NBR asks banks
The National Board of Revenue has instructed the commercial banks to ensure deduction of the advance income tax from the payable amount of import bills against local letters of credit.
The revenue board last week issued a special order asking the banks to deduct AIT at the time of bill payment against local LCs opened by businesses.Usually manufacturers, large scale traders, suppliers and contractors open local LCs for collecting raw materials and other products from local market.
Back-to-back LCs mostly opened by the garment industry under the master LCs for executing export orders do not fall under the provision.
NBR officials said that banks as AIT deducting authorities were supposed to deduct the tax while making payments to the suppliers against local LCs.
But some banks often do not deduct the tax, they said.
Many banks open local LCs in different names such as supplier financing and invoice financing and refrain from deducting AIT from payment against the credits, the NBR alleged.
‘Whatever the name is, if a transaction is similar to local LC, a bank will have to deduct the AIT from the payment of bills,’ the NBR order said.
According to the article 52 of Income Tax Ordinance-1984, deduction of AIT from payment to local LC bill receiver is mandatory.
Officials said that banks would deduct the tax at different rates ranging from 1 per cent to 4 per cent.
According to the rule 16 of Income Tax Rules-1984, AIT on the payment of local import bill is nil if the payment does not exceed Tk 1 lakh.
The AIT is one per cent if the payment exceeds Tk 1 lakh but remains below Tk 5 lakh. It is 2.5 per cent on the payment amounting to Tk 5 lakh to Tk 15 lakh and 3.5 per cent on the payment amounting to Tk 15 lakh to Tk 25 lakh. The AIT is 4 per cent if the payment exceeds Tk 25 lakh.
-With New Age input
