Chairman, All Pakistan Consumer and Pharmaceutical Products Distributors Association (APCPPDA), Tahir Khaliq has urged the chairman Federal Board of Revenue (FBR) to withdraw changes made in the definition of Turn Over Tax (TOT) in the budget document for the year 2011-12.
In a letter to the chairman, he said that the definition of turnover for the levy of Turn Over Tax (TOT) has been changed. The previous definition was: "The gross receipts, exclusive of Sales Tax and Federal Excise duty or any trade discounts shown on invoices, or bills, derived from the sale of goods, and also excluding any amount taken as deemed income and is assessed as final discharge of the tax liability for which tax is already paid or payable."
The new definition of turnover, notified on June 3, 2011, is: "The gross sales or gross receipts, inclusive of Sales Tax and Federal Excise or any trade discounts shown on invoices, or bills, derived from the sale of goods." He said that distributors of cigarettes are a 100 percent documented sector and all their purchases and sales are documented and routed through the banking channel and work on a margin of approximately 1.5 percent. They have to incur huge expenses on the cost of distribution which include motorised, transportation, financial expenses, I.T. expenses, heavy security expenses, very high fuel and energy costs, etc, etc.
It may be appreciated that cigarette distributors were agitating that the TOT on them should be reduced to 0.1 percent. In fact, the plea of the distributors is that their turnover is actually the margin that they earn on sales and not the sales that they book on behalf of their manufacturers/ principals because this is their turnover and TOT should be paid by them on this since all sales of the manufacturers/principals are routed through distributors, the TOT is once taken from the manufacturer/principal while on the sales of the same goods, the distributors are asked to pay TOT again.
Another point to be noted is that distributors of cigarettes and other products are collecting excise duty and sales tax on behalf of the Government and take immense risks in doing so and provide services for colleting the same but are being penalised for doing so. This is not the turnover of the distributor but they are being asked to pay TOT on this collection of excise duty & sales tax that they make for their principal and the Government.
In any case the distributor's margin is not such that he can pay this amount from his margin. Hence we earnestly request the Government to either restore the previous definition of Turnover ie Turnover should mean the "Gross receipts excluding of Sales Tax and Federal Excise duty or any trade discounts."
OR
Treat the gross margin of distributors as their turnover and TOT be collected from them on their margin which is actually their turnover. In another letter to the chairman, he pointed out that until Finance Bill 2010 minimum Income Tax on limited companies being distributors of cigarettes was 0.1 percent of turnover. This was a negotiated rate with FBR at different levels after a series of discussions explaining that cigarette distributors have a gross margin of almost 1.5 percent from which they have to meet their heavy expenses of distribution including high fuel and power costs, security expenses, cost of man power, expenses on information technology, financial costs, etc.
It may be noted that cigarette distributors are all 100 percent documented and all their purchases are through banking channels and their accounts are audited by their respective income tax circles from time to time.
The 0.1 percent on turnover was arrived by reducing the tax payable on cigarettes distributors by 80 percent, whereas the minimum Income Tax rate was 0.5 percent. Now the turnover tax has been raised to 1 percent the effective Turnover Tax for cigarette distributors has become 0.2 percent and has been made applicable on companies, AOP's and individuals. He urged to make suitable amendments in the law to make turnover tax for cigarette distributors to 0.1 percent.
Comments
Comments are closed.