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The source tax on local food suppliers was reinstated by the National Board of Revenue (NBR), and they will now only be required to pay a 2% source tax.
Previously, sellers who supplied locally produced food items had to pay a source tax of 4%.
During Covid-19, NBR decreased the source tax rate to 2% in FY22 and eliminated the tax from local food suppliers in FY22.
In a recent circular, NBR asked banks to withhold 2% of the cost of locally produced food from suppliers’ accounts when they receive payment.
NBR representatives stated that on November 13, the Income Tax Policy Wing published a circular in this regard.
The list include rice, wheat, potato, onion, garlic, peas, chickpeas, lentils, ginger, turmeric, dried chillies, pulses, maize, coarse flour, flour, salt, edible oil, sugarcane, milk, black pepper, cinnamon, cardamom, clove, date, cassia leaf and all kinds of fruits.
The amount which is subject to tax at source under section 52, is exempted from tax or is subject to a reduced tax rate in an income year of the suppliers.
The circular states that suppliers must apply to the NBR for the issuance of a certificate and must notify the NBR in writing that the payment in question would be made without any deductions or with deductions at a proportionately reduced rate, as appropriate, for that income year.
The payee will be subject to a 50% penalty if they don’t provide documentation of filing their return at the time of payment, according to the guidelines.
On the other hand, the tax rate will be higher than 50% if the payee does not receive payment by bank transfer.
(DT)
