The business community and industrialists have termed the government decision to impose 'reformed general sales tax' (RGST) and 10 percent flood surcharge as 'last straw on camel's back', saying that it would further aggravate the miseries of the industrial sector which is already facing problems.
The 'RGST' and flood surcharge would decrease the purchasing power of common man and would decline industrial activity, which would deprive the government of revenue. "Even if the rate is reduced from 17 to 15 percent, imposition of RGST would withdraw all exemptions having huge inflationary impact on consumers," they said.
The value-added tax (VAT) has been renamed as RGST by including all ingredients of the VAT. Business and trade are shocked over the government methodology to impose VAT in the name of RGST by withdrawing all kinds of exemptions. The VAT had been proposed to be implemented under the cover of RGST which is unacceptable to the business and trade. The same laws and rules and regulations would be applicable in the RGST as happened in case of the proposed RGST. The VAT has been implemented in its true spirit by renaming it as RGST which would only increase the cost of doing business, they said.
The Government has enhanced the registration threshold from Rs 5 million to Rs 7.5 million under RGST to exempt small and medium retailers from tax. However, the question arises as to how to determine the turnover of the retailer, and it will result in harassment. Due to limited documentation, at present tax department has no electronic system to determine the annual turnover of the unregistered retailers, etc. The registration of new taxpayers under the RGST depends on the available data of turnover and sales to the buyers within the supply chain. In the absence of monitoring mechanism, there is no way to check the actual turnover of the unregistered persons. The discretionary powers of the sales tax officials to determine the annual turnover of a person may also result in harassment.
Until or unless the business community would not study the RGST Bill 2010, it is not possible to comment on the legal aspect of the RGST law. There might be some harsh documentation clauses in the RSGT law which may create serious legal problems as far as documentation is concerned. If there are harsh punishments for non-compliance under the RGST, it would also result in harassment to the business community.
Most of the representatives of the business and trade community were of the opinion that the rate of the RSGT would be recued from higher 17 percent to 15 percent, but this reduction would not reduce their cost of doing business. This is due to the fact that the increased prices of commercial and industrial raw material, electricity and strict documentation under the RGST would have serious negative impact on the business community. The exemptions and zero-rating facility would be withdrawn under the RSGT having direct impact on the manufacturing cost of the local units. At the same time, the input and raw materials consumed in the finished products would also be increased due to withdrawal of exemptions and high cost of utilities.
Business community also expressed reservations on electronic refund, saying that the issue of sales tax refund is pending for many year and business community is moving from pillar to post to get these refunds, said Sheikh Shabir, a former president of Rawalpindi Chamber of Commerce and Industry (RCCI), while talking to this scribe.
He said that before imposition of RGST they have to make complete documentation to move to electronic tax system, but it will take years. The new electronic refund system is in test phase and it is yet not clear whether the tax authorities would be able to countrywide replicate the new system of the withdrawal of zero rating facility.
Shabir termed the RGST a mockery of words, saying that the government is making fun of common people. The exemption on food items is for non-patent and open food items not for packed products, which will put a lot of pressure on common man and deprive his children for milk and other essentials", he said.
He urged to impose tax on agriculture income, which will bring huge money to the kitty. "The feudals and government functionaries are not allowing imposition of agri income tax and are further overburdening the common people", he said. He said that imposition of 15 percent RGST will have complication as there is no documentation. "They have formed no mechanism or documentation. If a shopkeeper charges the RGST from a customer and does not pay to government, how can government recover it ?" he asked.
"They did it in haste under pressure and did nothing positive for making it viable. They should have to consult the stake-holder and after consultation it would have been imposed", he maintained. Business Community is ready to accept the Electronic Cash Register (ECR) for documentation purposes, but is it possible for Federal Board of Revenue to distribute millions of ECRs across the country, said Zahid Muqbool former President Islamabad Chamber of Commerce and Industry (ICCI) while talking to Business Recorder.
"Has FBR the capacity to check these ECRs daily", he asked, adding "No they don't have capacity and it will result in rise in corruption". "This is just a change of name as in place of VAT they have imposed RGST of 15 per cent and have ended the exemption, which will cause a new boom of inflation", Zahid Muqbool said.
He said that they are themselves not clear as how to administer it. "They have set a slab of Rs 7.5 million and how they check as the turnover is over Rs 7.5 million or not", he added. The RGST is a tax of developed countries where people are literate and know about taxation, he said, adding that business community had proposed to first launch a large scale awareness campaign for at leas two years then impose the RGST. He rejected the turnover tax of one percent saying that people who are working on one or two percent have to pay from their own pockets.
Ali Raza Saeed Shah, President Rawalpindi Chamber of Commerce and Industry (RCCI) said that the industrial sector is facing pressure due to increasing cost of business and this decision will cause hell not only for industrial sector but for common people.
"We had asked the government to expand the tax net but they are over-burdening the existing tax payer", Ali Raza said, adding that the government should have adopt the policy to bring more people in tax net, but they failed.
"We will not accept this as it is unjust and tantamount to destroy the country's economy", he said, adding that the business community will devise a strategy to stop this move of the government. Flood surcharge will have a burning effect on common man while industrialists will also face the consequences of this tax, Ali Raza said, adding that cost of business will increase which will keep the commodities out of reach of the common people.
Comments
Comments are closed.