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FBR soon to reduce sales tax from 16pc to 5pc on marriage halls in Islamabad

FBR soon to reduce sales tax from 16pc to 5pc on marriage halls in Islamabad

ISLAMABAD: The Federal Board of Revenue (FBR) is likely to reduce the rate of sales tax from 16 percent to 5 percent on the marriage halls located in the jurisdiction of Islamabad Capital Territory (ICT) during the next few days. In this regard, a special SRO or circular is going to be issued most probably on Wednesday or Thursday. There are 80 marriage halls in the jurisdiction of Islamabad.

Almost in mid-August last year, the FBR imposed a 5 percent advance sales tax on different functions, including weddings, seminars, workshops, exhibitions, concerts, parties, or any other gatherings at private hotels or commercial venues. In this regard, Section 236D of the Income Tax Ordinance 2001 was invoked and as per this section advance tax at the rate of five percent would be collected on the total amount of the bill from a person arranging or holding a function in a marriage hall, marquee, hotel, restaurants, commercial lawn, club, a community place or any other place used for such purpose.

A source at the FBR told Customs Today that there was wide ranging difference of rate of sales tax being charged from marriage halls located in twin cities. Marriage halls located in the jurisdiction of Punjab are paying 5 percent sales tax, whereas marriage halls located in ICT are paying 16 percent sales tax and there was only a road between Islamabad and Rawalpindi’s marriage halls. This wide ranging difference of rate of sales tax has almost left the marriage halls located in ICT without business.

The source said that sales tax on services had been transferred to provinces after the 18th Constitutional Amendment 2010 allowing provinces to collect tax on their terms. Therefore, in 2015, the Punjab Revenue Authority (PRA) imposed 5% tax on marriage halls, including marquees or any such business by whatever name.

Presently, the source said that FBR was is collecting sales tax from marriage halls in the federal capital under Capital Territory (Tax on Services) Ordinance, 2001. The Federal Board of Revenue had imposed a levy at the rate of 16 percent in the capital in current fiscal year 2016-17.

It is pertinent to note here that almost one year back, in January last, FBR expressed serious concern over the poor collection of withholding tax from functions/gatherings, marriage halls/lawns during 2015-16 and directed all Regional Tax Offices (RTOs) to improve collection of tax on functions and gatherings under section 236D of the Income Tax Ordinance 2001.

In this regard, the FBR issued instructions to the field formations while appreciating the performance of the RTO Rawalpindi in this regard. The FBR carried out a comparison of the RTOs and appreciated that the RTO Rawalpindi has shown better performance in collection of withholding tax on functions and gatherings under section 236D of the Income Tax Ordinance 2001.