Some startling disclosures were made by the Member Sales Tax, Central Board of Revenue (CBR) Shahid Ahmed at the CBR sales tax co-ordination committee meeting on blacklisting, suspension of registration/enrolment of suspected persons and new registration for sales tax purposes held at the Sales Tax House here on Wednesday.
Painting an appalling picture he disclosed that fake persons claimed Rs 3 billion as sales tax refund, which actually has been paid.
Shocked to see such a large number of fake registration, he said he would like to understand as to how a relaxed situation existed to allow registration of persons, who have just disappeared by depriving Rs 3 billion as sales tax refund claimed by them which actually has been paid.
He is considering taking action against such persons who have fraudulently connived to benefit at the cost of others.
The meeting was chaired by Shahid Ahmed and attended by Collector of Enforcement Khawaja Tanwir Ahmed, Additional Collector Manzoor Memon and secretaries sales tax from Central Board of Revenue, Engr. M.A.Jabbar, Vice-President Federation of Pakistan Chambers of Commerce and Industry, Siraj Kassam Teli, President Karachi Chambers of Commerce and Industry, Majid Memon and Ghaffar Plasticwala.
The purpose of the meeting was to discuss the improvements in section 21 (4) of Sales Tax Act and amendments in Sales Tax General Order (STGO) 6/2003 for creating balanced and careful approach in blacklisting the units only after giving the registered persons reasonable opportunity of hearing and issuing of show-cause notice and facilitating new registrations for the purpose of sales tax.
The Member Sales Tax informed the meeting that the blacklisted and suspected units are about 2,300 in Pakistan out of which 600 units are in Karachi.
"The city is our main focus as more than 50 percent of sales tax is given in Karachi, he said and added that the purpose of the meeting was also to remove the irritants in respect of blacklisting of the units.
He said: "I believe in carefully thought over action in blacklisting the units so that the genuine and otherwise not liable to be blacklisted units are not attracted to the list."
He said that the STGO was issued for uniform application of the parameters of the STGO throughout Pakistan.
He was of the view that probable escape be found out for expeditious disposal of cases of those units which are agitating against their being blacklisted in quasi-judicial proceedings.
He would also favour the off-loading of the blacklisted units from the list if the issue is legal and means that the unit does not own any tax liability and is punished merely because of illegal acts of others.
FOUR ISSUES: Engr. M.A.Jabbar said: "There are four issues involved:
(a) how to facilitate safe passage to the blacklisted units, which may have been made to suffer because of the illegal acts of others, while having no liability of tax due or tax to be paid or tax to have been evaded.
(b) the amendments in section 21 (4) and shrinking of STGO (6) of 2003 so that the STGO does not extend its scope beyond the law driving its working. Besides the operation of section 21 (4) should be subject of having afforded opportunity of hearing with a show-cause notice for the defence of the charged registered person. Further the section 21 (4) has to be also saved to provide claiming of input tax adjustments once the blacklisted unit has been absolved of the charge.
This is necessary because the present sales tax law provides claiming of input adjustments for only three preceding periods.
In the present situation, delisting from the blacklisted book after few months require filing of refunds and not access to the input tax adjustments.
The whole section and the STGO and its parameters have to be amended and put to the language so that it is discretion less and lawfully allowed as legislation instead of administrative instructions which are often subject of frequent changes by CBR.
(c) on the legal issue the units, which are being punished for the acts of others have also a legal position to claim de-listing from the blacklisted book, which point requires providing immediate relief to the units seeking de-listing from the blacklisted master-print with sales tax department, and (d) the companies, which have preferred appeals in adjudication collectorates, may be given option to invoke dispute resolution mechanism provided in the law for expeditious disposal so that the restoration of their position on the merits allows them to continue with their business, which on account of being blacklisted, comes to standstill as nobody wants to do business with them.
Engr. Jabbar said that the best for sales tax department would be to go for automation of the system as presently the manual reconciling of the accounts gives birth to penalising honest and genuine businessmen on account of misdeeds of others, who also involve the suppliers and buyers of theirs without any benefit to them the blacklisted unit.
FAKE REGISTRATION: Siraj Kassam Teli said: "The department can also be blamed for facilitating fake registrations, which could be 75 percent of the fake registered persons unearthed by the sales tax department."
He asked that he would like to have complete information as to how much sales tax is collected, how much is refunded, how much is held up for how much period and for what reasons.
Shahid Ahmed informed the participants that during nine months and 19 days, a refund of Rs 42 billion of sales tax has been paid to exporters.
He said that he had considered the refund of sales tax and blacklisting as the irritants, the removal of which he has considered the task before him.
On the refund side, he said, "he is comfortable as he has refunded Rs 42 billion during the last nine months against collection of Rs 156 billion, while quoting collection of last year as Rs 194 billion with sales tax refund of Rs 42 billion.
He said: "The data speak about the way the department is treating refund of sales tax as priority to facilitate growth of business by charging the liquidity for the business."
He concurred with the suggestions of Engr. Jabbar and said that he is seized of the fact that section 21 (4) needs amendments for future and requires affording opportunity and show-cause before taking any action under the law.
Shahid Ahmed asked the secretary sales tax, CBR to issue the circular to the blacklisted units for availing the opportunity of seeking de-listing from the blacklisted units through dispute resolution as the same may also expedite the dispute brought forth for them.