Zero-rated import items be exempted from record keeping: KCCI

The Karachi Chamber of Commerce and Industry (KCCI) has suggested that all imports and supplies made under zero rated sales tax regime be exempted from maintenance of record.
KCCI General Sales Tax and Refund Sub Committee in its proposal noted that imports and suppliers made under zero rated sales tax regimes are required to maintain record due to which they are subjected to audit although no loss of revenue is involved.
The sub committee submitted that early clearance of refund backlog and pending issues will enable both tax payers and Central Board of Revenue (CBR) to focus on their major functions, build trust and enhance exports. Refund will help in promoting business activities and in turn will generate revenue. The committee proposed that all manufacturers-cum exporters be issued exemption certificate by the Sales Tax Collectorate for not charging sales tax on raw materials at import stage.
The sub committee pointed out that refund claimants are required to furnish supported document within 60 days of fining sales tax return. The time limit of 60 days is not enough to comply with the requirement of refund documents considering hefty involvement of papers work and as such a large number of bonafide claims are not processed for refund.
This 60 days condition also contradicts section 7 and section 66 of Sales Tax Act wherein input tax and refund respectively is allowed to be claimed within one year.
The sub committee pointed out that although CBR vide its letter dated November 25,2006 has allowed one time extension till December 31,2006, for submission of supporting documents of refunds clams filed prior to July 1,2006. However, claims for the month of June 6 filed up-to July 15,2006 and subsequent clams filed after July 1,2006 are not covered in this extension.
The sub committee further proposed removal of 60 days time limit for claiming genuine refund under rule 28, chapter-v of SRO 666 (1)/2006. Another issue, the sub committee pointed out, was input adjustment. The sub committee noted that sales tax department has classified certain sales tax registered persons as suspicious suppliers and disallows input adjustment in case purchase is made from suspicious suppliers.
This penalised a registered buyer who claim input adjustment on legitimate purchases with sales tax payment, but both registered buyers and seller are made to suffer for failure of the sales tax department to record tax payment in their data base.
In this regard the sub-committee proposed that input claim should be allowed to all registered persons who purchased goods on valid sales tax invoices showing tax payment even if data base does not show input. The sub committee further suggested that the sales tax department may have reconciliation with registered seller subsequently before blocking the seller's registration number The sub committee demanded that criteria of "suspicious" be defined.