Supplies to unregistered persons: FBR ready to reduce/abolish 3pc further sales tax

The Federal Board of Revenue (FBR) is ready to reduce or abolish three percent further sales tax on supplies made to unregistered persons in case the businessmen are willing to get themselves registered with the sales tax department.

During the 2nd meeting of the sub-committee of the Standing Committee on Finance held here on Thursday at the Parliament House, tax authorities informed that the three percent further sales tax was imposed to encourage new registrations and voluntary compliance.

To increase sales tax registrations, the government had imposed three percent further sales tax on the supplies made to the un-registered persons.

The FBR has received Rs40 billion on account of further sales tax deposited by the un-registered persons.

The un-registered persons are paying additional three percent further sales tax along with the 17 percent standard sales tax.

If people are ready to come for sales tax registration, the government can reduce or abolish the further sales tax, the tax authorities added.

Responding to this, the representatives of the business and trade contested that the FBR itself provided a window of three percent further sales tax from un-registered persons, discouraging registration and documentation.

Dr Ramesh Kumar Vankwani MNA and convener of the sub-committee of the Standing Committee on Finance disclosed that it had come to his notice that the government may launch another amnesty scheme for businessmen and individuals who had not availed the last two amnesty schemes.

The businessmen, who have not availed the past schemes, are requesting the government for another amnesty scheme.

Later, Dr Ramesh Kumar informed media that the new amnesty scheme should be launched for small and big businessmen. "Such scheme is need of the hour", he said.

Businessmen are well aware that their data is available with the FBR and they want to do businesses without any harassment. They want to legalize and whiten their foreign and local assets. If such an amnesty scheme is launched, it would be a successful scheme, he said.

When asked that how the government can launch an amnesty scheme under the IMF program, the convener of the sub-committee of the Standing Committee on Finance responded that the program is reviewed after every three months and we cannot rule out possibility of such scheme.

However, the FBR acting chairperson and the FBR officials did not respond to the said comments of Dr Ramesh Kumar on the new amnesty scheme.

The chairman of the sub-committee also informed that the acting FBR chairman would continue to work as permanent chairman of the FBR.

During the committee proceedings, Dr Kumar expressed displeasure over the non-provision of names of big businessmen and industrialists, who had been paid sales tax refunds to the tune of billions of rupees.

"We have come to know that refunds have been paid to only big industrialists," he remarked.

Dr Kumar directed the FBR to ensure bringing names and list of industrialists and big businessmen who had been paid refunds at the next meeting.

The FBR officials briefed the committee that the FBR had paid refunds to the tune of Rs130 billion during the current fiscal year.

The FBR has paid much higher amount of refunds during the current fiscal year as compared to the last fiscal.

Within the category of manufacturers, the FBR has cleared refunds of around Rs3.9 billion during 2019-2020.

Dr Kumar directed the FBR to submit complete records of payment of refunds made during last seven months of 2019-2020.

The sub-committee of the Standing Committee on Finance further directed the FBR to correct the FASTER system for timely payment of refunds to the exporters and also resolve issue pertaining to the annex-H (stock statement) of the monthly sales tax return.

Small exporters are unable to obtain refunds under the defective FASTER system during the last eight months of 2019-20. The small businessmen are unable to conduct their businesses due to the problems in the FASTER system, committee members said.

The committee also took notice of the classification disputes between the FBR and the importers on the import of petroleum chemicals and other items.

Even customs valuation rulings have been challenged in courts.

The classification disputes should be resolved by the FBR.

Senior FBR officials assured the committee that the classification disputes would be resolved following applicability of the trade facilitation law of the World Trade Organization.

Regarding petroleum chemicals, different customs tariff rates are applicable and the matter was also taken up by the Federal Tax Ombudsman in 2018.

The FBR is trying to do accurate assessment of duties and taxes on the import of petrochemicals items in the light of new tariff classifications, FBR officials said.

The representatives of the business and trade requested the committee to defer the condition of the CNIC of the un-registered buyers.

The condition of the CNIC should be applicable only from the start of the chain at the stage of manufacturers to wholesalers and dealers and not the small traders.

The small traders should be exempted from the condition of the CNIC, they said.

Dr Kumar questioned that why the traders and businessmen are again raising the issue of the CNIC after reaching an agreement with the government. The FBR had traders had reached an agreement with the consensus of the traders community. Why traders are now not complying with the agreement already agreed between the two sides. Why traders have done agreement if they are not ready to implement the same?, he questioned.

Tax authorities of the FBR shared the details of the agreement before the committee.

Rana Muhammad Sikandar Azam, president Faisalabad Chamber of Commerce and Industry (FPCCI) informed the committee that business transactions and activities had almost came to a halt after introduction of the CNIC condition of the un-registered buyers.

On the other hand, massive revenue leakage is taking place in the country. For example, the tax potential of electronics market is around Rs200 billion, but the actual tax coming around Rs50 billion and there is a revenue leakage of Rs150 billion in this sector.