The FBR has overburdened the commercial importers by increasing value-addition rate from 2 percent to 3 percent with immediate effect ie June 4, 2011, whereas reduction of one percent in the standard rate of sales tax and benefit of 2.5 percent special excise duty would be effective from July 1, 2011.
Explaining the revenue measure of 2011-12, a tax expert, Arshad Shehzad, said on Saturday that the sales tax revenue measures have been implemented with immediate effect, but the relief measures have been enforced from July 1 2011. The increase in one percent rate for value-addition of commercial importers has been given immediate effect, whereas reduction in sales tax is from June 4, 2011. However, impact of relief and revenue measures should be enforced from the same date. Contrary to this, the increase in rate of commercial importers has been enforced from June 4 but relief measures from July 1, 2011.
He stated that the government vide notification 482(I)/2011 has increased the rate of value-addition tax required to be paid at customs stage from 2 percent to 3ercent. The amendment is effective immediately from 4th Day of July 2011, accordingly custom authorities have start charging increased rate on bills of entry filed by commercial importers for clearance of their consignments. However, the reduction in rate of indirect taxes are specifically notified from 1st July 2011. Hence, interestingly, for the remaining period of this fiscal year the taxpayers rather getting benefit will burdened with additional amount of tax.
It is also important to note that advance value-addition tax is though adjustable but not refundable. Hence, in order to adjust the impact of 3 percent value-addition tax commercial importers would now requires to maintain gross value-addition of at least 18.75 percent on value excluding price appearing on bill of entry. However, this equation would further worsen in case of application of sales tax withholding tax on their supplies. The supplies made to persons registered with Large Taxpayers Unit (LTU) are chargeable to one percent withholding tax under notification 660(I)/2007 and commercial importers are not excluded from it. He, therefore, suggested that since significant increase has been made this year in value-addition tax and this percentage by and large would be treated as full and final tax. Hence in order to remove the genuine difficulties of the commercial importers and accrual of refunds on this account, they should included in rule 5 of the notification 660 pertaining to the exclusion provisions of tax withholding.
He said that it is also interesting to note that withdrawal of sales tax exemptions, provided under Sales Tax Act, were proposed to be given effect from 1st July 2011. However, the same treatment to SRO based exemptions and zero rating were given with effect from 4th June 2011. He was of the view that to observe the harmonisation and symmetry, these measure should taken placed with same effective date, be more appropriated, Arshad Shehzad added.