According to the provisions of sub-section (7H) inserted in section 50 of the Income Tax Ordinance, 1979, through Finance Act, 1999, every person has to collect tax @ 10% of the amount of commission or discount allowed, at the time of making sale of petroleum products to a petrol pump operator. Income tax so collected has been made full and final discharge of the petrol pump operator’s tax liability. Withholding tax deductible on supplies under section 50(4) also constitutes full and final discharge of tax liability.

2. It has been brought to the notice of the Board that in certain cases of petrol pump operators tax is being withheld/collected under sub-section 50(4) and 50(7H). The purchaser of the petroleum products deducts tax under section 50(4) @ 3.5% out of the payment which is inclusive of petrol pump operator’s commission, while the petrol pump operator has already paid withholding tax under section 50(7H) @ 10% of commission or discount on the same petroleum products.
3. The above situation is likely to create hardship for such petrol pump operators. To remove this hardship, the Commissioner of Income Tax may issue exemption certificates under clause (b) of sub-section (4) of section 50 if tax is being collected @ 10% under section 50(7H) and is being deposited promptly. However, in case irregularities are found in collection/deposit of tax under section 50(7H), the exemption certificate issued may be cancelled.

Second Secretary (Withholding Tax)

Tele: 9202467