KARACHI: Secretary Policy FBR Raja Vishnu Qavi has said a new fully automated sales tax system is being implemented from July 01, 2016, which would reduce post-filing discrepancies.

“We expect there would be some issues in the beginning, but the same would be addressed accordingly,” Vishnu said.

The government has accepted all the suggestions forwarded by Pakistan Stock Exchange (PSX) and Securities & Exchange of Pakistan (SECP) to support the country’s equity market and promote investments, Raja Vishnu Qavi, Secretary Policy Federal Board of Revenue (FBR) said.

“PSX is an emerging market and we want to support its development,” Vishnu said speaking at a post-budget seminar organized by Karachi Tax Bar Association (KTBA).

“The calculation and collection of taxes on equity markets including capital gains tax (CGT) rests with National Clearing Company of Pakistan (NCCPL) as per the recommendation of PSX,” he said. “Other suggestions have also been entertained”.

Adnan Mufti of Sheikha & Mufti Chartered Accountants the new automated sales tax return filing system as proposed in the Finance Bill 2016 had many flaws and would lead to excessive litigation.

“As per the new system there will be no manual sales tax return filing and input tax refunds will be dependent on the information fed by the suppliers,” Mufti said.

Adnan Mufti also criticized withholding of sales tax and said sales tax was not withheld anywhere in the world. He said after the implementation of fully automated system, both buyers and sellers would be registered, therefore there was no need of withholding sales tax.

He said this was a big flaw as until and unless supplier fed correct information in the return, the buyer would not be able to claim input tax refund.

“The new automated system is quite supplier oriented, which is a good thing but the short-comings in the procedure need to be fixed to avoid litigation,” Mufti added.

Former President Pakistan Tax Bar Association Abdul Qadir Memon spoke on the direct taxation measures proposed the by Federal Budget 2016.

He said FBR mentioned certain principles on the basis of which the tax proposals were prepared. But, the Finance Bill 2016 did not serve any of these principles.

“The Finance Bill 2016 does not reduce any burden from the poor and middle class; there are no measures for broadening the tax base and documentation of economy and there is no plan to increase the share of the direct taxes,” Memon added.

President KTBA Rehan Jafri said the Federal Budget 2016-17 was an indirect tax oriented budget with no initiatives to broaden the tax base.