KARACHI: Pakistan Business Council (PBC) has suggested rationalizing sales tax regime as higher standard rate of 17 percent is discouraging documentation.
In its proposals for budget 2021/2022, the PBC said that the high standard tax rate of 17 percent has led to low registration of less than 200,000 while income tax filers are about 2. 8 million.
Moreover, Tier 1 retailers engaged in the business of finished fabric, and locally manufactured finished articles of textile, textile made-ups, leather and artificial leather are allowed reduced sales tax rate of 12 percent, if their sales transactions are integrated with the FBR system.
Unfortunately, several income taxpayers are not willing to register owing to high rate and even retailers are not interested in implementing the POS integration as high rate of 12 percent is not attractive, in addition to other issues.
The Standard rate and POS rate be gradually reduced by 1 percent per year to attract to encourage the unregistered taxpayers to become registered and avail benefits of input adjustment.
This will increase the documentation of the economy and create a level playing field for the registered taxpayers.
It is proposed that Section 3(1A) should be rationalized and further tax should not be applicable if:
a) Buyer in not required to be registered under Sales Sax Act 1990;
b) Buyer holds FTN; Buyer, being service provider, is registered under respective provincial authority