Section 153: Payments for goods, services and contracts

Plain-Language Summary

A general explanation to aid understanding. The official statutory text appears below.

This section defines the following terms used in The Income Tax Ordinance, 2001: • courier service — any specialized entity that provides fast, secure and often tracked transportation of documents, packages and small freight, typically offering door-to-door delivery solutions of goods within specific timeframes and in case of digitally ordered goods in e-commerce delivery and collection of cash (CoD) on behalf of the seller and such delivery service provider includes but not limited to – (a) Logistics services; (b) ride-haling services; (c) food delivery platforms; and (d) e-commerce services • payment intermediary — any third party entity including a banking company, financial institution, a licensed foreign exchange company or payments gateways that facilitate the transfer of funds or payment instructions between two or more parties to enable, process, route or settle payments in a financial transaction, without being the ultimate source or recipient of the payment;] • manufacturer — a person who is engaged in production or manufacturing of goods, which includes— (a) any process in which an article singly or in combination with other articles, material, components, is either converted into another distinct article or product is so changed, transferred, or reshaped that it becomes capable of being put to use differently or distinctly; or (b) a process of assembling, mixing, cutting or preparation of goods in any other manner; and This is the official statutory text, shown as written — it is not a paraphrase or a legal opinion. Consult a verified lawyer to see how it applies to your specific situation.

1[153. Payments for goods, services and contracts.— (1) Every prescribed person making a payment in full or part including a payment by way of advance to a resident person 1[ ] 2[ ] — (a) for the sale of goods 3[including toll manufacturing] 4[, except where payment is less than seventy-five thousand Rupees in aggregate, during a financial year]; (b) for the rendering of or providing of services 5[except where payment is less than thirty thousand Rupees in aggregate, during a financial year]; (c) on the execution of a contract, 6[including contract signed by a sportsperson] 7[but not including] a contract for the sale of goods or the rendering of or providing services, shall, at the time of (6A) The provisions of sub-section (6) in so far as they relate to payments on account of supply of goods from which tax is deductible under this section shall not apply in respect of a company being a manufacturer of such goods. (6B) Omitted previously. (7) Omitted previously. (8) Where any tax is deducted by a person making a payment to a Special Purpose Vehicle, on behalf of the Originator, the tax is credited to the Originator. (8A) Omitted previously. (9) In this section, – “prescribed person” means – (a) the Federal Government; (b) a company; (c) an association of persons constituted by, or under law; (cc) a non-profit organization; (d) a foreign contractor or consultant; (e) a consortium or joint venture; (f) an exporter or an export house for the purpose of sub-section (1A); (g) an association of persons, having turnover of fifty million rupees or above in tax year 2007 1[or in any subsequent tax year . (h) an individual, having turnover of fifty million rupees or above in the tax year 2009 or in any subsequent year. “services” includes the services of accountants, architects, dentists, doctors, engineers, interior decorators and lawyers, otherwise than as an employee. “sale of goods” includes a sale of goods for cash or on credit, whether under written contract or not “manufacturer” for the purpose of this section means, a person who is engaged in production or manufacturing of goods, which includes- (a) any process in which an article singly or in combination with other articles, material, components, is either converted into another distinct article or produce is so changed, transferred, or reshaped that it becomes capable of being put to use differently or distinctly; or (b) a process of assembling, mixing, cutting or preparation of goods in any other manner.” 1 30th The word “or” omitted through Finance Act, 2020 dated June, 2020 making the payment, deduct tax from the gross amount payable (including sales tax, if any) at the rate specified in Division III of Part III of the First Schedule 1[;] 2[Provided that where the recipient of the payment under clause (b) receives the payment through an agent or any other third person and the agent or, as the case may be, the third person retains service charges or fee, by whatever name called, from the payment remitted to the recipient, the agent or the third person shall be treated to have been paid the service charges or fee by the recipient and the recipient shall collect tax along with the payment received.] (2) Every exporter or an export house making a payment in full or part including a payment by way of advance to a resident person or permanent establishment in Pakistan of a non-resident person for rendering of or providing services of stitching, dying, printing, embroidery, washing, sizing and weaving, shall at the time of making the payment, deduct tax from the gross amount payable at the rate specified in Division IV of Part III of the First Schedule. 3[(2A) Notwithstanding the provision of sub-section (1), – (i) every payment intermediary at the time of processing payment through digital means, on behalf of a seller of digitally ordered goods or services through locally operated e-commerce platforms (including websites); and (ii) every courier business providing courier services collecting cash from a buyer under Cash on Delivery (CoD) payment terms on behalf of a seller for the supply of digitally ordered goods and services through e-commerce platforms (including websites); shall collect tax from the gross amount payable (including sales tax, if any) to the seller at the rate specified in Division IVA of Part I of the First Schedule to the Ordinance and deposit to government treasury.] 1 2017. Full stop substituted by the Finance Act, 2 2017. Added by the Finance Act, 3 2025. Sub-section (2A) inserted by the Finance Act, (3) The tax 1[deductible] under 2[ ] sub-section (1) and under sub-section (2) of this section, on the income of a resident person or 3[ ], shall be 4[minimum] tax. Provided that,— (a) tax deducted under clause (a) of sub-section (1) shall 5[not be minimum tax] where payments are received on sale or supply of goods, by a, — (i) company being a manufacturer of such goods; or (ii) public company listed on a registered stock exchange in Pakistan; 6[ ] (c) tax deducted under clause (c) of sub-section (1) shall be adjustable if payments are received by a public company listed on a registered stock exchange in Pakistan, on account of execution of contracts7[ ] 8[ ] 9[. "Explanation.— For the removal of doubt, it is explained that the income of resident person referred to in sub-section (3) means the amount on which tax is deductible under sub-section (1) or (2) of this section.] 1[ ] 2[ ] 3[(4) The Commissioner may, on application made by the recipient of a payment referred to in sub-section (1) and after making such inquiry as the Commissioner thinks fit, may allow in cases where tax deductible under sub- section (1) is not minimum, by an order in writing, any person to make the payment after deduction of tax at reduced rate but such reduction shall not exceed eighty percent of the rate specified in the said Division 4[except in cases of public limited companies where the Commissioner may allow payment without deduction of any tax]: Provided that the Commissioner shall issue reduced rate certificate within fifteen days of filing of application to a company if advance tax liability has been discharged: Provided further that the Commissioner shall be deemed to have issued the reduced rate certificate upon the expiry of fifteen days to the aforesaid company and the certificate shall be automatically processed and issued by Iris: 1 30th Claude (d) omitted through Finance Act, 2020 dated June, 2020 the omitted clause read as follows: “(d)tax deducted under clause (c) of sub-section (1) in respect of a sportsperson shall be 1[minimum] tax 1[ ] 1[; and] “ 2 30th Claude (e) omitted through Finance Act, 2020 dated June, 2020 the omitted clause read as follows: “(e) tax deducted under clause (b) of sub-section (1) by person making payments to electronic and print media for advertising services shall be 2[minimum] tax 2[ ].” Provided also that the Commissioner may modify or cancel the certificate issued automatically by Iris on the basis of reasons to be recorded in writing after providing an opportunity of being heard.] 1[ ] (5) Sub-section (1) shall not apply to — (a) a sale of goods where the sale is made by the importer of the goods and tax under section 148 in respect of such goods has been paid and the goods are sold in the same condition as they were when imported; 2[ ] (c) a refund of any security deposit; (d) a payment made by the Federal Government, a Provincial Government or a Local Government to a contractor for construction materials supplied to the contractor by the said Government or the authority; 3[ ] (f) the purchase of an asset under a lease and buy back agreement by a modaraba, leasing company, banking company or financial institution; or (g) any payment for securitization of receivables 4[or issuance of sukuks] by a Special Purpose Vehicle to the Originator. (6) Where any tax is deducted by a person making a payment for a Special Purpose Vehicle, on behalf of the Originator, the tax is credited to the Originator. 1Sub-section (4A) omitted through Finance Act, 2019, omitted sub-section read as follows: (4A) The Commissioner, on an application made by the recipient of a payment referred to in clause (94) of Part IV of the Second Schedule, in cases where the said recipient has fulfilled the conditions as specified in the said clause, by an order in writing for a period of at least three months, may allow any person to make the payment without deduction of tax in respect of payments as referred to in clauses (b) of sub-section (1) of section 153: Provided that the recipient of the payment has made advance payment of tax equal to two percent of the total turnover of the corresponding period of the immediately preceding tax year. (7) In this section, — (i) “prescribed person” means— (a) the Federal Government; (b) a company; (c) an association of persons constituted by, or under law; (d) a non-profit organization; (e) a foreign contractor or consultant; (f) a consortium or joint venture; (g) an exporter or an export house for the purpose of sub- section (2); (h) an association of persons, having turnover of 1[one hundred] million rupees or above in 2[any of the preceding tax years]; 3[ ] (i) an individual, having turnover of 4[one hundred] million rupees or above in 5[any of the preceding tax years]; 6[ ] [(j) a person registered under the Sales Tax Act, 1990 7[having turnover of one hundred million rupees or more in any of the preceding tax years]; 8[ ] 9[ ] ] 10[(k) a person deriving income from the business of construction and sale of residential, commercial or other buildings (builder); 11[ ] 1 30th The word “fifty” substituted through Finance Act, 2020 dated June, 2020 (l) a person deriving income from the business of development and sale of residential, commercial or other plots (developer)] 1[;] 2[(m) for the purpose of sub-section (2A), a payment intermediary; or (n) for the purpose of sub-section (2A), a courier service.] (ii) “services” includes the services of accountants, architects, dentists, doctors, engineers, interior decorators and lawyers, otherwise than as an employee; 3[(iia) “courier service” means any specialized entity that provides fast, secure and often tracked transportation of documents, packages and small freight, typically offering door-to-door delivery solutions of goods within specific timeframes and in case of digitally ordered goods in e-commerce delivery and collection of cash (CoD) on behalf of the seller and such delivery service provider includes but not limited to – (a) Logistics services; (b) ride-haling services; (c) food delivery platforms; and (d) e-commerce services; (iib) “payment intermediary” means any third party entity including a banking company, financial institution, a licensed foreign exchange company or payments gateways that facilitate the transfer of funds or payment instructions between two or more parties to enable, process, route or settle payments in a financial transaction, without being the ultimate source or recipient of the payment;] (iii) “sale of goods” includes a sale of goods for cash or on credit, whether under written contract or not; 4[and] (iv) “manufacturer” means a person who is engaged in production or manufacturing of goods, which includes— (a) any process in which an article singly or in combination with other articles, material, components, is either converted into another distinct article or product is so changed, transferred, or reshaped that it becomes capable of being put to use differently or distinctly; or (b) a process of assembling, mixing, cutting or preparation of goods in any other manner; and (v) “turnover” means— (a) the gross sales or gross receipts, inclusive of sales tax and federal excise duty or any trade discounts shown on invoices, or bills, derived from the sale of goods; (b) the gross fees for the rendering of services for giving benefits including commissions; (c) the gross receipts from the execution of contracts; and (d) the company’s share of the amounts stated above of any association of persons of which the company is a member.] 1[ ] 2[ ] 3[ ]

Effective date: 2001-09-13

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