LAHORE: Repeated amendments to the Sales Tax law has opened a window of opportunity for tax authorities to mix them up to delay refunds and adjustment of input tax with the output tax, said sources.
Especially, the supplies of cement sector are being questioned by the relevant authorities in the backdrop of amendments made to the Sales Tax Act, 1990, under the Finance Acts of 1997, 1998, 2003 and 2008 respectively. Most of the transactions before the cut-off dates have become controversial so far refund and adjustment claims of the sector are concerned, said the sources.
The Sales Tax Act introduces indirect tax to be levied, charged and collected on imported goods or on taxable supplies of goods, and the same is collected by the supplier on behalf of the government, while the incidence of tax is finally borne by the consumer if the imported goods or of the taxable supplies of the goods. The foundational parameters of the sales tax are that the quantum of the tax is based on the value of the goods imported into Pakistan or the taxable supplies made in Pakistan by a registered person. Also, the incidence of the tax is triggered or made chargeable when the goods are imported into Pakistan or when the registered persons make taxable supplies in the course of furtherance of any taxable activity carried out by him. The liability to pay tax is on the person importing the goods in respect of the imported goods, or on the persons making the supplies in respect of taxable supplies made in Pakistan.
So far as adjustment of the input tax is concerned, it is due at the time of payment of output tax. The legislature has facilitated the supplier to adjust the input tax from the output tax at the time of making supply of the value-added goods. Thus the input tax paid by one supplier on receiving the goods would be the output tax of the other who is supplying the said goods. The supplier on receiving the price of the goods supplied would after deducting the already paid input tax from the output tax, deposit the balance in treasury. This process would continue at each successive stage of the supply chain until the final goods is purchased by the final consumer, who would be finally burdened with the entire incidence of sales tax.
However, the tax authorities are found withholding refund amounts and not letting the tax adjustment under the garb of amendments made to the law from time to time leading to expensive litigation as well as wastage of time of taxpayer department and the adjudicating forums has become norm of the day. The sources said the matters go up to the level of apex court and finally disposed of in favour of taxpayers but tax authorities repeat the same exercise again and again to withhold lawful returns on the one hand and disallow tax adjustments on the other to show their performance to the high-ups.
Copyright Business Recorder, 2023
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