FBR's amended SRO on input tax adjustment awaited: around 50,000 wholesalers reluctant to file ST, FED returns

Around 50,000 wholesalers are reluctant to file their sales tax and federal excise returns on the assumption that the Federal Board of Revenue would allow 97 percent input tax adjustment, instead of the existing 90 percent. Sources told Business Recorder on Wednesday that the wholesalers were included in categories of taxpayers, who are not allowed to adjust input tax in excess of 90 percent of their output tax.
An amendment was proposed to the SRO564 (I)/2012 to allow 97 percent input tax adjustment to wholesalers. Resultantly, most of the wholesalers are not filing their returns and waiting for issuance of the amended SRO. The SRO564(I)/2012 included 'wholesalers' in categories of taxpayers, who are not allowed to adjust input tax in excess of 90 percent of their output tax. This restriction has been imposed on the 'wholesalers' through issuance of the said SRO. Under SRO 564(I)/2012, amendment has been made in SRO 647(I)/2007 dated June 27, 2007 to exclude 'wholesalers' from the said SRO.
When the SRO564(I)/2012 was issued, most of the wholesalers had stopped filing sales tax returns and requested the FBR to change their category/tax status on issuance of SRO 564(I)/2012, which has disallowed input tax in excess of 90 percent of their output tax. Later, the FBR proposed amendment in the SRO564 (I)/2012 to allow 97 percent input tax adjustment to wholesalers. The wholesalers are desperately awaiting the issuance of the relevant notification by the Board.
Sources said that wholesalers had high turnover, but their actual profit margin was very low. Previously, 100 percent adjustment of input tax was allowed. Now, wholesalers are allowed to adjust only 90 percent of the input tax and provisions of Section 8B of the Sales Tax Act of 1990 would also be applied on them. Under Section 8B of the Act, a registered person shall not be allowed to adjust input tax in excess of 90 percent of the output tax for that tax period.