PTBA proposes withdrawal of restriction on input claim under Sindh sales tax

KARACHI: Pakistan Tax Bar Association (PTBA) has urged the Sindh government to withdraw the restriction on claiming input tax by services rendered by a taxpayer.

The apex tax bar in its proposals for Sindh budget 2019/2020, said that no input tax is allowed to be claimed on goods or services acquired prior to six months preceding the date of commencement of the provision of taxable services by a taxpayer.

It is recommended that such restriction should be eliminated.

That any bar on admissibility of input tax borne by the taxpayer prior to six months preceding the commencement of provision of taxable services is against the basic principal of Value Added Tax (VAT). It is also not justifiable in case of a long term projects.

Any assessment order can be amended by a tax officer on the basis of any subsequent information, etc. Such powers are arbitrary and unjust and may open the doors for harassment and corruption, the tax bar said.
Therefore it is recommended that the taxpayer should first be confronted with a show-cause notice with substantial reasons and definite information/evidence(s) that warrant reopening or amending the assessment order.

Further, the powers to amend any assessment order should only be vest with the Commissioner or Board only.

This recommendation would introduce transparency in the tax system for revision of shut and close transactions and provide justice to the taxpayer.

Highlighting another issue, the PTBA said that the taxpayer is required to retain records for a period of 10 years and show-cause notices may be issued within a period of 8 years from the date of relevant tax period.

“This is in excess of the statute of limitation provided under the STA and ITO. It will not only put excess burden on the taxpayer, but also dis-incentivizes the tax authorities from taking timely action.”

The time period for retention of records and assessment of tax should be reduced to 5 years.

This would save taxpayers from practical difficulties and unnecessary burden while pushing the tax authorities to take more timely action.

In another proposal, the PTBA said that the tax officer is empowered to ask for any information from a taxpayer without specifying the reason or nature of the case being investigated by him.

Scope of Section 52(1) should be restricted to specific parties and transactions which are within the jurisdiction of Sindh and are specifically identified by the tax officer instead of fishing and roving enquiries.

This promotes equity and natural justice and avoids harassment and unnecessary proceedings.

At present the Sindh Revenue Board (SRB) may arbitrarily empower a Deputy Commissioner to exercise the powers of Commissioner (Appeals).

This provision should be deleted. Such an amendment undermines the quasi-judicial function and weakens the judicial process by empowering a junior ranked officer to assume the powers of a quasi-judicial authority.

At present recovery of demand can be initiated at any time after the assessment order is issued.

Since an appeal may be filed within 30 days from the date of receipt of an assessment order, the recovery proceedings should not be initiated within such time.

This recommendation would harmonize the Federal and Provincial tax laws.

The PTBA said that a lot of services mentioned in the First Schedule are without H.S. Code/Tariff Headings which may create difficulties.

It is suggested that all services should be marked with the respective Tariff Headings in order to avoid confusions on the part of assessing authorities as well as the registered persons.

This recommendation would bring clarity, equity and harmony in the tax laws.

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