Pakistan Industries Earning Over Rs30 Cr SC Directs Payment of 4pc Super Tax Within a Week

ISLAMABAD: Industries and sectors with incomes exceeding Rs300 million that are subject to a ten percent super tax for the tax year 2022 are required to deposit the amount within a week at a rate of four percent, according to the Supreme Court of Pakistan (SC).

In addition, the Federal Board of Revenue (FBR) will cash in bank guarantees presented to the High Court up to 4% of the total amount.

In this regard, on February 16, 2023, the Supreme Court handed down its decision in the super tax case.

Airlines, automobiles, beverages, cement, chemicals, cigarettes, tobacco, fertilizer, iron and steel, LNG terminal, oil marketing, oil refining, exploration and production of petroleum and gas, pharmaceuticals, sugar, and textiles are the industries or segments.

Shabbar Zaidi, a top chartered accountant and former chairman of the Federal Board of Revenue (FBR), is of the opinion that this order of the Supreme Court does not apply to taxpayers in Sindh. Instead, the Sindh High Court judgment on this matter continues to apply because the Supreme Court’s order deals with the encashment of cheques that were issued in accordance with the Lahore High Court’s orders on this matter.

Respondents who are required to deposit super tax at the rate of 4%, which is applicable to assessee industries earning income exceeding Rs300 million as provided in Division II B but falling outside the proviso thereto, must do so within a week of receiving the order from the Supreme Court. The petitioner is entitled to cash in bank guarantees provided by the respondents in response to the High Court’s instructions to the amount of 4% tax.

The petitioner’s lawyers have pointed out that the tax year 2022 for which the disputed Super Tax was imposed under Section 4C of the Income Tax Ordinance, 2001 (the “Ordinance”) begins on July 1, 2021, and ends on June 30, 2022. The respondents in this case are high-earning taxpayers with incomes greater than or equal to Rs300 million. They claim that they are exempt from the super tax for two reasons.

First and foremost, due to the fact that their accounting year came to an end on December 31, 2021, prior to the end of the tax year 2022 on June 30, 2022. As a result, the petitioner was requesting the contested super tax with retrospective effect.

At this point, the arguments are not convincing to the court because, according to the petitioner’s attorney, the accounting year of the respondents ends during the Tax Year 2022, which is when Section 4C is legally applicable.

Section 4C’s super tax rates are now listed in Division IIB, Part I of the Ordinance’s First Schedule, according to the order. However, the First Proviso to Division II B imposes a 10% higher tax rate on individuals with incomes exceeding Rs300 million from certain specified industries. Otherwise, such earners in other industries or businesses are subject to a 4% tax rate.

On the basis of discrimination, the High Court ruled in favor of the respondents. Because the respondents’ argument implicitly accepts liability to taxation at a rate of 4%, the FBR chairman argued that the aforementioned argument cannot serve as the basis for striking down the challenged super tax.

However, he is unable to explain to us why the first proviso’s industries should be subject to a higher super tax rate. The Supreme Court stated, “We grant him time to prepare his case on that point.”

In every petition, the Supreme Court has sent notices to the respondents. In the week that begins on March 13, 2023, the case has been relisted.