Reintroduction of tax credit on registered sales proposed

Reintroduction of tax credit on registered sales proposed

KARACHI: Karachi Tax Bar Association (KTBA) has suggested the tax authorities to reintroduce tax credit on registered sales in order to broaden the tax base.

The KTBA in its proposals for budget 2023/2023 urged the Federal Board of Revenue (FBR) to reintroduce the tax credit on registered sales by making amendment in Section 65A of the Income Tax Ordinance, 2001.

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The tax bar said to provide incentive for documentation of economy and increase of the tax base a tax credit of 2.5 per cent of tax liability was offered to manufacturers for Tax year 2009 who were making 90 per cent of their sales to persons registered under the Sales Tax Law. The tax credit was increased to 3 per cent by Finance Act, 2016. However, this Tax credit was deleted by Finance Act, 2017.

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Due to deletion from the tax law, years of efforts to document the economy has been pushed backwards and that too without any warning and rationale.

Therefore, it is proposed the tax credit on 90 per cent sales should be also extended to persons making 90 per cent of purchases from persons registered under the Sales Tax Act, 1990 as well.

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The tax credit should also cover entities providing services and duly registered with the provincial sales tax authorities.

It will provide the much-desired stimulus to the documentation of the economy, the KTBA added.

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