All Pakistan Textile Mills Association (Aptma) has asked the Federal Board of Revenue (FBR) to remove serious ambiguities in the new sales tax regime on local supplies notified through SRO.1125(1)/2011, creating problems for textile mills at domestic stage.
Sources told Business Recorder here on Thursday that the Aptma has also informed the FBR that the requirement of submitting sales tax invoices under the Sales Tax Act, 1990 would not be applicable on supplies made to the unregistered persons under SRO.1125(1)/2011.
In this regard, the Aptma has made a presentation to the FBR Chairman Ansar Javed seeking clarifications on issues relating to the sales tax on local supplies notified through SRO.1125(1)/2011 as amended by SRO 154(I)/2013 and 221(I)/2013.
According to the Aptma letter to the FBR Chairman, there are certain ambiguities in the new regime of sales tax on local supplies notified through the subject SROs and for certainty and consistency clarification on following issues are solicited so that the member unit could comply with the new statutory provisions.
The Aptma said that the clause (vi) of the conditions envisages supplies of goods usable as industrial inputs to the registered as well as unregistered persons shall be charged to tax @ 2 percent when made to five specified sectors. Whereas, FBR's earlier clarification dated March 7, 2013 stated that the "supplies of yarn" are chargeable to sales tax @ 2 percent, whether made to registered or unregistered persons.
The Aptma has raised questions in circumstances when making supplies of yarn to the unregistered persons: Firstly, What name to be written on the sales tax invoice to be issued to a walk-in unregistered customer who is not providing his identifying particulars?
Secondly, whether address / CNIC number of such a walk-in-customer is required on the invoice or otherwise? Thirdly, whether the seller can receive consideration in cash from such a walk-in customer? Fourthly, whether supplies to such a customer can exceed Rs 5 million during the last 12 months?
Though clarifications are being sought from the FBR yet Aptma is of the opinion that since sales tax @ 2 percent is to be charged on all the supplies whether to a registered person or to an unregistered person therefore due to this special regime the requirement of sales tax invoice on the pattern given in the sales tax act would not be applicable when making supplies to the unregistered person. Accordingly, identifying particulars are not required and there would be no application of section 73 of the Sales Tax Act, 1990 and the quantum during the year. However, as an abundant precaution Aptma is seeking official interpretation on our aforesaid understanding, Aptma said.
As per clause (vi) supplies to persons not belonging to the specified five sectors shall be charged to tax @ 5 percent. It is practically impossible for the member units to ascertain that the unregistered purchaser falls within or outside the five specified sectors. Therefore Aptma is of the understanding that as per FBRs earlier clarification dated March 7, 2013 supplies of yarn would be considered to the five specified sectors as other than that the consumption of yarn is not conceivable, Aptma said.
The Aptma has further asked the FBR to clarify that what would be the status of input tax adjustment in case of raw material ie polyester, viscous, acrylic, etc and other stores and spares in case of supplies to both registered and unregistered persons? Aptma's understanding is that since the goods are taxable hence the input tax on the aforesaid items would be available irrespective of the fact that whether sates have been made to the registered person or unregistered person.
What would be the status of applicability of Withholding Safes Tax regime enforced through Sales Tax Special (Withholding) Rules, 2007 in case of supplies to unregistered person and supplies from / to registered firms and association of persons (AOPs)? The association's understanding is that the aforesaid Special Procedure should not be applicable and to formalise that an appropriately worded exclusion is to be added in Rule 5 of the Withholding Rules, Aptma raised question.
The association has asked the FBR to issue detailed clarifications on the aforesaid issues as well as on any allied matters so that there is no scam whatsoever in future like the previous one wherein very compliant sales tax registered person have been financially burdened for misuse of the earlier regime by the buyers, it added.
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