THURSDAY JANUARY 20: Lack of documentation: FBR ready for amendment in Sales Tax Act

ISLAMABAD: The Federal Board of Revenue (FBR) is ready to propose amendment in the Sales Tax Act 1990 through Finance Bill 2010, making it compulsory for businessmen to provide National Tax Number (NTN)/computerised national identity card number (CNIC) of the buyers, in case the government directs the FBR to do so.
Responding to a query on proposed 'reformed general sales tax' (RGST) at the Public Accounts Committee (PAC) meeting here on Wednesday, FBR Member Strategic Planning and Statistics Abrar Ahmed Khan said that the RGST had proposed a provision to disclose NTNs/CNICs of the buyers to encourage documentation. The FBR can propose such amendment in the sales tax law through the Finance Bill 2010. The main issue is that the business and trade are not ready to disclose their identity ie CNICs/NTN for documentation purposes.
When Acting Chairman of the PAC, Zahid Hamid, enquired whether the FBR can amend the existing Sales Tax Act, 1990 for introducing such provision, Abrar fully endorsed the viewpoint of the committee. He said that the FBR can introduce such amendment in the Sales Tax Act on the directive of the government. In reply to another query, the FBR Member informed the committee that total arrears of all taxes come to the tune of Rs 84 billion.
In a case of fake addresses of suppliers, Khalid Aziz Banth FBR Member Domestic Operations North explained to the committee that there are cases where fake addresses have been declared by suppliers. The FBR has initiated proceedings against such suppliers, who have declared fake addresses. There are also instances where the suppliers are liable to be registered, but they have not obtained the registration with the sales tax department.
About precautionary measures taken by the FBR, Mahmood Alam, Member Indirect Tax Policy, said that the FBR has introduced "List of Active Taxpayers" to ensure business transactions take place among registered persons. The "List of Active Taxpayers" is an important initiative under reforms to check the non-compliant taxpayers. The manufacturers would be required to make purchases only from those persons, who are covered under the "List of Active Taxpayers". The FBR website has displayed the details of the "List of Active Taxpayers" for compliance by the business and trade.
The Auditor General of Pakistan informed the committee that rule 4 of the Sales Tax Rules, 2006 requires that manufacturers and retailers whose turnover during last twelve months exceeds five million rupees besides, wholesalers, dealers and distributors are liable to be registered.
One hundred thirty four (134) registered persons of the RTO (Audit), Karachi and RTO, Hyderabad and Quetta, made/received supplies of value exceeding rupees five million to each of the one hundred thirty four registered persons of various RTOs during the year 2007-08. The persons who received/made supplies were required to get themselves registered with the respective tax offices as required under law.
Non-fulfilment of the requirement of law by the unregistered persons resulted into non-realisation of sales tax of Rs 340.509 million. The lapse was pointed out to the RTOs and the FBR during September, 2008 to April, 2009. The RTO said that the adjudication proceedings were still in progress. The DAC showed its serious concern for delay in finalising the adjudication proceedings, and directed the RTO to expedite the same under law and inform progress to Audit.