FBR urged to allow one sales tax registration for multiple businesses

KARACHI: Federal Board of Revenue (FBR) has been urged to allow multiple businesses on one sales tax registration for better documentation of the economy.

In its tax proposals for budget 2019/2020, the Pakistan Tax Bar Association (PTBA) said that after amendment in Sales Tax Act, 1990, through Finance Act, 2008, FBR has directed to cancel multiple registrations under single proprietorship.

It said that proprietor having two businesses faces with the dilemma to show his entire sales under one business, which is creating hardship for his customers in their respective returns.

Moreover, tax department often raise queries as to how a registered person can raise a invoice relating one business if he is registered with the department under another ‘business category’.

“FBR should issue necessary instructions to incorporate multiple business features in its web-portal to facilitate taxpayers,” the PTBA suggested.

The PTBA said that by implementing this suggestion it would result in better documentation of economy and proper maintenance of records of taxpayer.

Highlighting another issue, the PTBA said that the definition of time of supply as amended through the Finance Act, 2013 stating receipt of advance as subject to sales tax, has created number of practical problems because of which sales tax on advance was earlier withdrawn by Finance Act 2007.

The registered persons besides other practical issues has to undertake a tremendous exercise of reconciliation between the books of account where sales is recorded on the basis of delivery of goods with the sales tax returns where sales tax is paid on advance receipts.

Furthermore, this also leads to discrepancies in CREST resulting in hardships to taxpayers as well as to the department.

Therefore, the tax bar proposed withdrawal of the amendment made through the Finance Act, 2013.

It said that it will help taxpayers to avoid unnecessary hassle as well as for the department; as charging of sales tax on advance receipts will not create any additional revenue for the Government.

The PTBA also pointed out ‘hire purchase’ transaction involves periodical installments received/earned over a period of time.

Currently, Sales Tax is being charged on full amount at the time of signing (entered into) of hire purchase agreement.

The registered is burdened with increased amount of output tax on hire purchase sale at the time of sale although the amount is received from the customers in installments.

Definition of time of supply’ may be amended and tax should not be levied at the time of signing of HP arrangement.

Instead, tax should be levied at the time when installment is effected / paid.

Further, the element of interest embedded in such installment should also be excluded for assessment of sales tax.

Charging sales tax on full amount at the signing of hire purchase agreement is not justified and is in conflict with the definition of value of supply which states that it is the consideration which the supplier receives from the recipient for the supply.

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