KARACHI: President Karachi Chamber of Commerce & Industry (KCCI) Agha Shahab Ahmed Khan has stressed that the rate of GST should be reduced by 3 percent to 14 percent from current 17 percent which will have a very positive impact on business sentiment and it would trigger demand in domestic market, besides providing much needed relief to trade, industry and consumers.
Highlighting Budget Anomalies identified by KCCI which have been submitted to the Anomalies Committee (Business & Technical), President KCCI advised to withdraw 3 percent Further Tax on Sales to Unregistered persons to facilitate transactions.
Agha Shahab said that it is unjust to force suppliers to provide CNIC of unregistered person and pay 3 percent further tax at the same time. After getting unchecked access to the data base of citizens, Federal Board of Revenue (FBR) should be made responsible to broaden the tax base and register all entities in sales tax regime so that suppliers are not forced to sell to unregistered persons.
He further pointed out that after acquiring powers by FBR to access data of citizens from institutions and organisations such as FIA, Banks, NADRA and airlines etc., a major security risk has been created for citizens/taxpayers.
Hence, adequate safeguards may be inserted in the law and exemplary penalties be fixed in the provisions in case if the data is compromised by an official while access to data should be limited to officers in higher grades only, he proposed.
President KCCI said that the phenomenal increase in rate of FED from 13 percent to 25 percent on caffeinated energy drinks is unjust and discriminatory. Caffeinated energy drink is produced by only one of the two major producers of beverages in Pakistan who contributes a major portion of over Rs100 billion in tax revenue.
The unjust increase is tantamount to targeting one producer and is discriminatory. Any tax should be imposed on the industry, not individual producers, therefore, the rate of FED on caffeinated energy drinks be restored to 13 percent.
Referring to Clause 12 of Finance Bill U/S 45B in which a new sub-section (5) has been added, which disallows production of any new documentary material or evidence before Commissioner (Appeals) which earlier has not been produced by the appellant before the officer of Inland Revenue. He stressed that the clause may be removed as it is contrary to law of natural justice and ultra-vires of the constitution.
A taxpayer should not be denied the right to produce evidence or documentary material at any stage while contesting his case.
KCCI had proposed to restore tax credit at 10 percent on purchase of new machinery for BMR, to encourage investment in industry and spur growth, which was allowed prior to 2019. However, the proposals have not been included in Finance Bill 2020-21 Agha Shahab urged the policymakers to restore rate of tax credit to at least 10 percent and this credit should be applicable up to FY2025 to enhance the investment in production capacity of industries.
Expressing concerns over re-imposition of 3 percent Value Addition Sales Tax (VAT) on Commercial Import of Raw Materials, President KCCI said that the VAT cannot be imposed where no value is added.
Therefore, the anomaly may be rectified and the clause re-imposing 3 percent Value Addition Sales Tax on commercial importers of raw materials in the finance bill should be deleted.
He further mentioned that inclusion of flavoured milk in 8th Schedule since July 2015 has resulted in sharp increase in cost and retail price of flavoured milk which has been a healthy diet supplement and popular among the masses. Flavoured milk category is in initial development stage within dairy industry, but its growth potential has been capped by imposition of sales tax and further tax at high rate and market size has reduced. Ironically, Milk and Fat Filled Milk (Liquid Tea Whitener) and components remain in Zero Rate Regime.
Flavoured milk with natural ingredients is a healthy substitute for other drinks, particularly for children and has a tremendous market potential for growth. It also complements to import substitution and saving of foreign exchange.
Therefore, the locally manufactured flavoured milk and its components/ sub-components may be excluded from 8th Schedule and included in Zero Rated regime by insertion in 5th Schedule, and status prior to Finance Act 2015 may be restored.
He believed that disallowing of input tax U/S.8(m) in the Finance Bill, has unfairly penalised registered manufactures/suppliers specially those engaged in supply of third schedule products which are subject to sales tax on retail price whereas it is the responsibility of FBR and its field officers to identify unregistered persons and bring into tax-net. Clause (m) of Section 8 should therefore be deleted to allow registered suppliers to continue business activity freely rather than going into unnecessary litigation that in result would generate revenue for the exchequer.
By amendment in Finance Act'2019 importers of Automobile and Motorcycle spare parts are required to print MRP (Maximum Retail Price) on the packages and pay Sales Tax and Addnl Sales Tax on Customs Value. Agha Shahab emphasised that it is not possible to ascertain the retail price of Automobile and Motorcycle parts before arrival of consignments to Pakistan due to fluctuation in exchange rates and forecast the prices in domestic market. He suggested that Automobile/ Motorcycle spare parts may be taken out of Third Schedule and included in normal import regime for assessment of duties and taxes, subject to standard valuation procedures.
Agha Shahab further recommended to rescind SRO.351, and restoration of PMC and PVC in the list of exclusions in SRO.190 (I) 2002. SRO.351 is ambiguous as to the actual products intended to be zero rate for export. PMC materials such as Polypropylene and Polyethylene are not produced in Pakistan and the country is a net importer of these materials, hence there is no justification in allowing zero rates export to Afghanistan. It seems the concession has been obtained by certain vested interests through misleading representations to Ministry of Commerce.
He also advised to take out MDF Board from the items allowed under FTA due to material damage to domestic industry which has adequate capacity to fulfil domestic requirements. Concessions on import under FTAs and various SROs be withdrawn and Regulatory Duty be imposed at 16 percent on import of MDF board which is produced in Pakistan.
He pointed out that the single local manufacturer of Aluminium Beverage Cans already enjoys a high degree of protection through the increase in Custom Duty (20 percent) on Empty Beverage Cans, additional Duty (7 percent), Regulatory Duty (5 percent) and Valuation ruling on higher side. Further, such manufacturer is also exempted from Income Tax and other taxes. This wide disparity has created a monopoly rendering the import of Aluminium Beverage Cans unviable for the bottlers, who are left with no option but to purchase it from local Beverage Can manufacturer whereas reliability and quality of which is yet to be tested in long run.
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