KARACHI: The Federal Revenue Council (FBR) agreed to return the Rs1 billion withheld from the Sindh treasury, prompting the provincial government to continue to collect withholding taxes on motor vehicle registrations after a three-month break, sources said on Thursday.
The source said the Sindh Excise and Taxation Department was continuing to collect withholding taxes on motor vehicle registrations after FBR agreed to return the amount as the first phase of Rs5 billion.
The Sindh government suspended levying a withholding tax on new motor vehicle registrations in July last year after the FBR recovered a total of Rs5 billion from a provincial bank account managed at the federal level.
The federal government is making all its efforts to convince provincial governments to continue collecting as withholding taxes. However, the provincial government has a clear stance that the collection will not commence until the money is returned that was allegedly taken by FBR from its account.
The provincial department collects withholding taxes under section (231B and 234 Income Tax Ordinance 2001).
The provincial excise and taxation department suspended tax collection, referring to the Sindh cabinet decision. The province decided to stop collecting withholding taxes on behalf of the FBR, which were collected by the excise, taxation and narcotics control departments. The decision was taken in connection with the Sindh Cabinet decision which was held in February last year.
Following an irresistible provincial stance, FBR was forced to return the amount to the provincial government, according to FBR officials.
A senior FBR official confirmed with The News that the revenue agency paid one billion rupees out of the Rs5 billion claimed and the payment challenge was ready to transfer.
“The remaining amount will be paid on time,” the official said.
The Sindh excise and tax department began collecting tax cuts since last October. The FBR official said the provincial department assured top tax authorities about collecting motor vehicle registrations from July to September.
The Karachi Regional Tax Office received Rs222 million under section 231B in December, a significant 222 percent higher compared to Rs69 million in the same month last year. Likewise, the tax office received Rs207 million under section 234 in December, 15 percent higher than Rs181 million in the same month last year.