Tag: budget proposals

KARACHI: Karachi Tax Bar Association (KTBA) has recommended the tax authorities to separate tax fraud investigations from normal audit and assessment function.

The KTBA in its proposals for budget 2022/2023 submitted to the Federal Board of Revenue (FBR), stated that tax assessment and tax frauds are two distinct things. But in Sales Tax law both powers are concurrently exercised by same authority.

READ MORE: FBR urged to remove irritants in sales tax refund

Segregation of two functions will result in efficient and focused assessment of tax by the tax officers resulting in increased revenue to the exchequer.

Two distinct authorities shall be provided in law for the purpose of assessments in audits/enforcement (under Section 11 of Sales Tax Act, 1990) and proceedings of tax fraud under section 2(37) of the Act, which involves doing tax evasion knowingly, dishonestly or fraudulently.

READ MORE: Unified sales tax law for all tax authorities sought

Preferably a dedicated Directorate may be established to determine tax frauds. This will objectively provide a distinction between the law abiding taxpayers and those who are engaged in tax frauds, the tax bar said.

The KTBA also recommended time limit to conclude audit proceedings.

Presently no time limit has been prescribed under the law to conclude the audit proceedings initiated under section 25 of the Sales Tax Act 1990.

However, apex court of the country has upheld that such audit is to be concluded within one financial year.

READ MORE: Proposals for recovery of sales tax on bad debts

Due to absence of any prescribed time limit, the audit proceedings are unnecessarily delayed for years and registered taxpayers are required to submit records multiple times.

It is proposed that a new sub- section or proviso be inserted in the Section 25 prescribing a time limit of one year to conclude the audit proceeding.

It will save time and cost of registered persons as well as tax officers.

Earlier, the tax bar proposed to remove irritants in issuance of expeditious sales tax refunds.

The tax bar said from July 1, 2019, FBR has implemented systems for expeditious processing of sales tax refunds, for which taxpayers are required to file Annexure H of the sales tax return. However, the registered persons have been facing challenges in filing of Annexure H.

READ MORE: Proposal for withholding on purchases from unregistered

Annexure H is required to be filed within 120 days from the date of filing of the sales tax return. This condition should be removed and registered persons be allowed to file Annexure H as and when considered feasible by him.

At present, opening balance of input tax on raw material / other items is allowed to be entered in Annexure H for the tax period July 2019 only. If a taxpayer fails to file Annexure H for July 2019 within the due date or extended date, then he will never be able to file Annexure H for any of the subsequent tax periods. This is against the natural justice and fair play.

Annexure H filed by the taxpayer is rejected by the system without highlighting any discrepancy or communicating the discrepancy to the taxpayer.

In case any taxpayer does not want to carry out cumbersome exercise of filing Annexure H on a monthly basis, then such taxpayers should also be given an option to file Annexure H on an annual basis covering the data from July to June each year.

READ MORE: Zero rate sales tax suggested for public welfare services

Due to lack of clarity and clear cut guidelines from FBR, the taxpayers are matching Annexure-H with Annexure-F which appear inconsistent with the Scheme of Stock Statement and Stock Statement maintained as per accounting records, for the Purchases actually claimed in the Sales Tax return (i.e. Current year + prior month purchases) are being reported, instead of Purchases for the month only.

Due to above, Stock Statement is not matched with taxpayer stock records / audited financial statements. Unless the shortcomings are addressed the objective of faster processing of sales tax refund cannot be achieved. “This would result in simplified process for the taxpayers,” the KTBA said.

KARACHI: The Federal Board of Revenue (FBR) has been urged to remove irritants in issuance of expeditious sales tax refunds.

Karachi Tax Bar Association (KTBA) in its proposals for budget 2022/2023 urged the FBR should resolve the issues expeditiously.

READ MORE: Unified sales tax law for all tax authorities sought

The tax bar said from July 1, 2019, FBR has implemented systems for expeditious processing of sales tax refunds, for which taxpayers are required to file Annexure H of the sales tax return. However, the registered persons have been facing challenges in filing of Annexure H.

Annexure H is required to be filed within 120 days from the date of filing of the sales tax return. This condition should be removed and registered persons be allowed to file Annexure H as and when considered feasible by him.

READ MORE: Proposals for recovery of sales tax on bad debts

At present, opening balance of input tax on raw material / other items is allowed to be entered in Annexure H for the tax period July 2019 only. If a taxpayer fails to file Annexure H for July 2019 within the due date or extended date, then he will never be able to file Annexure H for any of the subsequent tax periods. This is against the natural justice and fair play.

Annexure H filed by the taxpayer is rejected by the system without highlighting any discrepancy or communicating the discrepancy to the taxpayer.

READ MORE: Proposal for withholding on purchases from unregistered

In case any taxpayer does not want to carry out cumbersome exercise of filing Annexure H on a monthly basis, then such taxpayers should also be given an option to file Annexure H on an annual basis covering the data from July to June each year.

Due to lack of clarity and clear cut guidelines from FBR, the taxpayers are matching Annexure-H with Annexure-F which appear inconsistent with the Scheme of Stock Statement and Stock Statement maintained as per accounting records, for the Purchases actually claimed in the Sales Tax return (i.e. Current year + prior month purchases) are being reported, instead of Purchases for the month only.

READ MORE: Zero rate sales tax suggested for public welfare services

Due to above, Stock Statement is not matched with taxpayer stock records / audited financial statements.

Unless the shortcomings are addressed the objective of faster processing of sales tax refund cannot be achieved.

“This would result in simplified process for the taxpayers,” the KTBA said.

KARACHI: Karachi Tax Bar Association (KTBA) has sought unified law for federal and provincial tax authorities in order to remove friction in classification of goods and services.

The KTBA in its proposals for budget 2022/2023 stated that friction between Federal Board of Revenue (FBR) and Provincial Revenue Boards / Authorities on classification of goods and services and Single Sales Tax Return.

READ MORE: Proposals for recovery of sales tax on bad debts

Even after ten years of devolution the Federal Board of Revenue and Provincial Revenue Boards/Authorities are at variance with respect to classification of services and goods

This has created extreme unrest and constant problem amongst business community and causing lot of chaos, confusion, harassment and litigation.

To resolve the variance on the subject it is better if a unified law is draft and adopted by all tax jurisdictions. Additionally it is proposed that issue of variance on goods and services may be settled by commonly adopting anyone of the following classifications: (a) First Schedule to Pakistan Customs Tariff / PCT code used for classify goods and services in custom duties; and (b) WIPO’s NICE Classification used to classify goods and services in trademark matters.

READ MORE: Proposal for withholding on purchases from unregistered

The harmonization will provide clarity and ensure better business environment to promote trust amongst and will avoid discord amongst Federation and Provinces

Earlier, the KTBA submitted proposal for making changes regarding recovery of sales tax on bad debts.

It said that the Section 7 of Sales Tax Act, 1990 lays a timeline of 180 days to claim input tax on purchases and there is no provision to allow supplier reversal if corresponding receivable are not recovered and is written off.

READ MORE: Zero rate sales tax suggested for public welfare services

Sales Tax is a consumption tax and it has to be neutral for the businesses. Therefore, as per best practices of VAT concept- based tax laws around the globe, supplier is allowed adjustment on account of irrecoverable sales tax in subsequent tax periods.

It is proposed that section 7 be amended to include a provision for allowing adjustment of irrecoverable sales tax paid against a valid tax invoice subject to appropriate conditions. It is likely to reduce the cost of business for the registered taxpayers.

READ MORE: Advance tax on individuals must be for Rs10mn turnover

KARACHI: Karachi Tax Bar Association (KTBA) has submitted proposal for making changes regarding recovery of sales tax on bad debts.

The KTBA in its proposals for budget 2022/2023 submitted to the Federal Board of Revenue (FBR) said that the Section 7 of Sales Tax Act, 1990 lays a timeline of 180 days to claim input tax on purchases and there is no provision to allow supplier reversal if corresponding receivable are not recovered and is written off.

READ MORE: Proposal for withholding on purchases from unregistered

Sales Tax is a consumption tax and it has to be neutral for the businesses. Therefore, as per best practices of VAT concept- based tax laws around the globe, supplier is allowed adjustment on account of irrecoverable sales tax in subsequent tax periods.

It is proposed that section 7 be amended to include a provision for allowing adjustment of irrecoverable sales tax paid against a valid tax invoice subject to appropriate conditions.

READ MORE: Zero rate sales tax suggested for public welfare services

It is likely to reduce the cost of business for the registered taxpayers.

Earlier, KTBA recommended amendments in withholding sales tax regime on purchases from unregistered taxpayers.

It said that the move was intended to increase the cost of doing business for unregistered taxpayers, which otherwise is counterproductive and has impacted the documented sector more adversely resulting in high cost of doing business for compliant taxpayers. On the other hand, no significant increase in registration has been witnessed as result of enhanced withholding rate.

READ MORE: Advance tax on individuals must be for Rs10mn turnover

It is proposed that either the withholding rate be reduced to 1% else tax withheld be allowed as admissible input tax to the registered taxpayers upon providing CNIC/ NTN of such unregistered suppliers so that FBR can trace those unregistered taxpayers and bring them into tax net.

It is likely to reduce the cost of doing business for the compliant registered taxpayers who are compelled to purchase their raw materials from the unregistered taxpayers owing to market practices.

READ MORE: Eliminating commissioner audit selection power sought

KARACHI: Karachi Tax Bar Association (KTBA) has recommended amendments in withholding sales tax regime on purchases from unregistered taxpayers.

The KTBA in its proposals for budget 2022/2023, informed the Federal Board of Revenue (FBR) that the the move was intended to increase the cost of doing business for unregistered taxpayers, which otherwise is counterproductive and has impacted the documented sector more adversely resulting in high cost of doing business for compliant taxpayers. On the other hand, no significant increase in registration has been witnessed as result of enhanced withholding rate.

READ MORE: Zero rate sales tax suggested for public welfare services

It is proposed that either the withholding rate be reduced to 1% else tax withheld be allowed as admissible input tax to the registered taxpayers upon providing CNIC/ NTN of such unregistered suppliers so that FBR can trace those unregistered taxpayers and bring them into tax net.

It is likely to reduce the cost of doing business for the compliant registered taxpayers who are compelled to purchase their raw materials from the unregistered taxpayers owing to market practices.

READ MORE: Advance tax on individuals must be for Rs10mn turnover

Another proposals, the tax bar said further tax at 3 per cent has been levied on taxable supplies made to a taxpayer who has not obtained sales tax registration number.

The expressions “person who has not obtained registration number” is quite vague and inadvertently covers all taxpayers whether required to be registered or not. This creates undue tax burden on taxpayers like service providers who otherwise are not required to be registered under the Act.

The expression “a person who has not obtained sales tax registration number,” as used in Section 3(1A) is required to be replaced with the following expression: “The person who are required to be registered but are not registered under the Act.” Alternatively a suitable explanation may also be inserted to amend SRO 648(I)/2013.

READ MORE: Eliminating commissioner audit selection power sought

Taxpayers not subject to tax under the Act dealing in non-taxable or exempt goods will be excluded from the purview of further tax and litigations pending before appellate forum will be settled.

The tax bra further highlighted that the FBR on the strength of Notification No.SRO 1222(1)/2021 has levied extra tax on supplies of electric power and natural gas to taxpayers having industrial or commercial connections, who either have not obtained sales tax registration number or are not on the Active Taxpayers List maintained by the Federal Board of Revenue under sales tax regime.

READ MORE: Threshold be doubled for domestic electric consumers

The expression “persons having industrial or commercial connections, but have either not obtained sales tax registration number or are not on the Active Taxpayers List maintained by the Federal Board of Revenue” is quite vague and inadvertently burdened all taxpayers like service providers, suppliers of exempt goods with extra tax.

It is proposed that expression “either in Income Tax or Sales Tax regime” be inserted in SRO 1222(1)/2021 after the words “Federal Board of Revenue”.

The issue is contentious and proposal is likely to rest all controversies.

KARACHI: The Federal Board of Revenue (FBR) has been urged to zero rate the sales tax on supplies of goods made to charitable or non-profit organizations providing public welfare services.

Karachi Tax Bar Association (KTBA) in proposals for budget 2022/2023, suggested amendments to sales tax laws regarding charitable or Non-Profit Organizations (NPOs), including hospitals and educational institutions.

READ MORE: Advance tax on individuals must be for Rs10mn turnover

The tax bar said that contrary Income Tax Law, there is no clear concept to determine a Charitable or Non-Profit Organizations in Sales Tax Act, 1990 and consequent to amendments brought in Fifth and Sixth Schedules, via Finance Supplementary Act, 2022 the situation has become more grave for these taxpayers.

“Public welfare services provided by such charitable, hospitals and educational institutions has become expensive as a good chunk of their revenue (donations/ grants) ends up in payment of sales taxes. This being contrary either to agreements signed by the Government with other States and international donors,” the tax bar said.

READ MORE: Eliminating commissioner audit selection power sought

It is suggested that supplies of goods to these institutions be charged to tax at the rate of zero percent and following new entry be inserted to Fifth Schedule: “Supplies to a Non-Profit Organization as determined U/s. 2(36) of Income Tax Ordinance, 2001″.

Earlier, the KTBA proposed the discretionary power of commission Inland Revenue to select audit cases should be eliminated.

“The power to select should only be exercised by the Federal Board of Revenue (FBR) under Section 214C of Income Tax Ordinance, 2001,” the tax bar proposed in its proposals.

READ MORE: Threshold be doubled for domestic electric consumers

The tax bar said Sub-Section (2) of Section 138 provides that If the amount referred to in the notice issued under sub-section (1) is not paid within the time specified therein or within the further time, if any, allowed by the Commissioner, the Commissioner may proceed to recover the tax in the prescribed manner.

“The tax authorities construe that term ‘payment’ mentioned in the section 140 does not cover amount recovered from the tax payer,” it added.

READ MORE: Genuine NPOs unable to get benefit of 100% tax credit

The KTBA said that rigorous proceedings causing hardship to taxpayers and leading protracted departmental and appellate proceedings.

“The power to select the return of income may rest only with the FBR already having the powers to select the case randomly through Computer U/s. 214C of the Ordinance,” it recommended.

KARACHI: The Federal Board of Revenue (FBR) has been proposed to increase the turnover from one million rupees to 10 million rupees for individuals to made advance payment.

Karachi Tax Bar Association (KTBA) in its proposals for budget 2022/2023, stated that Section 147 of the Income Tax Ordinance, 2001 relates to quarterly payment of advance tax.

READ MORE: Eliminating commissioner audit selection power sought

The subsection 6 entitles a taxpayer to file a lower estimate. Vide Finance Act 2018 condition has been added that the lower estimate be accompanied with prescribed details.

Subsection 4A as substituted vide Finance Act 2015 states that the taxpayer shall estimate the tax payable for the tax year, by the second installment due date and if the tax payable is likely to be more than the amount payable under sub-section (4), the taxpayer shall furnish an estimate of the amount of tax payable and discharge fifty per cent by the second quarter installment. The remaining fifty per cent to be discharged by the due date of the third and fourth quarter of the tax year.

READ MORE: Threshold be doubled for domestic electric consumers

The requirement of quarterly payment of advance tax is comfortable for the companies and AOPs as they are regularly operated entities. While the condition of income more than one million for the individual cause workload for the registered individuals to face notices and quarterly compliance of advance tax. Unease of doing business and rigorous compliance requirement.

The requirements to file prescribed details along with the lower estimate is against the scheme of deemed assessment and concurrent legislation as well since the section 205 mandates the taxpayer to discharge ninety percent of the tax liability by way of advance tax.

READ MORE: Genuine NPOs unable to get benefit of 100% tax credit

“The amendment shall be made in the threshold of one million rupees. It should be increased to ten million,” it is recommended.

 Sub-section147(4A) may be restored to the position prior to amendment vide Finance Act 2015 requiring taxpayers to file an estimate of higher side. While the ultimate objective of section 147 is to discharge tax liability of 90 percent this is well achieved vide pre-amended position with check as per section 205 of the Ordinance.

READ MORE: Changes sought in withholding on non-resident payment

The requirements under subsection 6 as inserted vide Finance Act 2018 tantamount to disturbing the concept of deemed assessment and should be deleted.

Giving rationale, the KTBA said this will save individuals from cost burdens of quarterly compliance And decrease the workload of individual tax-payers.

KARACHI: The Karachi Tax Bar Association (KTBA) has proposed the discretionary power of commissioner Inland Revenue to select audit cases should be eliminated.

(more…)