The Federal Board of Revenue (FBR) is still accepting the sales tax registration numbers (STRNs) as a legal registration document despite issuance of a notification that only National Tax Number (NTN) would be used for both the registrations of income tax and sales tax. The FBR has received report on anomalies in the Income Tax Ordinance, 2001 and sales tax changes from the Income Tax Bar Association (ITBA) Karachi.
Sources told Business Recorder here on Saturday that the FBR is reviewing the anomalies pointed out by the ITBA Karachi for making changes in the tax laws, if required.
The association noted that recently two circulars were issued by the FBR that STRN will not be used as reference of Sales Tax Registration and only NTN will be considered as STRN. But still STRN is being issued after July 1, 2010 which is against the instructions contained in the said Circulars. Urgent instructions need to be issued by FBR to remove this confusion.
The FBR circular issued in 2007 stated that no person shall hold 2 sales tax numbers at a time. But in case of a taxpayer it is observed that where a person holds 2 STRN, what will the position of claiming input and output tax in the presence of two STRN. The Board may remove the anomaly to clarify the situation of adjustment for registered person having two separate STRNs.
The ITBA further stated that the flat rate of taxability in the cases of AOPs tantamount to be discriminatory in nature and discourage small and medium business formation. It is recommended that the chargeability of income tax @ 25 percent in the cases of AOPs for the Tax year 2010 is harsh, discriminatory and its retrospective effect is likely to be challenged before the Judicial forums. It is, therefore, requested that either the old reign of taxation is to be retained or the applicability of this charge is to be made effective from Tax Year 2011.
The ITBA members are of opinion that the previous regime of advance tax should be retained as far as the dates of advance tax for companies are concerned as the payment of advance under the new scenario tax might create short falls, which will entail penalties. The law as per Finance Act, 2010 will create a lot of difficulties and is not practical.
About the taxation of individuals (Other than salaries), the ITBA said that when income increases from Rs 300,000 to Rs 300,001, income tax will be charged at Rs 22,500 which is not logical, but rather it is irrational and tantamount to high handedness. It is, therefore, this tax of Rs 22,500 is illogical, illegal and volatile of fundamental rights of a person guaranteed under the constitution recommended that marginal relief in tax should be allowed for the slabs.
The ITBA further recommended that small traders/retailers should be allowed adjustment of utilities against levy of minimum tax @ 1 percent. The adjustment of utilities was admissible when the rate of turnover tax on retailers was 0.5 percent. The inadmissibility of utilities is considered as unlawful by the Lahore High Court in case law reported as 2009 PTD 1473 holding that that the tax collected on utilities is adjustable for all tax payers and this decision should be followed in letter and in spirit.
It is recommended that the Forms of Income Tax Returns for all taxpayers for the Tax Year 2010 should be made available earlier for comments. It is, therefore, recommended that the final return be notified by 15-07-2010. Otherwise complying with new dates of filling of income returns will not be possible. It is also recommended that the computerised programme should be released by the FBR, so that the members could work on the returns "off line" and can then load it on the net of the FBR. Earlier availability of returns forms is very necessary to avoid the probable mistakes and the difficulties in the e-filing.
The ITBA further recommended that the NTN Certificates should be issued and amendments made therein immediately as majority of members are complaining of delay in issuance and amendments thereof. Same is the position of sales tax registration and amendment made therein. Urgent issuances of NTN and Sales Tax registration should be encourage to broaden the tax base.
The association has further observed that the cases been selected u/s 25 of the Sales Tax Act for the reason that FBR has noticed discrepancies in such cases. Most of the case relate to Utility bills. It is, therefore, recommended that the discrepancies, which are already in the knowledge of FBR, should be brought in the knowledge of taxpayers in writing with reasonable time for reply. In the cases where reply of the taxpayer found unsatisfactory, then they can be selected for audit and intimated accordingly.
Mutual funds are now required to deduct capital gains tax at the rates specified in Division VII of the Part-I of the First Schedule on redemption of securities as prescribed. However, there is no corresponding provision in the main law which requires the mutual funds to deduct such tax. The First Schedule can only prescribe rate of with holding tax but cannot impose responsibility to withholding tax, the ITBA added.