Over 55 percent of the wholesalers' community has filed their sales tax and federal excise returns for the tax period of August 2012 in September despite the fact that 'wholesalers' were included in categories of taxpayers, who are not allowed to adjust input tax in excess of 90 percent of their output tax.
Sources told Business Recorder here on Sunday that wholesalers had filed tax returns on the assumption that the FBR would allow 97 percent input tax adjustment, instead of the existing 90 percent.
It is expected that the remaining wholesalers would also file their returns for August and compliance level would reach around 75 percent. The wholesalers' compliance stemmed from expectations that the FBR drafted a statutory regulatory order (SRO) to facilitate them.
The SRO564(I)/2012 included 'wholesalers' in categories of taxpayers, who are not allowed to adjust input tax in excess of 90 percent of their output tax. This restriction has been imposed on the 'wholesalers' through issuance of the said SRO. Under SRO 564(I)/2012, amendment has been made in SRO 647(I)/2007 dated June 27, 2007 to exclude 'wholesalers' from the said SRO.
When the SRO564(I)/2012 was issued, most of the wholesalers had stopped filing of sales tax returns and requested the FBR to change their category/tax status on issuance of SRO 564(I)/2012, which has disallowed input tax in excess of 90 percent of their output tax.
Later, the FBR proposed amendment in the SRO564(I)/2012 to allow 97 percent input tax adjustment to wholesalers. The proposed amendment has encouraged wholesalers to file their monthly sales tax returns in September 2012. However, wholesalers are desperately awaiting the issuance of the relevant notification by the Board.
Sources said that wholesalers had high turnover, but their actual profit margin was very low. Previously, 100 percent adjustment of input tax was allowed. Now, wholesalers are allowed to adjust only 90 percent of the input tax and provisions of Section 8B of the Sales Tax Act of 1990 would also be applied on them. Under Section 8B of the Act, a registered person shall not be allowed to adjust input tax in excess of 90 percent of the output tax for that tax period.