Tax Mechanism
LAHORE: The flour milling industry has agreed to resume normal operations following a successful negotiation with the federal government concerning the withholding tax (WHT) mechanism introduced in the recent federal budget.
The agreement was reached during discussions between the federal government and the Pakistan Flour Mills Association (PFMA).
PFMA Chairman Asim Raza announced the outcome of the meeting, which included Finance Minister Mohammad Aurangzeb, Minister of State for Finance Ali Pervaiz Malik, and was overseen by Federal Minister of Economic Affairs Ahad Cheema.
The agreement stipulates that Section 153-A of the Income Tax Act, which would have imposed withholding tax on flour mills, will not apply to them. Instead, flour mills will operate under a commission-based system for their transactions.
Under the new arrangement, flour dealers and retailers will charge a commission per bag of flour sold, and the WHT will only be applicable to this commission amount.
This adjustment addresses the concerns raised by flour millers, who had previously gone on strike at the beginning of Muharram, protesting against the proposed tax mechanism which they felt unfairly turned them into “WHT collection agents.”
Additionally, it was decided that wholesalers and retailers with annual sales below Rs100 million will be included in the withholding tax framework in the upcoming year.
Tax reforms related to the flour industry will be deferred and applied to the finance bill for the fiscal year 2025-26, rather than the 2024-25 budget.
The initial strike by flour millers was postponed after the Punjab government intervened, assuring that a meeting with federal authorities would be arranged post-Ashura to address the issue.
Millers had expressed concerns that the inability to collect WHT effectively stemmed from flour dealers’ reluctance to share their computerized national identity cards and tax statuses, which complicated the enforcement of the withholding tax.
The resolution of this issue is expected to stabilize operations in the flour milling sector and prevent further disruptions.
