KARACHI: Federal Board of Revenue (FBR) has been proposed to abolish further sales tax in case taxpayers fulfil condition of Computerized National Identity Card (CNIC).
Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2020/2021 submitted to the FBR said that under sales tax law it is mandatory to provide CNIC number of Unregistered person in the invoice.
Similar statute has been added U/S.19A of Federal Excise Act, Sec.216A to Income Tax Ordinance, 2001 and Sec.156A of Customs Act.
Further a grey area has been left in the legislation which states that in case CNIC number is provided in good faith and proves incorrect subsequently, the seller/supplier will not be held accountable.
Moreover 3 percent further tax is also charged on sales to unregistered buyers despite providing the CNIC number, which is totally unjust and tantamount to penalizing the registered persons, the KCCI said.
This provision has created ambiguity in the law and resulted in great hardship for registered persons who are unable to conduct business transactions.
The negative impact on economy is clearly visible and there is a significant slowdown in business activities.
Particularly, the business to business transactions are worst affected and resulted in accumulation of unsold inventories.
Since last budget most transactions are being conducted with cash instead of payments through bank accounts.
No further tax on supplies to unregistered buyer should be charged if CNIC number is provided in sales tax return, the KCCI proposed.
Alternatively, in case CNIC number of unregistered buyer is not provided, further tax may be charged at 2 percent.
Giving rationale to the proposal, the KCCI said that it would remove the confusion and ambiguity in the Sales Tax regime.
Further, it will discourage cash economy and encourage documentation by placing the trust in registered persons.
Placing the responsibility to broaden the tax base squarely on RTOs and LTUs rather than on taxpayers.
Discourage fake and flying invoices which are used to avoid 3 percent further tax, the KCCI added.