KARACHI: The business community has demanded the tax machinery to reduce the sales tax rate to 12.5 percent from current rate of 17 percent and further reduce it to 10 percent in next three years.
The business community said that sales tax rate in Pakistan is very high as compared to global tax rates. The tax should be reduced in order to cut the cost of doing business in the country.
However, the current tax rate of 17 percent should be maintained for unregistered entities. This reduce rate will encourage the registration of the unregistered taxpayers to avail the benefit of input adjustment.
The business community has proposed the concept of group taxation which should be incorporated in Sales Tax Act 1990 because the sales tax regime needs to support businesses to pay only sales tax to meet net tax liability.
The business community said that group companies should be allowed for an option to be taxed as one fiscal unit for the purpose of sales tax; the conditions for exercising the option specified under Income Tax Ordinance (ITO) 2001 should be maintained.
It is also recommended that the sale tax refundable of one group company should be adjustable against the sales tax payable of another group company.
At present, there is no concept of group taxation in the Sales Tax Act 1990 on the pattern allowed under the ITO 2001.
It is highlighted that sales tax refunds are not easy to obtain and their accumulation is resulting in an ever increasing cost to companies.
Due to long delay in sales tax refunds the cost of doing business increasing as compared to regional competitors which is making Pakistan an unattractive investment destination.