Concern shown on FBR notifications about Sales Tax

July 29, 2013 Off By Web Desk

KARACHI: Pakistan Chemicals & Dyes Merchants Association said on Monday that for the past few months FBR had been unilaterally issuing notifications which have created problems in tax compliance by tax payers.

In a statement, it said a plethora of SROs have been issued which have created confusions and have made the Sales Tax compliance nearly impossible, particularly for those operating under SRO 1125.

Pakistan Chemicals & Dyes Merchants Association said that the latest in this series is the notification (Sales Tax) issued on 26-07-2013 FBR website. Following serious issues are seen to be developing if this SRO is implemented:

“By creating a huge difference of 15% between sales rate applicable on Same goods shall create a huge opportunity for dishonest and fraudulent elements to once again involve in flying invoices business, showing excessive consumption in units (which enjoy 2% Stax rate facility), thereby, pushing honest commercial importers completely out of business.”

The association said the new condition as per para IV-(e)/(ixa) does not specify how it can be confirmed that goods supplied are for the manufacture of goods specified in Table I & II. This shall open massive avenues for corruption and fraudulent practices, as every manufacturer (operating any sector) may claim that he is involved in manufacturing of goods specified in Table I & II and on the other hand the Stax department/auditors shall claim to exclude every buyer from the purview of this condition (ixa).

It said: “The solution in our view is to revert to condition in Original SRO 1125, where Registered person of five export sectors are to be levied sales tax @ 2%. All other registered manufacturers to be levied sales tax @5% and unregistered buyers to be also levied sales tax @5%. In this way govt shall not lose revenue as manufacturers operating in other sectors shall despite getting input @5% have to pay output @17%, thus ensuring full revenue for the exchequer.”

“After SRO 1125, an amnesty scheme was issued to textile sector due to misuse of 2% tax facility (as there was 3% difference between registered and unregistered manufacturers). Thus through SRO 154 FBR tried to remove difference in taxation between registered and unregistered person. Now once again a difference of 15% has been created which will surely create a huge incentive for misuse. Hence we request to keep difference between registered and unregistered person at minimum, it concluded.”