ISLAMABAD: Federal Board of Revenue (FBR) may introduce changes in mandatory CNIC (Computerized National Identity Card) condition in the upcoming budget 2020/2021 in to facilitate registered taxpayers.
At present unregistered purchasers, excluding end-consumers, of above Rs50,000 are required to provide a copy of CNIC in order bring the sales into the documented economy.
The business community raised concern over the low purchase limit. The sources said that the FBR is considering to enhance the limit to Rs200,000.
In the last budget the government made it mandatory for registered persons to obtain CNIC of unregistered person at the time of sale above Rs50,000.
The amendment was brought to Section 8 and Section 23 of Sales Tax Act, 1990 under which in case of invoices issued without CNIC or National Tax Number (NTN) of buyer, related input tax was disallowed on prorate basis except in cases where supplies are made to end consumers not exceeding Rs. 50,000.
Condition of providing CNIC number of buyers on invoices, to claim input tax adjustment, have benefitted unorganized sector more than the already documented sector.
Due to the condition, buyers prefer to purchase from unregistered suppliers as they do not ask for CNIC numbers. On the other hand, registered persons and corporate entities, who were already facing resistance from buyers for charging sales tax and further tax, have been facing severe deterrence from buyers who are resisting provision of CNIC numbers.
Consequently, the compliant taxpayers are forced to either provide CNICs of their employees, relatives, truck drivers, etc. or to shut down their businesses as they are at a competitive disadvantage with the unorganized sector.
This condition has also encouraged cash economy as taxpayers have been withdrawing their money from banks and are dealing in cash only.
According to a report despite massive changes in sales tax laws in Finance Act 2019 to force and mandate sales tax registration and filing of sales tax returns, there is only about 7 percent annual increase in sales tax returns filed from 146,922 return filers in June 2019 to 158,206 in December 2019.
Out of 11,284 additional returns, only 2,769.are payment returns while rest is Nil and Null returns.
The condition of CNIC on unregistered sales has been introduced in the Finance Act 2019 but it was not implemented in July 2019. While, from August 2019 to January 2020, the condition was relaxed through agreement between shopkeepers and FBR.
The FBR sources said that business community had also recommended changes in provisions related to CNIC conditions.
Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in its proposals for budget 2020/2021 suggested to enhance the purchase limit to Rs100,000.
It also pointed out that CNIC condition has been causing cashflow issues since its implementation which will further intensify during the current pandemic of Covid-19, especially for registered taxpayers.
Therefore, the FPCCI sought a general amnesty through legislation in the next budget regarding CNIC condition for the whole tax year 2020 starting from August 2019 to June 2020.