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.
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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.
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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.
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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.
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