IMPORTANT WITHHOLDING INCOME TAX PROVISIONS FOR CONSTRUCTION INDUSTRY

Exemption of Withholding tax on iron and steel products

As per clause 46A of Part IV of Second Schedule of the Income Tax Ordinance, 2001 withholding tax shall not be applicable to any payment received by manufacturer of steel or iron products relating to sale of goods manufactured by him.

Exemption of Withholding tax on various services

As per clause 46AA of Part IV of Second Schedule withholding income tax shall not be applicable to following persons;

• Hotels and restaurants receiving payments in cash for providing accommodation or food or both.

• Individuals who are not registered, receiving payments for the supply of sand, bricks, grit, gravel, crushed stone, soft mud or clay.

• Artisans, plumbers, electricians, surface finishers, carpenters, painters or daily wagers, receiving payments in respect of services provided or rendered to the construction sector including construction of buildings, roads, bridges and other such structures or the development of land, subject to the following conditions, namely: —

(a) services under this clause are provided or rendered by an individual who is not registered;

(b) the name, Computerized National Identity Card Number and address of such individual is recorded by the recipient of such service; and

(c) payment for such services is made directly to such individual

Exemption of Withholding tax on petroleum products

As per clause 43C of Part IV of Second Schedule withholding tax shall not be applicable to any payment received by a petroleum agent or distributor who is registered under Sales Tax Act, 1990 on account of supply of petroleum products.

Reduced Withholding tax rate for various products including cement and steel

As per clause 24C of Part IV of the Second Schedule the withholding income tax rate in the case of distributors, dealers, sub-dealers, wholesalers and retailers of fast moving consumer goods, fertilizer, electronics excluding mobile phones, sugar, cement, steel and edible oil as recipient of payment shall be 0.25% of gross amount of payments subject to the condition that beneficiaries of reduced rate are appearing on the Active Taxpayers’

Lists issued under the provisions of the Sales Tax Act, 1990 and the Income Tax Ordinance, 2001 (XLIX of 2001):

• Provided that the benefit under this clause shall only be available to those Tier-1 retailers as defined under Sales Tax Act, 1990 who are integrated and configured with Board or its computerized system for real time reporting of sales or receipts.