Industrialists have completely rejected the proposed Value Added Tax (VAT) law draft on the ground that it should be implemented across the board. Former President of Karachi Chamber of Commerce and Industry (KCCI) and Advisor to Chief Minister for Investment, Zubair Motiwala said that no sector should be exempted and VAT should be implement on agriculture sector as well, Afghan Transit Trade and other sectors as well.
Speaking after a presentation on proposed VAT law by Member Direct Tax Policy of Federal Board of Revenue (FBR) Asrar Raofu at Site Association of Industry (SAI) on Friday, Motiwala further pointed out that under proposed VAT law, all the five zero rates sector of industries have to deposit tax initially and then it will be refunded. This will open a gate of corruption, he added.
He said that industrialists are ready to close their units for two months if the proposed law is not amended and implemented across the board. Criticising imposition of VAT on industrial land and exempting garniture of land, he said that it will increase cost of industrial land many times and make it difficult for investors to purchase land and establish units. Investors will prefer to go for agriculture rather then establishing units, he added.
"We reject the proposed law in toto and it will not succeed if it is implemented in the present shape", said Chairman SAI, Saleem Parekh. He said that the law should not touch five zero rates sector of industrial and these sectors must be allowed to enjoy exemption as it is today
Giving a presentation Asrar Raofu said that the purpose of visit is to get feedback of business community on proposed VAT law and remove lacunas in the law. He said that the law would be implemented with the consensus of all the stakeholders and after approval of legislative assembly.
He further said VAT has two seats of laws one is federal and the other is provincial. Under federal set of law VAT covers goods and federal list of services which includes transport of persons and cargo by rail, air and sea. Under new law federal excise duty will be abolished on services and there will be a uniform rate of VAT at 15 percent.
He said that under proposed law exemption of turnover limit for registration under tax net has been enhanced from Rs 5 million to Rs 7.5 million. Law also allows zero rating to export only. Replying a question, he dispelled the impressing that VAT has been imposed on funeral burial or similar services.
Referring to refunds, he said that a new refund system has been created and from first April 2010 it will be implanted on trial bases at Large Tax Paying Units (LTU). He said the new law has been prepared to minimise tax exemption, which were prevailing in present sales tax regime. Total shape of Sales Tax Act was changed time to time with amendments in the Act. Now the assembly will pass the law after thorough debate and any amendment will be made impossible without approval of the legislative house.