The Federal Board of Revenue (FBR) is examining a proposal to revise sales tax collection mechanism particularly in case of commercial importers dealing in iron & steel re-meltable scrap specifically compressor scrap. Sources told Business Recorder here on Saturday that the FBR is reviewing the tax proposals of the Chief Commissioner, Regional Tax Office (RTO) Gujranwala for revision of sales tax on commercial importers of the said items.
According to the RTO, a series of meetings were held with commercial importers under Patriot Metals Association (PMA Gujranwala). Concerns of the commercial importers of iron & steel re-meltable scrap specifically of compressor scrap - a business solely confined to Gujranwala. Main issues in this regard are as under:
Firstly, sales tax is charged at import stage @ Rs 5,600 per metric ton from both commercial importers as well as industrial undertakings, though the aforesaid sales tax is adjustable in case of industrial undertakings.
Secondly, income tax @ 6 percent and value addition sales tax @ 3 percent is being charged on import of scrap by commercial importers whereas for Steel melting re-rolling industries, rates are 1 percent and zero percent respectively. The difference has rendered them uncompetitive.
Thirdly, no mechanism has been provided in Chapter-XI of the Special Procedures Rules, 2007 (after the amendment made through SRO.1025 (I)/2014 dated 14.11.2014) regarding supplies made by the commercial importers.
Responding to this, Chief Commissioner RTO Gujranwala was opined that the contention of the commercial importers is not correct as 6 percent income tax and 3 percent value addition sales tax are charged at import stage from both industrial undertakings as well as commercial importers of compressor scrap.
It is correct that adjustment advice is not permissible in case of commercial importers. However, if adjustment is allowed against supplies made by commercial importers, it may give rise to flying & fake invoices. Secondly, 2nd proviso to sub-rule 2 of Rule 58H of Chapter-XI of Sales Tax Special Procedure Rules, 2007 provides for adjustment of sales tax paid at import stage against sales tax liability on electricity consumption by the industrial undertakings. Commercial importers do not fall under this category by any means. Hence, irrationality of their demand, Chief Commissioner said.
Third contention, in fact, is the main issue which is creating problem for commercial importer, ie, supplies of imported compressor scrap. There is no mechanism provided in Chapter-XI for this purpose.
According to the RTO, there are two solutions for the said issues:
Chief Commissioner recommended that the commercial importers may be excluded from Chapter-XI of the Special Procedures Rules, 2007 issued vide SRO 1028(I)/2014 dated 14.11.2014. The board may fix such tax on import and supply of "Iron and Steel Re-meltable scrap" in Chapter-X of the Special Procedure Rules, 2007 as it may deem fit, as this chapter deals with all kinds of commercial importers.
Currently commercial importers are paying Rs 5,600 per metric ton plus 3 percent value addition on $ 620 (ITP). While making supplies to un-registered persons, further tax of 1 percent may be paid, after which issue of supplies of the commercial importers will also be resolved without any risk of flying/fake invoices, Chief Commissioner added.
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