Recently, Sharif Ud Din Khilji, the Managing Partner at Khilji & Co. Chartered Accountants has announced that after continuous efforts by P@sha, PSEB, and Ministry of IT, FBR have enabled users to file online tax exemption application against section 154A.
The said issue was raised by the Chairman of P@sha, Mr. Barkan Saeed with the Prime Minister and Finance Minister who immediately issued instructions to facilitate IT companies to file online tax exemption, which resulted in this good news for the IT industry. As per the instructions, all the IT sector persons engaged in the export of IT & IT-enabled services are now required to immediately file an online exemption application.
According to budget 2021/2022 documents, the Finance Bill 2021 had proposed a new section 154A for the imposition of income tax on the export of services.
Read more: FBR mandates Facebook, YouTube, Google, and other digital platforms to pay taxes
The proposed said section stated, “Every authorized dealer in foreign exchange shall, at the time of realization of foreign exchange proceeds on account of the specified export of services, would deduct tax from the proceeds at the rate of 1 percent of the proceeds of the export.”
It is advised that tax should be on the amount of value of export and the same should not be related to proceeds realized.
The services included are:
• IT related services;
• Technical services;
• Royalties;
• Construction contracts; and
• Any other service.
After the introduction of the proposed new section, authorities from different domains opposed the idea. Sharif Ud Din Khilji discussed this matter on his LinkedIn post stating, “The last time I checked this afternoon (July 01), the FBR system was not updated to issue exemption certificates under 159/154A, so FBR and IT companies need to act at the earliest before banks start deducting taxes.” However, now the motion has been approved, and the online filing of exemption applications against section 154A is now live.
