 20 persons, and vehicles having a capacity of 20 persons or more. For example, the annual advance tax rate was reduced from Rs. 2,500 per seat (non-air conditioned) to Rs. 1,000 per seat (non-air conditioned). The advance tax was reduced from Rs. 4,000 per seat (air-conditioned) to Rs. 1,500 per seat (air-conditioned).
The Federal Board of Revenue (FBR) directed the Provincial Excise and Taxation authorities to deduct a reduced rate of withholding tax on Passenger Transport Vehicles from 1 July 2022 under the Tax Laws (Second Amendment) Ordinance, 2022.
At the request of the transporters industry, the FBR has issued a legal clarification to the Directorate General Withholding Taxes and all Provincial Excise and Taxation authorities for compliance.
Primarily, the main issue is that the Provincial Excise and Taxation authorities are reluctant to interpret the Tax Laws (Second Amendment) Ordinance, 2022, on their own, but they are relying on the FBR’s letter/clarification/circular.
According to the FBR’s clarification, the FBR has explained the change in the Rate of Tax under section 234 read with rule 10 of the Tenth Schedule of the Income Tax Ordinance, 2001.
The FBR stated that the rate for collection of advance tax under section 234 read with clause (2) of Division III of Part IV of First Schedule to the Income Tax Ordinance, 2001 has been revised in the mentioned manner through Tax Laws (Second Amendment) Ordinance, 2022 promulgated on August 22, 2022.
Furthermore, a new sub-rule (ha) has been inserted in Rule 10 of Tenth Schedule of ITO, 2001, whereby the provision of rule (1) of the said Schedule will not apply to advance tax collected under section 234 of ITO, 2001, in respect of goods transport and passenger transport vehicle during the period starting from the date of commencement of Tax Laws (Second Amendment) Ordinance, 2022 and ending on 30 June 2023. The said mentioned changes in the Income Tax Ordinance, 2001 are intimated to the Director General (WHT), Federal Board of Revenue (HOs), Islamabad.
Under Finance Act, 2022, the government increased the advance tax rate on passenger transport vehicles. The rates were brought down through the Tax Laws (Second Amendment) Ordinance, 2022.
Presently, the advance tax on passenger transport vehicles plying for hire is collected based on the seating capacity of vehicles by the Excise and Taxation authorities. The rates of adjustable advance tax on such vehicles provided in Division III of Part IV of the First Schedule of the Income Tax Ordinance were enhanced by substituting the relevant table.
Under the Tax Laws (Second Amendment) Ordinance, 2022, the advance tax has been reduced on vehicles with a capacity of four or more persons; vehicles with a capacity of 10 or more persons but less than 20 persons, and vehicles having a capacity of 20 persons or more. For example, the annual advance tax rate was reduced from Rs. 2,500 per seat (non-air conditioned) to Rs. 1,000 per seat (non-air conditioned). The advance tax was reduced from Rs. 4,000 per seat (air-conditioned) to Rs. 1,500 per seat (air-conditioned).
In August 2022, the transporters observed a nationwide strike against tax increases, leaving thousands of passengers stranded across the country. The public transport action committee ended a three-day strike due to flooding. Transport owners protested as the government had increased the tax from Rs. 300 to Rs. 4,000 and Rs. 8,000. “It will not be possible to operate public transport after the heavy taxation,” the owners added.
