The Income Tax Ordinance, 2001

 

 

 

Section

 

153.  Payments for goods and services.-

 

(1)    Every prescribed person making a payment in full or part including a payment by way of advance to a resident person or permanent establishment in Pakistan of a non-resident person –  

 

(a)    for the sale of goods;

 

(b)    for the rendering of or providing of services;

 

(c)    on the execution of a contract, other than a contract for the supply of goods or the rendering of (Word "professional" omitted by Finance Act, 2003) or providing of services,

 

shall, at the time of making the payment, deduct tax from the gross amount payable at the rate specified in Division III of Part III of the First Schedule.  

 

 (1A) Every exporter or an export house making a payment in full or part including a payment by way of advance to a resident person or permanent establishment in Pakistan of a nonresident person for the rendering of or providing of services of stitching, dying, printing, embroidery, washing, sizing and weaving, shall at the time of making the payment, deduct tax from the gross amount payable at the rate specified in Division IV of Part III of the First Schedule.

 

(2)    The gross amount payable for a sale of goods shall include the sales tax, if any, payable in respect of the sale.  

 

Sub section 3 omitted by Finance Bill 2006. Before omission it read as follows

    (3)    Every prescribed person making a payment in full or part (including a payment by way of advance) to a non-resident person on the execution of –  

 

                clause (a) and (b) omitted by Finance Act 2005

 

         (a)    a turnkey contract;  

            (b)   a contract or sub-contract for the design, construction or supply of plant and equipment under a power project;  

 

    (c)   a contract or sub-contract under a construction, assembly or installation project in Pakistan, including a contract for the sale (Substituted for "supply" by Finance Act, 2003) of supervisory activities in relation to such project; or  

 

    (d)   any other contract for construction or services rendered, other than a contract to which section 152 applies, or 

 

    (e)    a contract for advertisement services rendered by T.V. Satellite Channels,

 

 shall deduct tax from the gross amount payable under the contract at the rate specified in Division III of Part III of the First Schedule.

 

(4)    The Commissioner may, on application made by the recipient of a payment referred to in sub-section (1) ("or (3)" omitted by Finance Act 2007) and after making such enquiry as the Commissioner thinks fit, allow, by order in writing, any person to make the payment without deduction of tax.  

 

(5)    Sub-section (1) shall not apply to –  

 

(a)    a sale of goods where –  

 

(i)     the sale is made by the importer of the goods;  

 

(ii)     the importer has paid tax under section 148 in respect of the goods; and  

 

(iii)    the goods are sold in the same condition they were in when imported;  

 

(b)    a refund of any security deposit;  

 

(ba)   a payment made by the Federal Government, a Provincial Government or a local authority to a contractor for construction materials supplied to the contractor by the said Government or the authority;

 

(bb)   a cotton ginner who deposits in the Government Treasury, an amount equal to the amount of tax deductible on the payment being made to him, and evidence to this effect is provided to the “prescribed person

 

(c)    the purchase of an asset under a lease and buy back agreement by a modaraba, leasing company, banking company or financial institution; or  

 

(d)    any payment for securitization of receivables by a Special Purpose Vehicle to the Originator; or

 

(e)    a payment made by a Small Company as defined in section 2.

 

(6)   The tax deducted under this section shall be a final tax on the income of a resident person arising from transactions referred to in sub-sections (1) and (1A);

 

        Provided that sub-section (6) shall not apply to companies in respect of transactions referred to in clause (b) of sub-section (1);

 

        Provided further that this sub-section shall not apply to payments received on account of-

                (i)  advertisement services, by owners of newspapers and magazines;

(ii) sale of goods and execution of contracts by a public company listed on a registered stock exchange in Pakistan

 

         before substitution by Finance Bill 2006 sub-section (6) read as follows

        (6) The tax deducted under this section shall be a final tax on the income of a resident person arising from transactions referred to in clause (a) or (c) of sub-section (1).  

 

(6A)  The provisions of sub-section (6) in so far as they relate to payments on account of supply of goods from which tax is deductible under this section shall not apply in respect of any person being a manufacturer of such goods.

 

Sub section 7 omitted by Finance Bill 2006. Before omission it read as follows

        (7)    The tax deducted under this section shall be a final tax on the income of a non-resident person arising from a contract specified in sub-section (3).  

 

(6B) The provisions of sub-section (6) in so far as they relate to payments on account of sale of goods from which tax is deductible under this section shall apply on account of an individual and AOP. This sub-section shall be applicable from tax year 2007

 

(8)    Where any tax is deducted by a person making a payment to a Special Purpose Vehicle, on behalf of the Originator, the tax is credited to the Originator.  

 

       

        sub-section (8A) omitted by Finance Act 2007. Before omission it read as follows

 

    (8A) Every person from whom tax is being collected under this section shall disclose his National Tax Number to the withholding agent. In case of there being no National Tax Number (NTN), Computerized National Identity Card Number (CNIC) shall be provided. Where a person fails to disclose his NTN or CNIC number, as the case may be, at the time of collection or deduction of tax, the rate of withholding tax shall be two per cent over and above the rates specified in Division III of Part III of the First Schedule.

 

(9)    In this section, –  

 

“prescribed person” means –  

 

(a)    the Federal Government;  

 

(b)    a company (inserted by Finance Ordinance Act 2005) other than a small company, as defined in clause (59A) of section 2 ;  

 

(c)    an association of persons constituted by, or under, law;  

 

(d)    a foreign contractor or consultant;

 

(e)    a consortium or joint venture; or

 

(f) an exporter or an export house for the purpose of sub-section (1A)

     

(Word "professional" omitted by Finance Act, 2003) services” includes the services of accountants, architects, dentists, doctors, engineers, interior decorators and lawyers, otherwise than as an employee; and  

 

“sale of goods” includes a sale of goods for cash or on credit, whether under written contract or not.