Sales tax concession: Revenue Board rectifies communication glitch

To discourage deliberate delay in payment of sales tax, the Central Board of Revenue (CBR) has taken precautionary measures to check those people who are availing of immunity from additional tax and penalties under the sales tax concession package carelessly drafted by the audit authorities.
Sources told Business Recorder here on Wednesday that the CBR Member Audit issued a letter to the collectors of sales tax on November 6, 2002 to give concession of additional sales tax and penalties to those people who pay principal amount of sales tax, including 25 percent additional tax.
However, the Member Audit forgot to mention the cut-off date of the instructions issued over a year back.
This encouraged the unscrupulous people to deliberately delay payment of taxes as long as possible and upon, detection, they opt to pay principal amount and 25 percent additional tax.
In this way, certain people due to loopholes in the instructions misused the letter. However, timely intervention of the tax authorities rectified the errors for proper compliance by the registered units.
The concession offered by the Member Audit amounts to additional tax at the rate of 3 percent per annum which is very low as compared to the mark-up rates of financial institutions.
Thus, there is an incentive to utilise (unpaid) government revenue as working capital in the business.
The sources said that it was also being contested that in the Budget 2003, Sub-section (5) was added in Section 25 of the Sales Tax Act, 1990, which gave a graduated rate of concession for payment of outstanding dues. But the Member Audit letter was in conflict with the statutory provisions of the Sales Tax Act, 1990.
On the other hand, there was a viewpoint that registered people should be encouraged to deposit sales tax liabilities under this letter instead of going into prolonged litigation. At the same time, judicial fora, including appellate tribunals had already waived off additional tax and penalties in a number of cases.
The sources said that as soon as these ambiguities were brought to the notice of the Sales Tax Department, the authorities promptly acted and announced new decisions to discourage evaders from availing of the concession.
The Sales Tax Department thoroughly analysed the Member Audit letter in consultation with the collectors for proper enforcement of law. For this purpose, a countrywide exercise was carried out to ascertain the implementation status of this letter.
The following two decisions were taken by the authorities:
The CBR has directed all the collectors of the sales tax that concession should not be allowed to people who deliberately delayed payment to avail of the benefit of additional sales tax and penalties.