KARACHI: It is learnt that Pakistan Chemicals & Dyes Merchants Association (PCDMA) has submitted its budget proposals for 2014-15 to Finance Minister Ishaq Dar. The taxation proposals have mainly focused on policy measures, administrative and enforcement issues faced by commercial importers.
The commercial importers of industrial chemicals, dyes/raw materials have strongly proposed withdrawal of income support levy and access to banking information, adjustment of sales tax refunds against income tax liability, reduction in sales tax rate from 17 to 12.5 per cent and maximum duty rate of 5 per cent on chemicals and dyes falling under the Pakistan Customs Tariff (PCT) chapter 25-39 (not manufactured locally) in the upcoming budget (2014-15).
The PCDMA members firms are commercial importers of industrial chemicals, dyes and other raw materials particularly for export-oriented industries including five zero rated sectors. Hence, discrimination between commercial importer of chapter 25–39 and industry should be eliminated. It also proposed maximum duty rate of 10 per cent for those items which are manufactured in Pakistan.
It is suggested that customs laboratory should be upgraded to the level of acceptance of its own results. It has been observed that at different stages, results of tested chemicals are being sent to other laboratories for retesting, which shows the inefficiency of the customs laboratory.
Nowadays Customs Department is adopting anti-business policies instead of business friendly policy as envisaged by the federal government, such as recently they have imposed testing fee Rs 3,000 for each item, which was previously Rs1,000 for each GD (number of items were not concerned). As for example, if any invoice contains ten items than the importer has to pay Rs. 30,000 which is quite unjustified and undue burden on export oriented industries.
Hence, there is need for immediate withdrawal of this anti-business practice. It suggested that the shipping lines/agents and freight forwarders are in practice of imposing different charges in various headers, unprovoked claims are becoming very difficult to bear and as an outcome the business community suffers in terms of high cost of doing business.
All these companies should restrain themselves from doing this injustice and uniformity in shipping charges and head of accounts should be maintained, which may be monitored through a ‘Shipping Committee’ to be constituted instead of Shipping Council, which has just no activity.
There are different authorities for taking different decision, it is suggested that one Ministry should regulate entire affaires of shipping lines/agents and freight forwarders. Since commercial importers are the major stakeholder of import sector having head office in Karachi, it is urged to take association on board regarding the subject matter and association’s participation may be declared mandatory for the said committee.
Finance Act 2013 inserted an amendment in section 164(2) whereby certificate of tax deduction or collection from the withholding agent is not enough as an evidence to claim a tax credit under income tax return. Furthermore, along with this certificate of deduction or collection, taxpayer must obtain income tax challan or computerized payment slip (CPR) from the withholding agent to obtain the tax credit under income tax return. The CPR is not practically possible in several cases. Proposed amendment is to avoid the practical difficulty and legal hassle.
Through the Finance Act, 2013 section 236G was introduced to the Income Tax Ordinance, 2001 whereby every manufacturer or commercial importer of electronics, sugar, cement, iron and steel products, fertilizer, motorcycles, pesticides, cigarettes, glass, textile, beverages, paint or foam are required to collect tax at the rate of 0.1 per cent of the gross value of sales to distributors, dealers and wholesalers.
This provision will prove to be a double edged sword against the distributors who are currently suffering huge withholding tax on account of section 153 of the Income Tax Ordinance, 2001. Advance tax under this section should be collected from those distributors, dealers and wholesalers who are not registered under the Sales Tax Act, 1990. At present under Section 60B of the Income Tax Ordinance, the WWF is applicable to all the taxpayers. WWF is paid by the taxpayers who fall under the Final Tax Regime (FTR). This is an extra burden on the taxpayer because they are not able to deduct “allowable deductions” against their taxable profits.
The reason behind this is that tax deducted at source is the final discharge of tax liability and taxpayer cannot able to take the benefit of WWF liability. It practically means that even a loss making unit has to pay Workers Welfare Fund. This matter is in court of law and still pending in the Supreme Court of Pakistan. It is suggested that an amendment be made in the Ordinance that WWF liability is not applicable to the taxpayer whose liability falls under the final tax regime (FTR) and it should be applicable on industrial units not commercial importers or traders. It suggested that an assessment order which is passed by a tax authority may be re-amended many times within the prescribed time limit by the commissioner under section 122 (4)&(5A).
Where an appeal is filed or decided against the Commissioner, he may amend an assessment order on any point which was not subject matter of appeal under Section 122 (5AA). Provision of law is harsh as the tax assessments already made could be re-opened/re-assessed as many times by tax authorities for the purpose of chasing their tax collection targets. Section 122(5A) of the Income Tax Ordinance has been amended through Finance Act 2012 whereby the Commissioner Inland Revenue has been given the powers for making such enquires as he deems fit. Furthermore, Section 176 provides wide powers to commissioners to require any person whether or not liable to tax, to furnish to the Commissioner any information, relevant to any tax leviable under this Ordinance as specified in the notice. An assessment order once amended should not be re-amended many times. The power delegated to commissioner is harsh and should be deleted. Further, wide powers provided to Commissioner who feels free to issue notices to genuine taxpayers to produce large scope of information, (not otherwise required under Ordinance) within very short span of time just to harass taxpayers. There must be some restrictions on the scope and number of notices that can be issued to a taxpayer in a given tax year e.g. normally Audit U/S 177 is carried out only once for a tax year. The new law has been promulgated through Finance Act 2013, which requires payment of income support levy @ 0.5 percent of net moveable assets exceeding Rs 1 million. It is inequitable because it has been restricted only to individuals who are already within the tax net, thus defeating the purpose of extending the taxpayers’ base. It taxes wealth that has already been taxed. Further, this levy will discourage savings and capital formation and divert funds to the unproductive real estate sector. The Section 165A requires online access to banks’ central database and reporting of deposits into customer accounts, details of credit card spending and withdrawals from customer accounts. This will discourage documentation and encourage cash economy. The purpose of the provisions in Banking and other laws is to maintain confidence in the banking system and therefore unnecessary disclosures of customer information should be avoided. Further, possible decline in the acceptance of credit cards as a whole, increase in dollarisation, avoidance of banking channels and flight of capital out of Pakistan. These provisions have been inserted through Finance Act 2013, in absurd manner [without approval of both houses, The Parliament and The Senate in contravention with procedure provided in the Constitution of Pakistan. Therefore, these provisions should be deleted. To facilitate the very purpose, Banks are already providing customer information where a specific notice is received from the tax authorities under Section 176, it proposed. The association said that it has been seen that on number of occasion registered person’s funds are stuck with the sales tax department in the form of sales tax refund and at the same time he is required to pay income tax at the time of assessment of his income tax liability. Resultantly, the taxpayer has to bear the burden of making payment of income tax liability whereas his own
money is lying idle with the sales tax department. A simple and unambiguous procedure may be notified for adjustment of sales tax refund with the income tax liabilities to alleviate the unnecessary cash flow problems faced by the registered persons. On supplies made to unregistered person further sales tax is chargeable @1% which is not allowable to adjust against taxpayer input tax liability. Further, it also requires to withhold 1% sales tax (not applicable to commercial importer) at the time of payment made to unregistered person. It is suggested to provide adjustment of 1 percent extra sales tax against input sales tax and requirement to withhold 1% sales tax and deposit to Government Treasury to be deleted. Through Finance Act, 2013, the definition of provincial sales tax U/S 2(22) was amended vide which FBR will declare provincial services for the purposes of input tax through a notification, however, no such notification has been made to date, while adjustment of such sales tax at web portal has also been disallowed from July 2013. From August 2013 FBR made an amendment in online sales tax return format not allowing the adjustment of input tax on services in Provinces. The taxpayers are not being allowed adjustment of sales tax paid on services resulting in increase in cost of doing business and has also lead to unnecessary litigations. FBR should authorise PRAL to establish data linkage between FBR and provincial sales tax authority databases, enabling taxpayers to adjust input sales tax both on goods and services. This is in the spirit of mutual cooperation of the Federal and Provincial administrations for the convenience of the service providers and recipient of services. FBR should immediately issue notification for provincial sales tax for the purpose of input tax. The PCDMA proposed that the sales tax rate should be reduced to 12.5 percent to reduce already soaring cost of doing business in Pakistan. Tax rate should be reduced to 12.5 percent in the next coming budget and should further gradually reduced to 10 percent. The reduced rate will encourage the unregistered taxpayers to get them registered so that they can avail the benefits of input adjustment which is currently not available to unregistered persons. This should be 5 percent for all without discrimination of industries & commercial Importers and others, further all refunds must be eliminated for everyone or sectors across the board As per Section 8A of the Sales Tax Act, 1990 a registered person shall be made liable if the sales tax is not paid by the seller of the goods from whom the registered person has purchased goods. This section is also inequitable where a person is penalised for an offence he has not committed. After verifying the seller status at the time of purchase it is not the purchaser responsibility to monitor its future acts & offences. It is strongly suggested that the section should be deleted as in any case registered person (purchaser) cannot be made liable if seller fails to pay sales tax.
m�lt@�m X)m ng: normal; line-height: normal; orphans: auto; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px;”>money is lying idle with the sales tax department. A simple and unambiguous procedure may be notified for adjustment of sales tax refund with the income tax liabilities to alleviate the unnecessary cash flow problems faced by the registered persons. On supplies made to unregistered person further sales tax is chargeable @1% which is not allowable to adjust against taxpayer input tax liability. Further, it also requires to withhold 1% sales tax (not applicable to commercial importer) at the time of payment made to unregistered person. It is suggested to provide adjustment of 1 percent extra sales tax against input sales tax and requirement to withhold 1% sales tax and deposit to Government Treasury to be deleted. Through Finance Act, 2013, the definition of provincial sales tax U/S 2(22) was amended vide which FBR will declare provincial services for the purposes of input tax through a notification, however, no such notification has been made to date, while adjustment of such sales tax at web portal has also been disallowed from July 2013. From August 2013 FBR made an amendment in online sales tax return format not allowing the adjustment of input tax on services in Provinces. The taxpayers are not being allowed adjustment of sales tax paid on services resulting in increase in cost of doing business and has also lead to unnecessary litigations. FBR should authorise PRAL to establish data linkage between FBR and provincial sales tax authority databases, enabling taxpayers to adjust input sales tax both on goods and services. This is in the spirit of mutual cooperation of the Federal and Provincial administrations for the convenience of the service providers and recipient of services. FBR should immediately issue notification for provincial sales tax for the purpose of input tax. The PCDMA proposed that the sales tax rate should be reduced to 12.5 percent to reduce already soaring cost of doing business in Pakistan. Tax rate should be reduced to 12.5 percent in the next coming budget and should further gradually reduced to 10 percent. The reduced rate will encourage the unregistered taxpayers to get them registered so that they can avail the benefits of input adjustment which is currently not available to unregistered persons. This should be 5 percent for all without discrimination of industries & commercial Importers and others, further all refunds must be eliminated for everyone or sectors across the board As per Section 8A of the Sales Tax Act, 1990 a registered person shall be made liable if the sales tax is not paid by the seller of the goods from whom the registered person has purchased goods. This section is also inequitable where a person is penalised for an offence he has not committed. After verifying the seller status at the time of purchase it is not the purchaser responsibility to monitor its future acts & offences. It is strongly suggested that the section should be deleted as in any case registered person (purchaser) cannot be made liable if seller fails to pay sales tax.