The Pakistan Chemical and Dyes Merchants Association (PCDMA) has suggested amendments in Customs Act to make it mandatory for Customs Valuation Department to hold meaningful consultations with FPCCI, chamber of commerce and industry and other relevant trade bodies before issuing any price ruling u/s 25A to curb menace of under-invoicing.
Chairman of the Association, Haroon Agar in proposals for the 2011-12 budget further suggested that every ruling should be valid for a maximum period of 90 days. 1. In case of products having wide fluctuations and where scan or exchange price is available, formula for calculating CFR prices based on these scan prices should be notified and in such cases prices should be issued on monthly contract basis. In many cases such as natural rubber, metals, plastics etc scan prices are available on web. In other cases Customs should prescribe to such scans, thus getting first hand knowledge for timely issuance of valuations.
2. In case of consumer products, committees for different types of products should be established, comprising of customs officials, nominees of FPCCI, KCCI and relevant trade bodies, importers and local manufacturers of competing products. These committees should evolve formula, criteria and mechanism, for fixing of valuations for such products and decide valuations on sufficiently broad basis to remove chances of evading price rulings by variation of name, origin, description, weight of packaging, etc.
3. PaCCS and One-Customs assessing officials should accept trade bodies' price recommendations and in case of difference of opinion, they should give reasons and evidence to substantiate their higher or lower assessments. In case of difference of more than 10 percent (lower or higher) the assessing officer should consult trade bodies prior to finalisation of the assessment. Monitoring committees should be formed with reps of trade bodies to check compliance.
Haroon Agar noted that tax rate for Associations of Persons (AOPs) be changed to flat 25 percent instead of previous progressive regime. In this regard it is pertinent to point out that income of AOPs or partnership firms is the combined income of its members or partners and hence it falls into a higher slab as compared to the proprietorship firms/individuals.
Therefore, logically, the income slabs for AOPs should be set higher as compared to individuals to bring them at par. This is also important as bringing individuals together in the form of partnership leads to bigger companies thus promoting economic activities. In this Finance Bill, by imposing a Flat 25 percent rate, the basic tax exemption has been done away with and also there is elimination of progressive tax rates, which is highly discriminatory. Hence, progressive tax rates with basic exemption should be restored.
--- In the tax rates for individuals, even if the income increases by one rupee into the next tax slab, the rate for the whole income changes. It means that person having a taxable income of Rs 300,000 shall have after-tax income of Rs 300,000, whereas person having income of Rs 300,001 shall have after-tax income of Rs 277,501, which is highly unjustified. Thus, the old system of charging higher tax rate only on income ABOVE that tax slab should be restored.
--- The WHT on import is increased to 5 percent. Since income tax is a direct tax, the only reason for such increase should be a substantial increase in GP percentage, and it should not be used as a tool to generate additional revenue. In current economic scenario, when genuine importers are struggling to keep their business alive against illicit imports under ATT, the rate of WHT should have been brought down to correspond to the difficult business environment, particularly for the industrial raw materials. Hence, at least WHT on commercial importers should be restored to 4 percent.
--- Individuals having turnover over Rs 50 million had been prescribed as withholding agents under Sec. 153. This shall greatly increase cost of doing business and shall burden them with overhead costs for complying with this provision. Hence, this amendment should be withdrawn. Without prejudice to above, in said amendment proviso specifying purchases for business purposes should be specified to avoid any confusion.
--- Due date of filing of statements by Comm Importers is changed to August 31 instead of September 30. This is causing hardship; as such it should be restored to September 30.
--- Wealth statement to be filed if WHT is above Rs 35,000: This means that any importer having a turnover of just Rs 700,000 should file wealth statement. This clause may be amended to change this condition to person claiming presumptive income of Rs 500,000 or above to bring it in line with other tax payers.
--- In last budget, sub-section 4(b) of Section 111 was deleted, by virtue of which the Commissioner is empowered to open any assessment beyond preceding five tax years or assessment years. The time limit should be maintained as it gives unlimited power to the tax authorities.
--- Section 122: In previous budget, Commissioner had been given further powers under section 122 with retrospective effect since July 4, 2003. Already, Section 122 is a bad law, giving extensive powers to Commissioner to amend an assessment as many times necessary, thus adding agony for the tax payers who are in the system, who may have to go through this assessment exercise time and time again during 5-year period, which is highly unjustified. Thus the Commissioner's powers under this section should be limited to a specified number of amendments.
--- Further, under Section 122, powers had been given to Commissioner retrospectively to amend an assessment order under subsection 5A, where appeal has been filed or decided against the order of the Commissioner, in respect of any point or issue which was not the subject matter of such appeal. This also gives undue powers to Commissioner as he may be able to penalise taxpayers by creating new contentious issues in the assessment order, thus dragging the taxpayer into courts and wasting taxpayers' and government's resources in wasteful, useless and lengthy litigations.
He noted that Section 153(a) of Income Tax Ordinance, 2008, provides for deduction of withholding tax on payments made against sale of goods. The tax rate applicable under Div III of Part III of First Schedule of ITO, 2008 is 3.5 percent of the gross amount payable in case of goods other than rice, cottonseed or edible oils. The term Gross Amount under section 153(2) includes the sales tax, if any, payable in respect of the sale. Under 153(6) the tax deducted under this section shall be a final tax on the income of a resident person.
However, The provisions of sub-section (6) in so far as they relate to payments on account of supply of goods from which tax is deductible under this section shall not apply in respect of [a company] being a manufacturer of such goods. He recommended that sales tax and federal excise duty (FED) levies should not be added to the value of goods for deduction of tax under section 147(9) and 153(2) as it is tantamount to "Tax upon tax".
1. In section 153(6A), words "a company" should be replaced by words "a person" restoring the position prior to Finance Act, 2008, allowing all categories of manufacturers to claim adjustment of tax deducted u/s 153(1). 2. Present rate of 3.5 percent is very high and it is nearly impossible for intermediate suppliers and wholesalers to make supplies with such a heavy tax being levied on supplies made by them. Thus discouraging supply chain formation and documentation of economy. We, therefore, propose as follows:
3. The tax rate may be reduced to 1 percent of the sale value excluding sales tax and under Section 153(6) the words final may be replaced with minimum. Or The tax rate may be reduced to 1.5 percent of the sale value excluding sales tax and the tax status under section 153(6) be retained as Final discharge of liability.
Haroon said that PCDMA has filed several objections on the proposed 'Reformed General Sales Tax' (RGST) Bill and reiterate demand that no changes should be brought in sales tax laws and rules without meaningful consultation with all the stake holders, particularly the trade bodies.
Regarding customs duty, he said that section 25A was amended last year, making value determined under said section applicable until revised, suspended or rescinded. We suggest that time limit should be placed for applicability to make Valuation Department revise values periodically in line with the international prices.
--- Time limit of 30 days fixed for filing review petition should be withdrawn as many times the order u/s 25A is received much after 30 days of fixation of value.
--- Time limit u/s 81 was reduced to 3 months instead of 6 months. The customs authorities were not finalising the cases even within 6 months and as a result guarantee/cheque submitted by importer is encashed in the absence of decision. If time limit is to be reduced, in case of failure to meet deadline, importer's value should be accepted.