FBR urged to revisit amendments in sales tax laws

KARACHI: The Federal Board of Revenue (FBR) has been urged to revisit the amendments brought in to sales tax laws in the recent pasts that are causing problems for taxpayers as well as increasing cost of business.
Karachi Tax Bar Association (KTBA) on Thursday highlighted issues with the FBR on following increase in form of further taxes that must be exempted:
Currently commercial importers are paying minimum value addition tax at the rate of 3 percent at import stage and this represents minimum value addition of at least 17.64 percent on supplies out of commercial imports. Through the Finance Act, 2013, further tax levied at the rate of 1 percent on sales to person who have not obtained sales tax registration which must be removed.
The more electric home appliances are being added for extra tax and the tax rate has also been increased from 0.75 percent to 2 percent. The tax would be recovered from manufacturer for entire supply claim by virtue of levy of sales tax on retail price at manufacturing stage therefore; aforesaid items must be exempted from further tax.
Input tax must not be levied on goods subject to extra tax at 2 percent by virtue of restriction provided in section 8(1)© of the Act.
The Board should assure the taxpayers, the federal and provincial government regarding the right to collect taxes to avoid the double taxation. The following services are subject to the levy of Federal Excise Duty as well as sales tax by the provinces including: Telecommunication Services; banking companies or non banking financial companies; insurance; shipping agents; franchise services; services provided by stockbrokers; certain types of advertisements; asset management services; and port and terminal operators.
Extra tax at 5 percent of the bill amount has been levied on supply of electricity and gas to unregistered but inactive taxpayers having commercial or industrial connections where the monthly bill exceeds Rs15, 000. The initiative is again for broadening the tax base, however, a genuine taxpayer will suffer the most. In this regard, the FBR should collect data of unregistered industrial and commercial consumers from utility companies and legally compel them to get themselves registered instead of putting additional obligations on taxpayers.
Restriction over input tax at 90 percent of output tax: zero rating concept has been converted in to reduced rate regime. Consequently, persons who were making local zero rated supplies and enjoyed exemption from restriction of input tax cannot adjust input tax in excess of 90 percent of output tax. “Person making zero-rated supplies provided value of such supplies exceeds 50 percent of value of all taxable supplies in a tax period.

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