KARACHI: The Federal Board of Revenue (FBR) has been urged to wave further tax where CNIC (Computerized National Identity Card) number is provided by unregistered supplier.
Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2022/2023 submitted to the FBR highlighted an issue stating an obvious anomaly is perpetuated by imposing 3 per cent penal tax (further tax) on registered persons on supplies made to unregistered persons.
Despite providing CNIC number of unregistered buyers, as required under Section 8 (Sub-Sec.1, Clause M) of Sales Tax Act, 10th Schedule, the registered seller has still to pay 3 per cent further tax.
Moreover, prior to Supplementary Finance Bill 2022, registered seller was not held responsible in case a fake CNIC was provided by buyer. However, after enactment of Supplementary Bill 2022, seller will be held accountable and face consequences in case fake CNIC number is provided by unregistered buyer.
The outcome of the amendment is that it is unjust and irrational to impose 3 per cent further tax on supplies by registered person to unregistered persons, while also it is required to provide CNIC Number of unregistered buyer in Sales Tax Invoice.
The KCCI proposed that CNIC number of unregistered buyers provided by registered seller/supplier be treated at par with STRN.
The 3 per cent further tax on supplies to unregistered buyer should not be charged if CNIC number is provided by registered seller in Sales Tax Return.
In case CNIC number of unregistered buyer of raw materials is not provided, VAT may be charged at 1.7 per cent on sales of raw material.
Giving rationale to the suggestion, the KCCI said 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 Regional Tax Offices (RTOs) and Large Tax Offices (LTOs) rather than on taxpayers.
Further, it will discourage fake and flying invoices which are issued to avoid 3 per cent further tax.
Besides, it will enhance business transactions through banking channels and promote growth.