Tag: budget proposals

KARACHI: The Federal Board of Revenue (FBR) has been suggested a drastic cut in duty and taxes on import of black to stop smuggling and increase revenue.

The Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2022/2023 submitted to the FBR said that consumption of black tea in Pakistan is 240,000 metric tons, but the imports through legal channels is hardly 100,000 metric tons due to very high rates of customs duty, sales tax, regularity duty and withholding tax.

READ MORE: KCCI proposes sales tax exemption to solar panels, inverters

Remaining requirement is fulfilled by smuggling, Afghan Transit Trade (ATT), and imports under various exemptions/concessions granted to PATA and Azad Kashmir which conduct 90 per cent of official imports and sold all over Pakistan in tariff areas.

The KCCI said that legitimate importers have been driven out of the market due to distortions in tax and duty regime, while also the government is losing a substantial amount of revenues.

READ MORE: FBR suggested automatic GD filing extension on system failure

The black tea imported in bulk and wholesale packing is treated as finished product in 12^th Schedule (Table 3) whereas it should be treated as raw material because black tea goes through a process of blending and packaging while also the taxes are charged on maximum retail price.

The KCCI said that black tea is an essential food item used in every household and common man. Such high tariffs while exemptions to select areas are only supporting misuse of concessions and smuggling. The tariff structure may therefore be rationalized as proposed while exemptions to PATA and Azad Kashmir be withdrawn as these are sources of revenue leakages:

READ MORE: KCCI proposes sales tax exemption to e-commerce

The customs duty should be reduced to 5 per cent from 11 per cent.

The regulatory duty should be brought down to zero per cent from 2 per cent.

The rate of sales tax should be reduced to …. From 17 per cent.

READ MORE: Withholding tax on raw material import should be adjustable

Whereas, the rate of withholding tax should be reduced to 2 per cent from existing 5.5 per cent.

The chamber said that the proposal would prevent misused of exemptions and significantly increase revenue by Rs70 to Rs.80 billion.

Significant relief to entire population in an essential food item which is most expensive in Pakistan.

Karachi Chamber of Commerce and Industry (KCCI) has proposed restoration of sales tax exemption on supply of solar panels and inverters.

The KCCI in its proposals for budget 2022/2023 submitted to the Federal Board of Revenue (FBR), stated that solar panels and inverters were earlier granted zero rated of sales tax.

READ MORE: FBR suggested automatic GD filing extension on system failure

The exemption from sales tax on supply of solar panels and inverters were withdrawn through supplementary finance bill 2021 thus imposing 17 per cent sales tax.

The chamber said that imposition of 17 per cent sales tax increased the cost for consumer and discourage use of alternative sources of energy.

Every household, commercial establishments and industries are opting for alternate sources of energy to reduce their expenditure and cost of doing business. Solar energy is now widely being used in Pakistan and helping to reduce dependence on costly thermal power.

READ MORE: KCCI proposes sales tax exemption to e-commerce

Every Household and commercial sector has been affected by exorbitant cost of electricity.

With imposition of 17 per cent sales tax, cost of solar panels and inverters will increase and discourage substitution.

It is proposed that exemption of sales tax on solar panel and inverters through Supplementary Finance Bill 2021 should be restored.

READ MORE: Withholding tax on raw material import should be adjustable

Giving rationale, the chamber said that the proposal would reduce prices for consumers for saving the electricity and gas for local industries and oil imports. It is Import substantial for the country. Expansion of an industry which has good potential for growth.

The Karachi Chamber highlighted the issued on indenting agents stating that such agents have to pay 5 per cent withholding tax on inward remittances of commission while the indenting agents based in Sindh also have to pay Sindh Sales Tax on Services at 13 per cent.

READ MORE: KCCI suggests VAT removal for commercial importers

To avoid such rates of taxation, indenters now mostly retain the commission outside Pakistan and book import orders on Proforma Invoices or Contracts from suppliers. This results in loss of foreign exchange to the country.

In the online meeting with KCCI on June03, 2021, the Minister for Finance and Revenue agreed to the proposal that indenting commission should be treated as export proceeds and taken out of the purview of provincial service taxes. Indenting agents serve all of Pakistan and should therefore remain in Export regime just as IT and other service providers. The proposal may therefore be incorporated in budget.

Encourage remittance of foreign exchange and documentation.

READ MORE: FPCCI demands CNIC condition withdrawal

The chamber in another issue stated that large amounts of refund of Drawback of Local Taxes and Levies (DLTL) pertaining to exporters are delayed and remain unpaid for months.

Exporters face liquidity crunch due to blocked funds and blocked refunds have a negative impact on exports.

In the meeting with KCCI delegation in Islamabad on September 20, Minister for Finance and Revenue had assured the KCCI delegation that DLTL will continue and pending refunds will be expedited.

KCCI therefore submits that payments of DLTL should be released and backlog be cleared.

Improve liquidity for exporters and help to enhance exports.

KARACHI: The Federal Board of Revenue (FBR) has been urged to allow automatic extension for filing Goods Declaration (GDs) where traders unable to file due to system glitches.

Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2022/2023 informed the FBR that due to malfunctioning of the online filing system, Importers are unable to file GDs in time.

READ MORE: KCCI proposes sales tax exemption to e-commerce

Consequently clearance of cargo is delayed and importers have to bear heavy demurrage and detention charges.

Similarly the filing of sales tax return is also delayed frequently due to software errors or disruption of the system resulting in expiry of deadline.

READ MORE: Withholding tax on raw material import should be adjustable

Due to these reasons, taxpayers are often penalized for delay in filing the sales tax returns within due date due to malfunction of the portal. Registered persons are held responsible for failure of the system which is not their fault.

READ MORE: KCCI suggests VAT removal for commercial importers

The chamber recommended adequate provisions shall be inserted in Customs Act 1969 and Sales Tax Act 1990, and necessary modification in the software be made which automatically condone any delay in Filing of GDs and filing of Sales Tax returns. System should allow waiver of demurrage and detention charges for the number of days during which system was down.

READ MORE: FPCCI demands CNIC condition withdrawal

It further recommended that delays in filing of Sales Tax Returns which occur due to failure/malfunction in the system should be automatically condoned without recourse to tax authorities and no penalty should be imposed for the delay in filing.

Giving rationale to the proposal, the KCCI said it would alleviate the hardships faced by importers and sales tax registered persons. It will also enhance confidence of tax-payers in the system and encourage compliance. Save the importers and registered persons from unjust charges and cost of doing business.

KARACHI: The Federal Board of Revenue (FBR) has been suggested to allow adjustment of withholding income tax collected at import of raw material against the actual liability.

Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2022/2023 submitted to the FBR highlighted that by amendment to Section 148 of Income Tax Ordinance, 2001, through Finance Bill 2018-2019, withholding tax paid on import of raw materials by commercial importers has been converted to minimum tax and the importers have been taken out of Fixed Tax Regime (FTR).

READ MORE: KCCI suggests VAT removal for commercial importers

The chamber said that the collection of withholding tax at source is tantamount to putting the burden of tax-collection from undocumented entities on the compliant tax payers and compounds the burden by treating it as minimum tax.

Concept of treating withholding tax as minimum tax is unique and unfair as it leaves the scope for further squeeze on documented and compliant tax-payers. “Any Tax paid as withholding tax should be adjustable in order to promote the culture of direct taxation and reduce dependence on tax at source,” the KCCI said and added that the rates of withholding tax are already very high and akin to turnover tax.

READ MORE: FPCCI demands CNIC condition withdrawal

Giving proposals to the issue, the KCCI said the withholding income tax at import stage on raw materials should be adjustable against actual liability.

The concept of minimum withholding tax on import of raw materials may be phased out.

Further, distinction should be made between importers of finished goods and raw materials who mainly cater to the industry and are fully documented.

Giving rationale to the proposals, the KCCI said commercial importers who are a major source of revenue will be able to resume their business and contribute to revenue as well as promotion of SMEs.

READ MORE: FBR urged to wave further tax on providing CNIC number

The KCCI further highlighted that the Finance Bill 2021-2022, imported plant and machinery not manufactured locally, has been omitted from 8th Schedule of Sales Tax Act, 1990, resulting in Increase in the rate of sales tax from 10 per cent to 17 per cent.

The chamber said this measure will discourage new investment in industry and upgradation of existing industries and BMR. Industrial machinery falls in the category of capital goods for the purpose of production. It should not be treated under the same criteria as consumer product or raw material, subject to 17 per cent sales tax.

READ MORE: Tax exemption sought for plant, machinery import

The KCCI proposed to restore plant and machinery not manufactured locally in 8th Schedule of Sales Tax Act, 1990, and exempt from 17 per cent sales tax, to encourage expansion and generate employment.

It will help to promote industrialization, GDP growth and employment.

Karachi Chamber of Commerce and Industry (KCCI) has suggested the tax authorities to withdraw Value Added Tax (VAT) imposed on commercial importers in order to rectify anomaly in the law.

The KCCI in its proposals for budget 2022/2023 submitted to the Federal Board of Revenue (FBR) said that a three per cent value addition sales tax at import stage on commercial importers of raw materials was removed in the Finance Act 2019-20 after long deliberations with FBR and Ministry of Finance for several years.

READ MORE: FPCCI demands CNIC condition withdrawal

It was agreed by FBR that the tax is unjustified because commercial importers do not add any value to raw materials. It is sold to SMEs without any change in form or any process. No inputs such as gas, electricity, labor or machinery are used hence 3 per cent VAT was an obvious anomaly.

Unfortunately, the very next year through Finance Act, 2020, amendment was made in the Twelfth Schedule to Sales Tax Act, 1990 –under the heading “Procedure and Conditions”, in condition (2), 3 per cent value addition sales tax has been imposed again on commercial import of industrial raw materials, thus restoring the anomaly.

READ MORE: FBR urged to wave further tax on providing CNIC number

Also, after re-imposition of this 3 per cent VAT, the exclusion from Section 8 B (1) 2, provided to commercial importers under SRO 647 (I) 2007 was not restored. This has led to double taxation as importers are forced to pay extra 10 per cent value addition over and above 3 per cent paid at custom stage.

The outcome of these amendment resulted in dual anomaly in the Finance Bill, 2020-21.

A 3 per cent VAT cannot be imposed on raw materials where no value is added.

READ MORE: Tax exemption sought for plant, machinery import

Restriction of 90 per cent adjustment of input is tantamount to double taxation as importers of raw material forced to pay extra 17 per cent (10 per cent of 17 per cent) value addition over and above three per cent paid at customs stage under Section 8B of Sales Tax Act, 1990 through SRO 1190 (I)/2019.

The KCCI said that this obvious anomaly should be rectified and raw materials imported by commercial importers shall be excluded from the scope of condition (2) under “Procedures and Conditions”   Twelfth Schedule of Sales Tax Act. Thus removing 3 per cent Value Addition Sales Tax on commercial importers which was re-Imposed unjustly.

READ MORE: Proposed list of higher withholding tax rates for non-filers

Importers of Finished products paying 3 per cent VAT at custom stage and having no local purchase should be excluded from application of Sec 8 (B).

The proposed amendment will remove an obvious anomaly and disparity in rates of sales tax on raw materials because all raw materials are ultimately consumed in the industry, and mainly by SMEs.

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.

READ MORE: Tax exemption sought for plant, machinery import

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.

READ MORE: Proposed list of higher withholding tax rates for non-filers

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.

READ MORE: PSX demands slashing CGT rates on disposal of shares

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.

READ MORE: FBR suggested reduce corporate tax rate for listed companies