Parliament-arians, business community, tax bar associations and other stakeholders would only have two months, ie August-September to comment on the reformed General Sales Tax (GST) in case the Federal Board of Revenue (FBR) notify amendments in the Sales Tax Act, 1990 and Sales Tax Special Procedures Rules by the end of current month (July).
Tax experts told Business Recorder here on Sunday that the FBR has to adopt a fast track method to timely notify amendments in the Sales Tax Act and withdraw notifications dealing with the zero-rating sectors by end of July. This would give some time to the corporate sector, business associations and the political parties to obtain clarifications on reforms being introduced in the sales tax. The reformed GST would be applicable in October 2010 and its new features need to be discussed among the stakeholders. The timeframe of withdrawal of exemptions and zero-rating must be announced to avoid resistance as happened in case of Federal Value Added Tax Act 2010.
The FBR should avoid situation, which resulted in strong opposition of the Federal Value Added Tax Act 2010 by the business and trade. If reforms in the existing sales tax regime are being notified by the end of July, only two months period would be available to chambers, federations, tax bar associations, chartered accountants and trade bodies to sought clarifications on GST rate, registration threshold and legal/procedural changes to be made in the Sales Tax Act. Even new VAT law would not be introduced; key changes in the Sales Tax Act would be debated by stakeholders. Any further delay in notifying the reformed GST would only give one-month period of August to business and trade for discussion before implementation of the amended law from October 2010.
Apparently, the FBR was unable to timely remove the apprehensions about the inflationary impact of the VAT despite the fact that the tax authorities were ready to surrender their powers to grant exemptions to the Parliament. Due to limited time, the people considered VAT as a new tax with extraordinary inflationary impact. If reforms in the GST could not be timely notified, the FBR will face same kind of resistance which was witnessed during introduction of the Federal VAT Act 2010. The stakeholders must be given at least August-September period to thoroughly analyse the amended law to avoid similar kind of complications relating to the Federal VAT Act.
When contacted, a senior tax official said that the reforms in the sales tax only require 1-2 hours work for the FBR. The rescinding of statutory regulatory orders would not require ample time. Similarly, distortions in the Sales Tax Act could be removed on papers in one day. The only issue is to develop consensus among the provinces on collection of sales tax on services.
The FBR has the first option to incorporate all new concepts of VAT in the existing Sales Tax Act. This requires approval from the Parliament. The second option is to remove distortions through SROs without going to the Parliament. In this case, the FBR can take away exemptions without tabling amended Sales Tax Bills in the Parliament. It would result in continuation of the existing sales tax law by rescinding all SROs, which created hurdles in true implementation of the VAT.
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