The Federal Board of Revenue (FBR) is planning to increase cost of doing business of un-registered businessmen, non-active taxpayers or non-filers by possible increase in the rate of "further sales tax" in coming budget (2015-16).
Sources told Business Recorder here on Sunday that the last budget focused on direct taxation measures to impose higher rates of withholding tax on non-filers of income tax returns. Budget (2015-16) would focus on sales tax measures to increase cost of doing business of un-registered businessmen etc.
At present, one percent further tax is applicable, which was introduced through Finance Act, 2013. It is not be applicable on petroleum products, natural gas and items which are being sold to end consumers. In this regard, the FBR had notified an S.R.O wherein list of items and category of registered persons have been provided on which exemption from one percent further sales tax is available.
When contacted a tax expert said that various sectors of economy had requested the government to withdraw the levy of further sales tax to avoid increase in the prices of consumers' goods and daily use commodities. While FBR is of the view that further sales tax burden on the unregistered persons would force them to come into the sales tax net. The burden of sales tax would increase on supplies to the unregistered persons. However, if the supplies have been made to the registered persons, there is no increase in sales tax burden. The enhanced rate of further tax would force the unregistered persons to come into the tax net and pay the due amount of taxes.
The concept of further sales tax is not new in Pakistan's Sales tax history and the old regime of 'further sales tax' was restored through Finance Act, 2013. In budget 2004-05, the FBR had abolished "further tax". The restoration of one percent 'further sales tax', under Sales Tax Act 1990, was considered as an easy way to generate additional amount to the tune of billions per annum.
Tax expert said that "further tax" was abolished in the 2004 budget, with the intention to control the phenomenon of fake and flying sales tax invoices. At that time, the levy was generating an additional amount of sales tax. "Further tax" was levied on supplies made to unregistered persons, which was later abolished through amendment to the Sales Tax Act in the past.