FBR advised to allow sales tax refunds on local supplies

FBR advised to allow sales tax refunds on local supplies

KARACHI: Karachi Tax Bar Association (KTBA) on Tuesday advised Federal Board of Revenue (FBR) to allow sales tax refund to manufacturers making local supplies.

The tax bar in a letter to FBR suggested in order to promote diversification of exports instead of relying solely on 5 export oriented sectors, you are requested to kindly issue necessary clarification/make necessary amendment to the effect that exporter-cum-manufacturers include all manufactures engaged in local as well export sales.

The tax bar said that apart from five export oriented sectors, conditional facility for expeditious processing of sales tax refunds through FASTER system has been given to exporter-cum-manufacturers, however, as per Income Tax Circular no. 10 of 2008 dated August 27, 2008, the term exporter-cum-manufacturers means those manufacturers whose exports during the preceding year are more than 80 percent.

The KTBA pointed out that input tax on fixed assets is adjusted against the minimum sales tax liability under section 8B of the Act only incase where other normal input tax [on goods / services] is less than 90 percent of the Output Tax, however, in case any unadjusted / unutilized input tax relating to fixed assets is carried forward to subsequent months than the same is treated at par with normal input tax and not being treated as input tax on fixed assets.

Therefore it suggested that in order to allow fair treatment of input tax on fixed assets and in order to promote capital intensive investment, kindly direct concerned person to make necessary amendments in online sales tax return portal to treat input tax on fixed assets as part of the input tax on fixed assets even if the same is carried forward to subsequent months.

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