Business Recorder reported that the Federal Board of Revenue will apply Section 153 of the Income Tax Ordinance 2001 on the ship breaking industry and recover 3.5% withholding tax on sale of ship plates to steel re-rolling mills recovery of billions of rupees taxes from ship breakers.
Sources said that Mr Ali Arshad Hakim chairman of the ship breakers and FBR convened a meeting at the FBR House. Ship breaking industry pleaded their case that no withholding tax is applicable as tax is charged at import stage and when the imported goods are sold in the same condition as imported, no further tax is to be charged according to the provisions of Section 153(5)(a) of Income Tax Ordinance 2001. The industry also presented its legal and technical viewpoint to the tax authorities for consideration.
Tax officials said that the supplies/sales of ship breakers are liable to withholding of tax under Section 153 of the Income Tax Ordinance 2001. The industry has been engaged in local sale of ship plates to re-rolling mills, which is subjected to 3.5% withholding tax. Thus, ship breakers have to pay one percent withholding tax at the import stage and 3.5% on local supply that is 4.5. However, the industry is only paying one percent tax as compared to 4.5% tax.
Sources added that the law is very clear on the issue which needs to be enforced retrospectively.
On the other hand, steel industry is also supplying ingots and billets to the re-rolling mills and paying applicable taxes. Both the ship plates and items supplied by steel units have been used for same purpose by re-rolling mills. Ship breakers have undue advantage due to non payment of 3.5% withholding tax on supply of ship plates as compared to steel industry. Ship breakers have low cost of production when compared with steel units as steel industry is using electricity as their major input. Payment of proper taxes by ship breakers would create a fair competition in the country.
