KARACHI: Federal Board of Revenue (FBR) has been urged to withdraw the mandatory requirement of Computerized National Identity Card (CNIC) on buying and selling under Sales Tax Act, 1990 till the time a sufficient number gets register for sales tax.
Karachi Chamber of Commerce and Industry (KCCI) has highlighted the issue as by amendment to Section 8 (Sub-Sec.1, Clause M) of Sales Tax Act, and addition of 10th Schedule, 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 ITO and Sec.156A of Customs Act.
Moreover 3 percent further tax is also charged on sales to unregistered buyers even if the CNIC number is provided, which is totally unjust and tantamount to penalizing the registered persons who have to bear the burden of 3 percent further tax.
The chamber said that rather than generating more revenue, this provision has resulted in proliferation of undocumented cash transactions.
With hardly 45000 registered entities in Sales Tax Regime, it is very hard to find a registered buyer. This has affected the entire supply chain including manufacturers, importers and traders in Documented Sector and has led to greater advantage for smugglers and undocumented sectors as they do not have to face any such condition. Many registered person are now forced to issue flying invoices to registered persons to overcome CNIC condition and avoid 3 percent Further Tax.
The chamber recommended that requirement of CNIC should not be mandatory till the time that number of registered persons in Sales Tax regime has substantially increased.
Providing CNIC number should be optional and may be treated at par with STRN if provided in the Sales Tax Return.
Further Tax on supplies to unregistered buyer should not be charged if CNIC number is provided in Sales Tax Return.
In case CNIC number of unregistered buyer of Raw Materials is not provided, VAT may be charged at 1.7 percent on sellers of Raw Material.
Giving rationale, the chamber said that it will discourage cash economy and encourage documentation by placing the trust in registered persons.
Discourage Fake and Flying invoices which are issued to avoid 3 percent further tax.
Enhance business transactions through banking channels and promote growth.