Pkrevenue.com

Tag: Karachi Tax Bar Association

  • FBR urged to resolve input adjustment on payment made through BOAD

    FBR urged to resolve input adjustment on payment made through BOAD

    KARACHI: Karachi Tax Bar Association (KTBA) on Thursday urged Federal Board of Revenue (FBR) to resolve the input adjustment issue on payment made through Bill of Additional Duty (BOAD).

    The KTBA in a letter informed the FBR that it had highlighted the matter through communications dated November 27, 2013 and June 23, 2014, respectively whereby the issue of non-adjustment of input tax, paid through challan of BOAD was highlighted that a registered person remained unable to claim its input sales tax against the output sales tax.

    The KTBA informed through the instant letter that the these paid challans of BOAD were still not available in the uploadable format in the system due to which the issue was still persist.

    The tax bar pointed out that the issue had been duly addressed at the WeBOC system already and the PRAL through its communication on December 05, 2013 intimated that the provision for the requested adjustment had been made available for payment made through WeBOC system in the online sales tax return portal.

    A similar mechanism should be devised and put in place for the adjustment of sales tax paid through BOAD for challans paid through One Customs as well, which has been held pending for a considerable time period for the last five years.

    The issue needs to be addressed and resolved, the KTBA said.

  • KTBA proposes steps for exports growth without revenue loss

    KTBA proposes steps for exports growth without revenue loss

    KARACHI: Karachi Tax Bar Association (KTBA) on Monday proposed steps to the Federal Board of Revenue (FBR) for the exports growth without any negative implications to the tax revenue.

    The KTBA submitted following proposals to FBR Chairman Syed Shabbar Zaidi:

    1- Section 8B (Bottleneck for potential / existing exports)

    Section 8B restricts Input tax adjustment to the extent of 90 percent of the Output tax (i.e. ratio of Input / Output ≤ 90percent). Since exports do not contribute towards Output tax (denominator) while the input tax relating to exports is included in numerator, therefore, such input tax relating to exports should not be considered for the purposes of comparison of ratio of Input / Output under Section 8B.

    For fair comparison, 90 percent restriction should be made applicable only for local sales where both input tax and output tax are subject to the levy of standard rate of sales tax.

    As per serial no.4 of SRO 1190(I)/2019 dated October 02, 2019, section 8B is not applicable to persons whose zero rated supplies during a month is more than 50 percent of the total taxable supplies.

    Suggestion: Either of the following options may be considered to be implemented by the FBR:

    i. Since exports do not contribute towards Output tax, therefore, condition of 50 percent should be amended to 10 percent [in serial no. 4 of the said SRO 1190] on monthly basis for all exports irrespective of any sector otherwise it would not be possible for registered person to absorb the amount of input tax paid for the purposes of manufacturing of items for local and export sales and consequently, the same would discourage export of goods; OR

    ii. Abolish sales tax on conversion cost (like electricity / gas bills) for manufacturers whose export sales during the preceding tax year is more than 40 percent of the total sales. Sales Tax liability, if any, on local sales, will be discharged by the registered person at the time of filing of monthly sales tax return.

    In case a person utilizing 80 percent of total capacity for local sales gets an opportunity to export remaining unutilized capacity of 20 percent, he will not be interested to avail that export opportunity as input tax paid on goods used for exports will form part of the total input tax and consequently, he will be required to pay 10 percent minimum value addition tax under section 8B, which will be refunded after around a year.

    Considering the impact of finance cost of delayed refund, he will not be interested to avail that export opportunity.

    2- Section 8B (Discriminatory Treatment with Manufacturers as compared to Commercial importers)

    Sales tax is now being collected from manufacturers on almost all value additions (like conversion cost, contractors, transporters etc.) and then they are required to pay 10 percent minimum value addition tax over and above all these inputs under section 8B of the Sales Tax Act, 1990 whereas on the other hand, commercial importers paying 3 percent minimum value addition tax at import stage have been excluded from the ambit of section 8B.

    In order to provide level playing field to manufacturers, the FBR is requested to consider any of the following options:

    i. Exclude manufacturers of 100 percent taxable goods from the ambit of section 8B of the Sales Tax Act, 1990

    ii. If complete exemption is not possible, increase the threshold of restriction of input tax adjustment to 95 percent from present 90 percent; OR

    iii. Abolish sales tax on conversion cost (gas / electricity bills) incurred by manufacturers of 100 percent taxable goods. This will not have any negative impact on Government’s revenue as sales tax liability, will be discharged by manufacturers along with filing of the monthly sales tax return.

    3- MINIMUM VALUE ADDITION (MVAT) SALES TAX AT 3 percent ON IMPORT OF PLANT & MACHINERY

    On the basis of powers under subsection 2 of section 7A, 12th Schedule has been inserted in to the Sales Tax Act, 1990 wherein it has been stated that MVAT will be applicable on

    “All imported goods subject to exclusions as in conditions and procedure given after the Table”.

    Moreover, among few other exclusions under clause 2 of the 12th Schedule, raw materials and intermediary goods meant for use in an industrial process which are subject to customs duty of less than 16 percent have also been excluded from the ambit of applicability of MVAT. You will appreciate that said exclusion is applicable only on raw materials and intermediary products of less than 16 percent Custom duty whereas similar exemption is nowhere specified for Plant and Machinery / spare parts and therefore, custom authorities are charging MVAT on import of Plant & Machinery / spare parts by manufacturers.

    It is needless to mention that exclusion from MVAT is already available to service sector importing goods for their in-house business. Clause 2(iii) of the Twelfth Schedule is reproduce as under:

    (iii) Registered service providers importing goods for their in-house business use for furtherance of their taxable activity and not intended for further supply.

    3.3- Based on the above submissions and considering the fact that goods including plant and machinery imported by service sector is already exempt from MVAT, the Plant & Machinery imported by manufacturers for its own use should not be subject to the levy of MVAT under Twelfth Schedule read with subsection 2 of section 7A.

    Therefore, it is requested to kindly issue necessary notification for inserting following clause in Twelfth Schedule.

    (ix) Plant, machinery and spare parts imported by manufacturers for their in-house business use for furtherance of their taxable activity and not intended for further supply.

    3.4- It is worth mentioning that earlier as per Chapter X of the repealed Sales Tax Special Procedures Rules, 2007 both the goods as imported by a manufacturer of goods for in-house consumption as well as goods imported by registered service providers for in-house business use, were exempt from levy of MVAT, however, in the 12th schedule of the Sales Tax Act, 1990, exemption from MVAT in case of imports of Plant & Machinery/spare parts by manufacturers of goods, has not been retained.

    4. SALES TAX REFUND – ISSUE BEING FACED BY EXPORTERS

    As per the amendments made in Sales Tax Rules, 2006 vide SRO no. 918(I)/2019 dated August 7, 2019, mechanism for expeditious processing of refund claim has been devised only for manufacturers-cumexporters.

    As per the Rules, refund will be treated as having been filed only after filing of Annexure H of the Sales Tax return, for which deadline of 120 days has been prescribed in the Rules and the same can be extended for a period of 60 days on the basis of approval from the Commissioner.

    However, the rules are silent about the mechanism for processing of Sales Tax refunds incase Annexure H has not been filed by manufacturer-cum-exporter for any reason. Considering the legal and legitimate right of the taxpayer to claim adjustment / refund of the input tax, either of the following two option be considered by the FBR for facilitation of exporters:

    i. Allow filing of Annexure H without any time limit [present time limit of 4 months be abolished and taxpayer be allowed to claim refund as and when required]

    ii. Incase present limit of 4 months cannot be abolished, registered persons be allowed at least to alternatively file refund on annual basis after the end of the tax year.

    Apart from the above, Annexure H is only being allowed to be filed to taxpayers who have filed the said Annexure from sales tax returns of July 2019 and onwards. Instead of claiming refund,
    some taxpayers have reported sales tax carried forward balance in their sales tax returns from July 2019 onwards.

    In case they now intend to file Annexure H from the current month, FBR’s online portal does not allow such taxpayers to enter opening balance of inventory / raw materials as the said field in blocked for editing. This limitation should be removed and taxpayers should be allowed to file Annexure H for any specific month, for which they intend to claim refund.

    From apparent mechanism being followed by the system, it appears that those taxpayers who have not filed Annexure H for the month of July 2019 will never be allowed to file Annexure H for any subsequent month.

    This apparent anomaly should be resolved at earliest.

    These suggestions will have no revenue loss to the government as sales tax collected is otherwise adjustable, however, through industrialization, government will be able to generate more tax revenue as well as employment opportunities.

  • KTBA submits observations on suspicious transaction reporting by jewelers, real estate agents

    KTBA submits observations on suspicious transaction reporting by jewelers, real estate agents

    KARACHI: Karachi Tax Bar Association (KTBA) on Friday submitted its observations on reporting of suspicious transactions by jewelers and real estate agents to Federal Board of Revenue (FBR).

    (more…)
  • KTBA seeks date extension for Tax Year 2019 return filing

    KTBA seeks date extension for Tax Year 2019 return filing

    KARACHI: Karachi Tax Bar Association (KTBA) on Wednesday asked Federal Board of Revenue (FBR) to extend the last date for filing income tax returns for tax year 2019 in order to facilitate the genuine taxpayers and give opportunity to those who are out of tax net.

    The KTBA in a letter to FBR chairman said that against the legal and permissible time period for filing the return of income of ninety (90) days under section 118 of the Ordinance, only 58 days have been allowed between September 2nd and October 31, 2019, which implies that 32 more days should be allowed further for the purpose.

    It said that at the same time, it is equally critical to decide the fate of the filers of the Assets Declaration Scheme of 2019 who could not submit their declarations due to untimely closure of the option on IRIS.

    Consequently, they also could not revise their wealth statements for the Tax Year 2018, which you would appreciate is a necessary component for filing the return of income for the Tax Year 2019.

    It is apprehended that if they are not allowed to submit their declarations, which they have not been so far, in the last four months, their right to timely file their returns of income for the Tax Year 2019 is systematically been jeopardized as well.

    Lastly, it would not be out of context to refer to the ongoing resistance from Shopkeepers and Trader of the country who still have to be given, inter alia, a final format of Return for their tax filing, which the FBR introduced vide its notification under Sections 99B and 9C of the Ordinance and committed that the same would be applicable right from the very Tax Year of 2019.

    It may be appreciated that we as a Bar, are very much cognizant of the FBR’s campaign to increase the number of tax filers and compliant taxpayers in the country to proportionately increase the much needed Tax revenue for which we would like to render our due role as an association.

    Taking stock of whole of the ongoing situation, however, it can conveniently be drawn that unless and until the concerns are addressed, not less than two third of the population of the tax payers of the country will turn to Non-Filers or to say “not appearing on the ATL”, which merely would further add to their woes.

  • How taxpayers fail in filing returns by due date, KTBA questions FBR

    How taxpayers fail in filing returns by due date, KTBA questions FBR

    KARACHI: A body of tax practitioners has questioned Federal Board of Revenue (FBR) that how taxpayers fail to file returns for tax year 2019 on September 30, 2019 when the tax authorities extend the date ahead of cutoff time.

    The Karachi Tax Bar Association (KTBA) in a letter to FBR chairman referring the Circular No. 14 of 2019 dated September 30, 2019 whereby the due date for filing the returns of income had been extended till October 31, 2019 in respect of Individuals and AOPs, and Companies following Special Tax Year.

    “At the outset, regarding the construction of the above mentioned Circular, it is pertinent that it was communicated to the taxpayers around 9:30 pm on September 30, 2019 whereas the deadline was up to 12:00 am.

    “The extension has purportedly been announced on account of alleged ‘failure of the taxpayers’ to file the returns of income by the due date of September 30, 2019 as the Circular states that the taxpayers (Individuals, AOPs and Companies) “failed to file their income tax returns/ statements.”

    On behalf of its members, the bar takes serious exception to the use of this uncalled for statement for, the said extension was necessitated due to the FBR’s failure to timely issue the final forms of returns of income.

    Even after issuance of SRO 979(I)/2019 on 02 September 2019, it took couple of more days for the FBR to upload these forms on IRIS and after the same having been uploaded, were carrying certain system issues/ technical glitches as well as interpretational matters.

    These were duly intimated by the Bar vide its letter dated 20 September 2019.

    The tax bar is of the view that instead of blaming the taxpayers who “could not file” the income tax returns by September 30, 2019 on account of the above discussed reasons, the Board acknowledging the same would have allowed the taxpayers without blaming them, due time of ninety days to file the income tax returns.

    As regards the extension allowed to the companies, it is tainted with an unprecedented condition of payment of 95 percent of admitted income tax liability by September 30, 2019.

    “This condition of payment of 95 percent tax liability is completely unheard and couldn’t be found to have existed anywhere under any provision of the Income Tax Ordinance, 2001 including the very section 214A under which the aforesaid Circular has been issued.”

    Besides the debate of any legality, what needs to be emphasized here remain that had there been any patent or latent intention of the Board to extend the due date only for those Companies which would have paid 95 percent of their income tax liability, the same should have been communicated clearly well before the last date of filing to provide necessary time to them to deposit the income tax demanded at the eleventh hour.

    What however, has been witnessed that the above Circular, with this irrational condition, was issued at the eleventh hour and came as a surprise, when the extended banking hours had already been lapsed.

    It was therefore, impossible for anyone to fulfill the condition even if they were forced too. Thought it was reported in the news media that the FBR had issued a Circular letter on this topic of payment of 95 percent income tax before availing extension in time, however the said Circular letter was never made public.

    Besides the above pandemonium, what needs emphasis here is that legal and permissible time period for filing the return of income in terms of section 118 of the Ordinance has not been allowed to Companies for, the final SRO for Companies was issued on September 06, 2019 allowing only twenty four (24) days to them for filing the return of income.

    It is, therefore, a strange condition in the first place and that too without any legal footing hence it would be all just and bona fide that the due number of days, which are ninety (90) from the issuance date of the final forms of return of income are allowed to the taxpayers including Companies without any pre-condition levied upon.

  • KTBA highlights glitches, lacunas in income tax return forms

    KTBA highlights glitches, lacunas in income tax return forms

    KARACHI: Karachi Tax Bar Association (KTBA) on Friday pointed out glitches and lacunas in income tax return forms which resulted in difficulties in filing tax returns for tax year 2019

    The tax bar wrote a letter to the chairman of Federal Board of Revenue (FBR) regarding its previous communication on August 27, 2019 about the draft income tax return forms for for individuals and AOPs for the tax year 2019 were issued on August 23rd, 2019 through SRO 951 of 2019.

    Through our above letter we communicated our serious concern as to the shortage of time period allowed in terms of number of days, for going through the entire SRO which contained 56 pages of returns of income and their annexures, which were only seven days and that too were issued in the evening of Friday followed by Saturday and Sunday, the next days.

    The shortage of time was coupled with the fundamental drawback, which was also duly highlighted in our above referred correspondence that the return forms were neither issued in offline/demo mode, with the formulas, nor in the Excel format, at the least, so as to enable the user to have any clue as to what changes have actually been made.

    “This, you [FBR chairman] would appreciate can only be done by feeding the data in the forms so as to evaluate whether the form is correctly performing the computation/ working out the income and the tax liability.”

    It is an admitted norm that where suggestions are genuinely intended to be solicited, these are facilitated not only in terms of ample time but in the right desired format as well, which the Bar and its members have been deprived of completely this year.

    The forms were not rolled out either in Excel form or on the IRIS till the last day.

    Despite our genuine request what came out as a startling fact that the Draft Returns were finalized on the eve of September 02, 2019 through SRO 979 of 2019, without any modicum of change, let alone any suggestion.

    Up till now since the issuance of the forms, more than seventeen (17) days have been passed on and it is now not a much unknown fact that return forms are filled with glitches and lacunas, which are factually deterring any bona fide filing of a tax return by an individual, whether Salaried or Business; resident or a non-resident.

    Needless to mention that Individuals constitute the largest class of tax filers out of 2.5 million club of taxpayers.

    Few of these flaws are being narrated hereunder for your necessary attention as filing of tax returns has been seriously jeopardized by these anomalies:

    i. Statement of Final Taxation for Individuals, Salaried Individuals and AOPs is not accompanied with Wealth Statement, which is a separate requirement under Section 116 of the Income Tax Ordinance, 2001;

    ii. Non-residents are not required to file Wealth Statement. On the other hand, the IRIS is invalidating their filing at the portal without a Wealth Statement;

    iii. The IRIS is also asking for details of Personal Expenses in cases of Non-resident, without which the return cannot be submitted.

    iv. Tax Return of a Salaried Individual contains only Reconciliation of Wealth without any details of assets/ Wealth Statement which is not in accordance with Section 116 of the Ordinance;

    v. In the Wealth Reconciliation which is accompanied with the Tax return, the detail from the last year Amnesty is being included in the inflows of the total. All those who filed Asset Declaration last year are now unable to file return as of now.

    vi. Person who is required to file statement under Section 115(4) of the Ordinance has no option left to file Wealth Statement as no separate tab is appearing in IRIS module.

    vii. There is a single field/ column for foreign income only contrary to the requirements of section 103(8) read with section104 of the Ordinance that provides computation of foreign income/ loss and adjustment and carry forward of losses;

    viii. There is no option to declare foreign income with their respective heads of income and instead only figure sums it all which does not give the fair picture of the foreign income;

    ix. Tax on income from Bahbood Certificates/ Pensioners Benefit account is not being properly worked out.

    x. There is no provision for adjustment or claim of capital loss in return form after NCCPL issues the annual certificate

    Besides the above lacunas, what needs emphasis here is that legal and permissible time period for filing a return is 90 days under section 118 of the Ordinance, while on the contrary, only 27 days have been given here between September 2nd and September 30, 2019.

    The tax bar said that the obnoxious condition imposed on them September 5, 2019 vide C.No.2(I)Cond./I.Tax/2018 dated September 05, 2019 whereby the instruction was given to the Commissioners to ensure the payment of due tax before allowing any extension.

    “It means the taxpayer has to pay for the income tax first if one has to apply for extension, beyond the dead line of September 30th, 2019 which he should not be needed to beg for in the first place. It is not only a disgrace to a bonafide taxpayer to succumb to an unwarranted condition of tax payment but also tantamounts to make him suffer through the encroachment in his legal space under the Ordinance, which allows him necessary time period to file his return of income with respect and without getting his legal right vitiated. It need not to be emphasized that the Commissioner is otherwise independently empowered to grant extension to a taxpayer in terms of section 119(3) of the Ordinance if such a request is made to him without regard to any instructions from the Board.”

    At the same time, the bar is cognizant of the fact the FBR’s campaign to increase the number of returns/ compliant taxpayers should not be sabotaged merely on the ground of short time period given firstly to understand the forms and again to file the returns of income.

    It is, therefore, all befitting that the due number of days, which are ninety (90) from the issuance date of the final return forms are allowed to the taxpayers and is not compromised on any pretext.

  • KTBA refuses comments on draft return forms on given format

    KTBA refuses comments on draft return forms on given format

    KARACHI: Karachi Tax Bar Association (KTBA) has refused the Federal Board of Revenue (FBR) for giving comments on draft return form for tax year 2019 as the present format of the draft form was not appropriate for checking.

    The FBR issued draft return forms for individuals and Association of Persons (AOPs) through SRO 951(I)/2019 dated August 23, 2019 and it asked stakeholders to provide feedback within seven days in order to finalize the return forms.

    “The forms of returns of income are in pdf format and therefore, it is not possible to check as to whether row and columns of the return forms are in consonance with the provisions of the Income Tax Ordinance, 2001 as applicable to the tax year 2019,” the KTBA said in its letter to the FBR chairman sent on Wednesday.

    Unless these forms are provided in offline/demo mode along with the formulas or at least in Excel format, the members of the bar are not in position to provide any feedback / comments.

    The KTBA asked the FBR to provide these forms in offline/demo along with the formulas or in excel format in order to evaluate the forms and provide FBR with feedback/comments.

    Related Stories

    KTBA urges prime minister for extending amnesty scheme for one month

  • CNIC condition not applicable on purchases below Rs50,000

    CNIC condition not applicable on purchases below Rs50,000

    KARACHI: The condition of providing CNIC details is not applicable on purchases up to Rs50,000 by a person, said Zeeshan Merchant, former vice president of Karachi Tax Bar Association (KTBA).

    (more…)
  • FBR urged to allow filing amnesty scheme declarations

    FBR urged to allow filing amnesty scheme declarations

    KARACHI: Federal Board of Revenue (FBR) has been urged to allow those persons to file their declarations who have paid duty and taxes under amnesty scheme 2019 by due date.

    (more…)
  • KTBA urges prime minister for extending amnesty scheme for one month

    KTBA urges prime minister for extending amnesty scheme for one month

    KARACHI: Tax practitioners of Karachi Tax Bar Association (KTBA) have urged Prime Minister of Pakistan Imran Khan to extend the last date for availing tax amnesty scheme to July 31, 2019 from existing June 30, 2019.

    In a letter sent to Prime Minister Imran Khan on Saturday, the KTBA requested for extension of due date for filing of Assets Declaration Scheme 2019.

    It said that the last date to avail the Assets Declaration Scheme 2019 (Amnesty Scheme 2019) is expiring in the next two days while there still lies innumerable cases of taxpayers who are yet to file their Amnesties but for the reason of paucity of time and extremely slow speed of the IRIS Software of the FBR.

    The KTBA said that the Foreign Amnesty Scheme was launched by the government through an Ordinance on May 14, 2019 whereby a 47 days window was available to declare foreign and local assets and expenditure.

    Though the Ordinance was promulgated on May 14, 2019 but the filing under the Scheme accelerated only after the launch of the online Citizen Profile on NADRA and Tax-Profile on FBR on its “Malumaat” application which took the public in general by surprise and after which considerable discomfort and anxiety echoed in the ranks, which resulted in the radical change in the perception of seriousness of the Amnesty drive by the FBR as was factually reflected by it.

    However, since all these announcements were made only a few days before the June 30 which left very short time to fill in and to file the Amnesty even if someone genuinely wants to.

    Had these announcement been made earlier, the desired level of momentum which is visible today could be seen earlier as well.

    It is germane to mention here that the decision to upload the personal data of around 53 million citizens online was also taken without following a stakeholder process and is quite concerning among the public that also created panic on the way to avail the benefits of the scheme.

    Further, FBR and the SBP’s delayed response on the clarifications for implementation of scheme like foreign currency remittance/accounts etc, is also delaying the process of declaration filing.

    In view of the above it is requested to kindly give directions to the ministry to extend the date of filing of Amnesties till July 31, 2019.