KARACHI: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has proposed to reduce general sales tax (GST) to a single digit from existing rate of 17 percent which would achieve sustainable economic growth in the country.
The FPCCI said that prevailing standard rate of sale tax is 17 percent which is extremely high. In current scenario, it directly impacts on rising inflation, induces tax evasion and fuel to corruption and smuggling.
The apex body has suggested that single digit sales tax will reduce inflation rate, smuggling and corruption. Besides, lower rate of sales tax would be instrumental in generating sustainable GDP growth, which eventually results in improved tax collection.
FPCCI has suggested the tax machinery that frequent changes in policies through statutory regulatory orders (SROs) are creating uncertainties therefore changes in policies without consultation of the concerned trade and industry should be withdrawn or revisited.
The apex body said that it is unfortunate that even after lapse of considerable period of almost 20 years; sales tax regime is not yet settled in Pakistan.
The policy makers are frequently making changes, through SRO’s, General Orders and circulars which complicates the regime for understanding and its compliance.
The federation said that due to frequent SROs uncertainty, confusion and inconsistency is being witnessed and it is adversely impacted on business environment.
It is proposed that all ad-hoc measures taken without the consultation of the concerned trade and industry be withdrawn or revisited. Efforts been made to simplify the sales tax law and procedure with the consultation of stakeholders.
The federation believed that if government settle the GST regime for once at all and ensure smooth application, will guarantee revenue collection in hassle free manner.
FPCCI has proposed that no sales tax and no refund regime should be initiated for five export sectors to encourage exports of the country and in this regard, it could avail maximum benefit from generalized system of preferences (GSP) plus status.
The apex body has suggested that all items listed in table 1 of SRO 1125(i)/2011 be chargeable to sales tax at zero percent within registered supply chain of five export sectors.
It is also proposed that sales tax at two percent be charged on supplies made to unregistered person along with one percent further sales tax to ensure collection of sales tax from domestic consumption of such industrial and finished goods.
It is believed that it would eliminate corruption, nonaccrual of bogus refunds and promote of exports.
The federation said that exports are one of the important and sensitive segments of the economy. Through this measure economic disorder could be addressed from its smooth performance and consistent growth of exports.
In the current scenario, there is a special regime prevails for five export oriented sectors under notification 1125(I)/2011. This scheme in recent couple of years has been modified quite a few times. Sales Tax at two percent is introduced on industrial raw material by the interim government without consultation of trade & industry.
It is mentioned that confusion within the scheme can be assess from the fact that even after issuance of 154(I)/2013, it was again modified through three different notifications 505, 682, 898 within the span of six months and still neither the Federal Board Revenue (FBR) nor export sectors are satisfied.
It is resulted in revival of notorious corruption prone sales tax refund regime and liquidity problems to export sectors. Inconsistent and uncertainty among export trade and its supply chain Induces corruption and hurt exports.
It is highlighted that no parameter is defined in the notification that how unregistered person can be verified as person dealing in five sectors.
The apex body said that In addition to it traders of textile chemical and dyestuffs (listed in Table -1 of SRO 1125) are facing problem due to unavailability of option at the time of their sales tax Registration, i.e. to be registered as textile chemical traders or registered as person dealing in textile sector. Due to this, CREST is showing Discrepancies as calculating at 17percent sales tax if anybody sales to textile chemical traders.