While making payments to petrol pumps for petrol and other lubricants, whether we should deducting tax from their payments? In view of my knowledge in this case it is the responsibility of principal(PSO,Shell etc. to deduct advance tax) to deduct tax. Is i am right?
Farhan,Income Tax on payment made to Petrol Pumps and Advertising Agents is to be deducted on their commission and not on the Bill amount.
The commission on which Income Tax is to be deducted
Commission 10% of the bill amount
Rate of Income tax is 3.5% on commission.
Actually the principal of petrol pumps & Advertising Agencies deducts Income Tax @ 10% before making the payment of commission to petrol pump Dealer therefore the aforesaid deduction is double but no specific provision of exemption is available in the Ordinance, However according to Circular No.25 of 1980 dated 23.09.1980 the F.B.R has authorized C.I.T to issue the exemption certificate with regards to W.H.T to Petrol Pump Dealers and Advertising Agencies,so that on the production of such certificate, the responsibility to deduct Income Tax shall be ceased.
Best Regards
Dear Farhan,
Clause 46 of Part IV of Second Schedule of the Income Tax Ordinance 2001 states -
"The provisions of sub-section (1) of section 153 shall not apply to
any payment received by an oil distribution company or an oil refinery 3[or
Permanent Establishment of Non-resident Petroleum Exploration and Production
(E&P) Companies] for supply of its petroleum products.]"
Its clear from above that if purchase oil direct from any oil distribution company like PSO , ARL etc then you will not deduct tax.
But there is no specific provision in law that defines the status of payments made to petrol pumps etc.
Any comments on above will be appreciated.