KARACHI: The Federal Board of Revenue (FBR) has been informed that taxpayers would not able to comply the last date of August 25, 2014 for filing sales tax return for the month of July 2014 due to anomalies in the sales tax return forms, which was recently uploaded on FBR e-portal.
Karachi Tax Bar Association (KTBA) in a letter to FBR Member (Policy) said that there were issues in the e-filing of the sales tax return and requested the revenue body for further extension in time for filing of the sales tax return for the tax period July 2014.
The tax bar highlighted the issues in reference to new sales tax return form through SRO 727(I)/2014 on August 11, 2014.
Issue # 01
A registered person making exempt supply or subject to reduced rate is required to mention references of the relevant SROs and clauses of the Sixth Schedule to the Sales Tax Act, 1990 under which the supplies are exempt/subject to reduced rate on Annexure ‘C’ of the sales tax return. One the newly uploaded sales tax return form for the month of July 2014, the ‘drop down’ menu of the Annexure ‘C’ from which reference of law is to be selected is blank. The registered person is, therefore, unable to mention relevant laws under which the supplies are exempt/subject to reduced rate.
KTBA requests to issue direction to PRAL to activate the ‘drop down’ menu on Annexure ‘C’ so that registered persons can select the reference of law under which the supplies are exempt/subject to reduced rate.
Issue # 02
Under the SRO 648(I)/2013 dated July 09, 2013, certain types of supplies are exempt from further tax at the rate of one percent on sales tax made to unregistered persons. The ‘drop down menu’ of ‘sales type’ of annexure ‘C’ does not show the types of sales which are exempt from further tax under the aforesaid SRO.
Direction should be issued to PRAL to mention types of sales on Annexure ‘C” which are exempt from further tax so the registered persons can select the ‘type of sales’ which is exempt from further tax to substantiate his action for not charging further tax on such sales.
Issue # 03
Under Section 7 (I) of the Sales Tax Act, 1990, if a registered person has not claimed the input tax within the relevant tax period, he may claim such input tax in the return for any of the succeeding six tax periods. The newly uploaded sales tax return is not allowing input tax / sales tax withholding on purchase invoices/document references which are of dated preceding months (i.e. issued prior to July, 2014).
The tax bar is of the view that it is a genuine right of registered persons to claim input tax on purchases made by him during the preceding six months if the relevant input tax could not be claimed in the relevant tax period. The bar, therefore, requests the FBR to issue direction to PRAL to make necessary amendments in the portal to allow registered persons to claim input tax/sales tax withholding related to preceding six months.
Issue # 04
Under Section 10(1) of the Sales Tax Act, 1990, excess input tax against output tax on supplies (other tan exports and zero rated supplies) is to be carried forward to the next tax period and is to be treated as input tax for that period. The newly uploaded sales tax return is not allowing credit of excess input tax brought forward from preceding tax months.
The KTBA requests the FBR to direct the PRAL to allow registered persons to claim excess input tax brought forward from preceding months against their output tax liability for the month.
Issue # 05
The KTBA received complaints from members that when they verify the sales tax return online after saving the same the amount of sales tax liability for the month changes as compared to what it was, when the return was saved. For that reason, they have been unable to file the sales tax return as the sales tax liability to be deposited as per the verified version is different from the actual sales tax liability which has been deposited by the registered person.
FBR has been requested to issue necessary direction to the PRAL for the resolution of the issue.
Issue # 06
The newly uploaded sales tax return is allowing input tax on services which were acquired only from those services providers who are registered with the FBR (i.e. courier services, customs agents, telecommunication etc.)
The restriction imposed by the portal by not allowing input tax on services provided by persons who are not registered with the FBR is unjust and against the spirit of memorandum of understanding, signed between the FBR and provincial governments as well as SRO No. 212(I)/2014 dated March 26, 2014.
Further, the rate of sales tax on services rendered in the provinces of Sindh has been reduced from 16 percent to 15 percent with effect from July 01, 2014. The Annexure ‘A’ of the return which caters the input tax on services is still showing the old rate of 16 percent. Moreover, certain services are subject to reduced rate of sales tax, however, these reduced rates are not being shown on the Annexure ‘A’.
The KTBA requested the FBR to issue directives to PRAL to allow input tax on services which were acquired from those service providers who are registered with provincial sales tax authorities but not with FBR.
The federal revenue authority has also been requested to issue directives for amendment in Annexure ‘A’ in respect of rates of sales tax as mentioned above.
Issue # 07
The KTBA members have informed that goods declaration (GDs) relating to exports are not uploaded on Annexure ‘D’ on timely basis which cause delay in filing of the sales tax returns. Moreover, when GDs are uploaded on the Annexure ‘D’, the total amount of Annexure ‘D’ is not shown on the main page of the sales tax return.
FBR has been requested to issue directions to PRAL for the resolution of the issue.
Issue # 08
Commercial importers are exempt from provisions of Section 8B of the Sales Tax Act, 1990, which restricts the claiming of input tax in excess of 90 percent of the output tax. Some of tax bar members have complained that their clients/taxpayers are facing problems as when no imports are made by them (commercial importer) in any month, the portal treats them (commercial importer) as wholesaler and withdraws the exemption available under the aforesaid SRO.
The KTBA requested the FBR to issue directions to the PRAL for necessary action so that exemption from Section 8B available to commercial importers under the aforesaid SRO is not withdrawn only for the reason that no import was made by him during any month.
Issue # 09
Input tax adjustment in respect of sales tax paid through bill of additional duties (BOAD) related to consignment cleared through ‘One Customs’ and in some cases manual entries is neither being automatically uploaded in the Annexure ‘B’ to the sales tax return nor these can be entered manually by the taxpayers. Hence, such restriction costs not only to taxpayers but also to the FBR while processing refund claims.
FBR has been requested to issue directions to PRAL to make necessary adjustment in e-filing programming enabling the registered person to enter such BOADs in Annexure ‘B’.
Issue # 10
Registered persons have not been able upload excel files for sales / purchases etc. for relevant annexure of sales tax return. Consequently, they have to enter all entries manually which is impossible if entries are voluminous.
The tax bar requested the FBR to issue directions to PRAL to make corrections in e-filing system so that the portal again start uploading excel files and registered person are saved from the hassle of manual entry.
Issue # 11
On the Annexure ‘A’ of the return which relates to purchases made by registered persons, the category ‘goods’ which are subject to sales tax at the rate of 17 percent is not being shown. Resultantly, registered persons are unable to claim input tax on purchase of goods.
The KTBA requested the FBR to rectify the issue at the earliest for the convenience of the taxpayers.
The Karachi tax bar requested the FBR to issue necessary instructions/directions to PRAL to resolve the above issues forthwith and also further extend the date of filing of sales tax return for the month of July 2014 by 15 days from the date of resolution of the issues.
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