The Federal Board of Revenue (FBR) has empowered the sales tax department to conduct sales tax audit in cases where Directorate of Revenue Receipt Audit (DRRA) has already completed audit in the same tax period, resulting in double audit in one year.
Interpreting the Finance Bill 2008-09, Muhammad Idress, lawyer, Supreme Court of Pakistan, and leading tax consultant, told Business Recorder that the FBR has provided limit of assessment in section 11 of the Sales Tax Act which is 5 years; period of assessment enhanced from 90 days to 120 days and second audit after the audit of DRRA has been provided. This would result in two audits in one year, which is totally unjustified, giving legal backing to the sketchy audit of DRRA.
Reacting to budget proposals, he said that increase in sales tax rate from 15 percent to 16 percent would increase the cost of production as well as prices of all taxable goods which would heavily affect the already crushed poor man.
Some other legal and technical amendments have been made in Sales Tax Act which will help the taxpayer for adjustment and claiming of tax liability and give some relief to the taxpayers.
About increase in sales tax rate, he said that the increase in tax rate will enhance rate of almost all commodities which will affect the price of goods and also burden the general people. This is in fact against the demand of large public in general and for business community in particular. About the withdrawal of special rate of 5 percent on textile, he opined that withdrawal of reduce tax on textile will also affect the textile industries.
The omission of retail tax through amendment in Sales Tax Act will create problems for the retailer. In other words, now sales tax payable would also be @ 16 percent, instead of 0.5 percent and 0.7 percent previously. He stated that the period of input tax has been reduced from 12 tax periods to 6 tax periods and the concept of carryforward as per section 10 has been reintroduced.
He said that the restoration of concept of carry forward will help cash flow of the tax payer and will curtail the tax liability of tax payer which is most demanded change by the business community as well as professionals.
Explaining the Finance Bill, he said that although 40 tax exemptions have been withdrawn but as per Finance Bill, technically all the redundant clauses of second schedule of the Income Tax Ordinance were withdrawn. Too many proposed amendments have been made in the Ordinance of 2001 out of which some are positive amendments and some are negative which will create problems to taxpayers. Tax levied on real state business as per section 113 c is a good step which will help the control of price of real estate and will also be helpful for exchequer. About Rs 30 to 40 billion tax revenue will be received by FBR.
He said that the new tax slabs rate for property tax has been introduce which was the demand of small taxpayer and are the accordingly to basic concept of taxation that is tax should be levied according to capacity to pay.
The withdrawal of section 113 that is minimum tax of 0.5 percent on company will help the documentation of economy and also reduce the burden of tax on corporate sector. Although amnesty scheme for declaration of undeclared income/assets has been introduced @ 2 percent, it will hurt the honest taxpayers but on the other hand through this amnesty billions of tax will be collected by the FBR, he said. The tax expert was of the view that a flat rate of 2 percent on import stage has been introduced which will cut down the complication of law and misuse of reduce rates and exemptions. A new provision 152(1AA) has been introduced for withholding of tax on payment of insurance to non resident companies it will also help the tax collection of FBR.
A final taxation on purchase of motor vehicle has been introduced which will help the petroleum crises in the country and on the other hand it will a lot of revenue to FBR, tax consultant added.