ByAttention businesses in Pakistan! A new regulation regarding advance tax on sales to retailers has been introduced, affecting specific sectors. Let’s break down the details and understand its implications.
Who’s affected?
This advance tax applies to manufacturers, distributors, dealers, wholesalers, and commercial importers dealing in:
- Pharmaceuticals
- Poultry and animal feed
- Edible oil and ghee
- Auto-parts and tyres
- Varnishes, chemicals, cosmetics, and IT equipment
- Electronics, sugar, cement, and iron & steel products
- Motorcycles, pesticides, cigarettes, glass, textiles, beverages, paint, and foam
What’s the change?
These businesses must now collect advance tax at the time of sale to retailers. The rate depends on the retailer’s filing status:
- Filers: 0.5% of the gross sale amount
- Non-filers: 1% of the gross sale amount
Example:
Imagine you’re a distributor selling electronics to a retailer. The sale amount is Rs. 100,000.
- If the retailer is a filer: You collect an advance tax of Rs. 500 (0.5% of Rs. 100,000).
- If the retailer is a non-filer: You collect an advance tax of Rs. 1,000 (1% of Rs. 100,000).
What happens next?
The collected tax is not an additional cost. It’s essentially a prepayment of the retailer’s final tax liability. You need to deposit it with the government.
Good news for filers!
The collected advance tax can be credited against your own income tax liability for the year, effectively reducing your final tax payment.
For non-filers:
This advance tax serves as a reminder to file your taxes and potentially benefit from lower tax rates in the future.
Key points to remember:
- Ensure proper systems are in place for tax collection, documentation, and deposit.
- Stay updated on any further developments or extensions to the regulation.
- Consult a tax professional for personalized guidance based on your specific business and situation.
By understanding and complying with this new regulation, you can ensure smooth operations and avoid potential penalties.
