Budget proposals 2014-2015: cement be brought under normal sales tax regime

KARACHI: Institute of Cost and Management Accountants of Pakistan (ICMAP) has proposed that cement should be brought under the normal sales tax regime by removing the cap of the third schedule of Sales Tax Act, 1990.
It is believed that it would help the cement manufacturers to reduce price for the retail market and give boost to the construction activity in the country.
It said that in third schedule there are 21 items or goods which are being charged with different sales tax rates and cement is also a part of those items.
It is also demanded that federal excise duty (FED) on cement should also be abolished.
At present, through the Finance Act 2013, several items, including cement, has been added (Sr. 22 to 30) in the list of 21 items already mentioned under the third schedule of the Sales Tax Act, 1990. The inclusion of cement in third schedule has resulted in increase in retail prices of cement in local market and additional tax burden on the cement manufacturers.
ICMAP has urged the government that normal mechanism should be adopted if the tax officials realizes that proper tax is not being paid by the registered person.
It proposed amendment in section 40B of the Sales Tax Act, 1990 of posting of Inland Revenue Officer because it feels that this provision may lead to misuse of power or authority and undue harassment by the tax authorities.
Currently, section 40B authorizes the Federal Board of Revenue (FBR) or the commissioner to post officer of Inland Revenue to the premises of registered person or class of such persons, to monitor production, sales of taxable goods and the stocks position, in case there is any material evidence of tax fraud or sales tax evasion against the person.
ICMA Pakistan has suggested that requirement for commissioner’s approval for revised return should be made easy in cases where no refund is enhanced or no liability is decreased to avoid hardship for registered person.
It is proposed an amendment in section 26 of “return” under Sales Tax, 1992 that the provision creates hardship for the taxpayer as even in case of a small clerical mistake in the return for that problem he has to go through the whole process of not less than audit to get the permission for revision.
In existing situation, as per section 26, a registered person is required to obtain approval of Commissioner Inland Revenue to file a revised return to correct any omission or wrong declaration made in the original sales tax return.
The ICMAP has proposed that the requirement for filing annual sales tax return should be done away as the companies already file monthly returns electronically and this would tantamount to be duplication of data submission by the taxpayer.
However, under section 26 it has been provided that the return filed electronically on the web or any magnetic media or any other computer readable media shall also be deemed to be a return.
At present, under Rule 17 of Sales Tax Rules, 2006 read with Section 26 (1) of Sales Tax Act, 1990, every registered private or public limited company is required to file annual sales tax return with the collector.
The ICMA Pakistan has recommended to immediately withdraw the income support levy as it is discriminatory for the taxpayers in form of double taxation, who have already paid tax on their income and savings out of the said taxed income, which are again being taxed.
It said that instead of broadening tax net, it has over burdened the existing taxpayers. It would also discourage savings and deposits in banks, national savings schemes, and would encourage investment in land and in other immovable assets.
Currently, through the Finance Act, 2013, an Income Support Levy was introduced, the rules of which were notified vide S.R.O. 904(I)/2013 dated October 8, 2013 has notified the rule for payment of this levy.
In the existing situation, the levy is to be paid by every individual, having net movable assets exceeding Rs one million, through wealth statements.
According to ICMAP, the levy is not part of the income tax law, rather it is a separate and independent law and introduced by the government to generate resources for providing financial assistance and other social protection measure to economically distressed persons and their families.