Transaction in ‘good faith’ not to entail any action: Sales Tax amendment excludes transaction below PKR 50,000 from new law

KARACHI: Sales Tax department has issued a circular here on Monday to clarify the provision of CNIC by a buyer to a “Registered Sales Tax person“. The circular says that at present only 41,484 businesses are registered, whom are actually paying some tax with their returns.

The circular says that provision of the CNIC number does not mean in any manner that buyer has to be a registered person under the Sales Tax Law. The circular further says that “ if it is subsequently proved that CNIC provided by the purchaser was not correct, , liability of the loss or penalty sall not arise against the seller in case of sale made in ‘good faith ‘.

The circular further refers to definition of good faith as per common law and jurisprudence. According to experts the use of word “ good faith “ would create problems for the Sales Tax Registered person who would be in trouble in case of each and every single transaction it makes above PKR 50000. Who and how will it be decided that a transaction made was in “ good faith” , asks a lawyers practicing on Commercial side.

Given the figures of 48,484 big sellers or businesses out of millions, the new amendment was necessary as country is facing worst ever financial crises but binding the seller of liability of buyer could prove disastrous for business activities. This would also open a door of ‘benami’ transaction and benami buyers arranged by the sellers so that their normal business activity remains. Instead of documenting economy, sale and purchase through other means like making a payment of buying through cheuqe in case of purchases above PKR 50000, the provision of CNIC would only hamper trade activity, maintains a whole seller. We will have to believe our customer and will have to face consequences if a lapse occurs as term “ in good faith “ implies entire responsibility of any loss of revenue to government on our shoulder.

The facility given to a women / female buyer that instead of her, her husband or father can provide CNIC is also no relief as male members of the family have to face the law and proceedings. The circular instead of clarifying things amounts to further harass the businessmen as they will have to weigh each and every sale in terms of “ good faith “. This would also mean that doing business under new regime is becoming increasingly difficult.

 

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