Tax authorities are considering a significant increase in monetary penalties for violations of general provisions of income tax laws. According to sources within the Federal Board of Revenue (FBR), the Large Taxpayers Unit (LTU) Karachi has submitted proposals for the budget 2020/2021, suggesting an increase in fines and penalties from the current Rs5,000 to Rs50,000.
(more…)Day: May 27, 2020
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KCCI wants end lockdown, deploy army for SOP enforcement
KARACHI: Karachi Chamber of Commerce and Industry (KCCI) on Wednesday urged the government to lift lockdown completely and allow all type of businesses to restart their activities.
Siraj Kassam Teli, Chairman Businessmen Group (BMG) and former KCCI president in a statement also advised the government to deploy troops from the army whose presence and patrolling at various commercial markets would ensure strict adherence to the Standard Operating Procedures (SOPs) devised to contain further spread of coronavirus pandemic.
Teli said that Pakistan’s economy was already in deep crises and the country cannot afford further damages hence, it was really critical to restart all businesses with normal timings and get back to routine life in presence of the virus.
“On one hand, we have to contain coronavirus pandemic but on the other, we also have to save the already ailing economy therefore, the patriotic and disciplined troops from armed forces must be given the task to ensure across the board implementation of SOPs, which has to be done on top priority in order to save the economy from plunging into further crises,” he said, adding that reopening of businesses under army’s supervision would help in protecting the businesses from complete collapse and save the masses from unemployment, poverty and starvation.
Chairman BMG, while referring to numerous measures adopted by the Federal and Provincial governments since the imposition of lockdown from March 23, said that the federal government and all provincial governments strived really hard to deal with COVID-19 pandemic and they all deserve to be appreciated but unfortunately, the number of people affected by coronavirus continues to rise all over the country as the public and also the members of the business community have been largely ignoring the SOPs due to lack of discipline.
“Pakistan army is well-known for its discipline all around the world hence, it is high time that the army must come forward to rescue the country, teach discipline to the masses and get the SOPs enforced all the time which is the only way to save our beloved motherland from further disaster,” he added.
He stressed that the coronavirus pandemic is not going anywhere and we have to live with it and continue our businesses in a disciplined manner.
“We cannot live in the lockdown forever so we have to exhibit the Discipline which is the first step on the road to success.”
He cautioned that if the lockdown is not suspended immediately, many businesses, which remain completely suspended since last more than two months, would shut down forever that would lead to creating a chaotic situation as the people would find no other option but to come out on streets to protest due to rising unemployment and poverty.
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Sindh proposed to exempt sales tax on export of services
KARACHI: Sindh Revenue Board (SRB) has been proposed to exempt sales tax on export of services.
Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2020/2021 presented to SRB, said that as per the Fifth Schedule to the Sales Tax Act 1990, exports made by a registered person are zero-rated.
“Presently, there is no concept of zero-rating in Provincial Sales Tax Acts,” it said.
Resultantly, the companies providing services to foreign companies and bringing foreign exchange in Pakistan need to pay sales tax from their own account.
The OICCI recommended that a separate schedule should be inserted in Provincial Sales Taxes Act for zero rating. “All services provided to foreign companies outside Pakistan which result in inflow of foreign exchange and export of all taxable services should be exempt from Sind Sales Tax.”
Giving rationale to the proposals, the OICCI said that this will result in harmonization of tax laws in Pakistan and would ensure convenient compliance with tax laws through uniform systems across the country and would also contribute towards the economic development of the Country.
The OICCI highlighted another issue that all pharmaceutical products are exempt from Sales Tax.
Consequently any sales tax paid by pharmaceutical industry on goods or services purchased, can neither be passed on to the consumer nor can be claimed as input, and has to be absorbed by the manufacturers in their costs.
It is resulting in increasing the cost of doing business and is also against the philosophy of sales tax which is supposed to be borne by the consumer.
Therefore, it is recommended that services received by pharmaceutical industry should be zero rated.Since pharmaceuticals prices are controlled, sales tax paid on inputs can neither be added to the selling price nor separately charged.
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Withholding sales tax should be exempted on services rendered to registered persons
KARACHI: Sindh Revenue Board (SRB) has been proposed to exempt sales tax withholding in case a registered person renders services to another registered person.
Withholding of sales tax from registered sales tax persons with Sindh Revenue Board (SRB), does not provide any benefit and only creates hardships for genuine taxpayers of reconciliations and delay in adjustments, said Overseas Investors Chamber of Commerce and Industry (OICCI) in its budget proposals for 2020/2021 submitted to the SRB.
It further said that similar to federal sales tax law, exemption should be given if payment being made to sales tax registered person against withholding sales tax.
Withholding tax rules are applicable on active taxpayers also.
The OICCI recommended:
i. Withholding should be exempted from deduction of Sales Tax at applicable rate against the payments to the Sales tax registered persons with SRB, in line with Federal Laws.
ii. The rate of withholding sales tax against the invoices of unregistered persons should be reduced to 5% in line with the FBR’s Withholding Sales Tax regime as applicable under SRO.660 (I)/2007.
iii. Withholding tax rules should not applicable on active taxpayers.
Giving rationale to the proposals, the OICCI said that the withholding agents are unnecessarily burdened with deduction of sales tax which is not claimable as input tax and is thus resulting in increasing their cost of doing business.
Similar matters have already been decided by the courts in case of sales tax withholding rules of FBR and PRA. The ultimate objective of the taxpayer is that indirect tax should not increase its cost of doing business. Moreover these enforcement measures have negative bearing on the regulated sector only.
The purpose of withholding tax deduction is to ensure that non-active & nonregistered taxpayers can be detected. Compliance burden of businesses can be reduced for businesses by exemption deduction at source for active taxpayers.
PRA allows similar provision [Sindh Sale Tax Special Procedures (Withholding Tax) Rules, 2014 read with notification SRB-3-4/14/2014].