ISLAMABAD: The Federal Board of Revenue (FBR) on Friday agreed to all major tax proposals of the value-added textile associations, including rationalisation of higher rate of sales tax (22 percent), separation of procedure of audit and adjudication under Sales Tax At, 1990, and special electronic refund system for disposal of old refund claims.
On the conclusion of a meeting between FBR Chairman Salman Siddique and presidents of the value-added textile associations in Karachi, Muhammad Javed Bilwani, of Council of All Pakistan Textile Associations, told Business Recorder that the FBR has, in principle, agreed with all major proposals of exporters, including revision in the adjudication procedure for the sales tax.
The FBR team, headed by Chairman, included Member Inland Revenue (IR) Shahid Hussain Asad, Chief Commissioners of Regional Tax Offices (RTOs) of Karachi-I, Karachi-II and Karachi-III and senior officials of Pakistan Revenue Automation Limited (PRAL). The delegation of export associations was headed by leading Karachi-based exporter, Javed Bilwani.
The representatives of the value-added textile associations highly appreciated the role of FBR Chairman and his team of tax managers in resolving all key issues of the exporters, particularly textile exporters. The Karachi-based export associations also showed full confidence in the tax authorities in view of FBR's positive role in resolution of tax-related issues of exporters.
Bilwani said that the FBR did not reduce one percent sales tax on nearly 70 items/raw materials in budget (2011-12) attracting higher rate of sales tax up to 22 percent despite one percent overall reduction in sales tax rate from 17 to 16 percent in budget (2011-12). In the past, whenever the rate of sales tax was reduced or increased, it had impacted all the rates. The sales tax rate has been correspondently increased or decreased on all slabs. However, the FBR has reduced the standard rate of sales tax from 17 to 16 percent, but the higher rates were not correspondently reduced. The FBR has in principle, agreed to rationalising the higher rate of sales tax after consulting with board in council meeting.
He further stated that the second issue related to the missing files of sales tax refund claims pertaining to manufacturers-cum-exporters. During shifting of tax record from one tax office of Karachi to another, the sales tax refund files of the manufacturers-cum-exporters had been misplaced. Even when the units submitted the duplicate files to the tax department, the refund claims have not been processed and required condition of pre-refund audit. In the presence of the electronic sales tax refund data, the FBR can obtain the computerised information and directly link the same with the Expeditious Refund System (ERS). The officials of the ERS agreed to the proposal of Bilwani with the comment that the data could be used and linked with the special ERS system for disposal of such refund claims.
On the issue of existing procedure of adjudication, Bilwani stated that the tax managers agreed to the reservations of exporters over the existing procedure of adjudication of disputed cases. The abolition of separate and independent adjudication system under the Sales Tax Act 1990 has created problems for the registered persons in obtaining impartial assessment orders pertaining to sales tax liability and disputed matters of sales tax and federal excise. At present, tax liability is determined by the officers who are responsible to select, initiate and conduct audit under section 25 of the Sales Tax Act 1990 and then to finalise and determine the tax liability. Under the previous adjudication procedure, the sales tax officers had to send contravention report, and adjudication was solely done by a separate officer, through issuance of show-cause notice to finalisation of Order-in-Original after adopting proper method of legal modalities. The adjudication and audit process were kept separate under the previous law to give level playing field and fair application of law. Now, an officer of Inland Revenue can pass an assessment order after audit, giving discretionary powers to a single officer. The FBR agreed to look into the matter for revision of the adjudication procedure under the Sales Tax Act, he explained.
He further said that the FBR had agreed to announce amnesty for those persons who would pay full amount of sales tax to avoid prosecution and criminal proceedings. Bilwani said that the tax authorities were told that one percent special excise duty was introduced through SRO 655(I)/2007 but no refund mechanism was available in the system at that point of time. The system was recently introduced in October 2010. Therefore, refund claims for the period July 2007 to September 2010 had become time-barred, without any fault on the part of exporters. Accordingly, it was requested that one-time extension be announced for submission of such claims to exporter of Karachi, he added.