Taxpayers are facing problem in clearance of their input tax adjustment claimed against invoices issued by services providers, particularly falling within the jurisdiction of Sindh province.
Tax experts told Business Recorder here on Saturday that the sales tax on service in Sindh from last financial year was being collected by Sindh Board of Revenue; accordingly service providers also gradually started filing their sales tax returns with the provincial board.
The FBR last year was failed to workout modalities with SRB which provides online electronically verification of sales tax returns filed with the SRB. Resultantly, input tax claimed by taxpayers registered with FBR remains electronically unverified and taxpayers are facing undue hassle. The FBR has to make direct links with the SRB for electronic verification of sales tax returns field by taxpayers in Sindh.
The crucial issue is that the sales tax invoices of services providers in Sindh are not being verified by the FBR. For example, if an exporter has claimed input tax against courier charges, the taxpayers dealing in courier service is registered with SRB and filed their returns with the regional board. For verification of the output tax, there is need for a system for immediate electronic verification of output tax by the FBR. There is a need to build an inter-departmental electronic system between provinces and the FBR in order to deal with the issue of real time electronic verification. The FBR has to put in place proper integrated system connected with external provincial sales tax collecting authorities to avoid input output verification problems.
They were also of the view that exporters substantial amount of input tax got stuck with FBR due to non verification from the electronic system. Almost a year has lapsed after this major shift and formation of provincial body but it is strange that such an important and basic matter remain neglected by both the tax collecting authorities particularly the FBR. In the presence of computerised database and available infrastructure, it is just a matter of principle decision making, to harmonise the system of both the tax collecting authorities.
They pointed out that from this year province of Punjab will also form its own body for collection of sales tax on services therefore the component of non verification of input tax increases with the passage of time if no appropriate IT related arrangement is made.
Besides complaints from export side, reports of problem were also received from person dealing with local industries. The sources in local industries reported that they are receiving notices from Karachi Regional Tax Offices for inadmissible input tax claim against invoices issued by service sector. In-spite of the fact that service sector is timely filing its sales tax returns with SRB, if FBR is not getting proper access to database or there is any limitation between the two regulating bodies then rather resolving the issue in principle, issuance of notice to taxpayer are nothing but an exercise in futility which at the one end overburden tax officer with undue work and at the other creates hassle for genuine taxpayers. The FBR''s limitation and in-attention on this core issue was a matter of great concern, experts added.