Traders of the federal capital have raised 10 major issues in the implementation of the Voluntary Tax Compliance Scheme (VTCS), seeking clarification on admissibility of real estate business in the scheme, electronic filing, discriminatory treatment to other sectors, inclusion of other banks to accept tax challans, tax officials powers to probe past years record, immediate inclusion of names of traders in Active Taxpayer List (ATL), role of inspectors in facilitation, clear policy for traders incurring losses in future years and status of notices already issued to traders.
During an interaction of Regional Tax Office (RTO), Islamabad, with the office-bearers and members of different trade bodies and Anjuman-e-Tajraan here at RTO on Thursday, Naushad Ali Khan, Chief Commissioner, RTO Islamabad, responded to various queries and legal issues raised by the business community.
He assured full assistance to the business community in filing of returns under the VTCS. Different representatives of service sector, service providers, hotels and real estate businesses strongly objected their exclusion from the VTCS while terming it discriminatory for others.
The representatives of the traders said that other banks should be allowed to accept challan forms under the VTCS. Responding to this, Naushad appreciated the idea and assured the business community of taking up the matter with the FBR. "We can request banks to accommodate new filers under the VTCS," he said. The traders said that the FBR must ensure inclusion of names of traders, availing the scheme, in the ATL without delay.
On the issue of electronic filing of returns, the Chief Commissioners assured that the tax officers would fully assist the businessmen in timely filing of returns electronically. They said that the RTO was ready to send special teams to the markets to guide the traders in filing of income tax returns.
The representatives of real estate businesses sought FBR clarification about their admissibility under the VTCS. In real estate, there is no selling of goods, but they have very high turnovers in immovable property transactions. The Chief Commissioner RTO responded that the service providers and business of real estate were not covered under the scheme.
The representative of Blue Area traders' community questioned the future policy of the FBR for dealing with the traders availing the VTCS. The FBR should give a clear policy in cases where the traders may suffer future losses due to unavoidable circumstances or business closure and any incident of terrorism etc. There might be a situation where the traders may not be able to submit higher rates of taxes under the VTCS in coming years due to one reason or the other.
The Chief Commissioner responded that the Income Tax (Third Amendment) Act 2016 signed by the President was an Act of Parliament. Even future governments could not change the Act of Parliament, he said. The traders apprehended that the RTO must take measures to check the harassment by lower staff of the tax department, who visit the markets and discourage traders to file returns. Only the officer up to the level of Inspector be authorised to visit markets and they should be in proper uniform for identity purposes.
The Chief Commissioner categorically conveyed to the traders that if any inspector visits market without official uniform, he should not be entertained by the business community. Traders have the right to seek details of any officer introducing himself as an Inspector of the RTO. "I have already de-notified seven employees since assuming charge of the Chief Commissioner," he added.
The traders objected that what would happen after expiry of the audit exemption period for the traders who would avail the scheme. Whether the FBR would examine past records after the period of audit immunity expires? Naushad stated that the tax department could not scrutinise the past record beyond five years under the Income Tax Ordinance 2001. Therefore, there were no chances that the past cases would be reopened.
The traders questioned the legal status of businessmen engaged in catering, hotel/restaurant business under the VTCS. Naushad said that the scheme had been exclusively designed for traders and those who had already filed returns could revise the returns without approval of the commissioner. Hotels and restaurants were not covered under the said scheme.
Referring to the scheme, he quoted Income Tax (Third Amendment) Act 2016 saying that trader means an individual or an association of persons (AOP) buying goods or merchandise and selling the same without further processing and providing, business-related after sales, services by doing repair jobs. Any person engaged in rendering of, or providing, services, business of retailer under Sales Tax Special Procedures Rules. 2007, shall not be treated as a trader for the purposes of scheme, he added.
The Chief Commissioner said that the special mobile units were ready to facilitate traders intending to avail the scheme. Even the tax officers of the RTO would assist the new filers in depositing challan forms in the bank on behalf of traders to save their time.
"The RTO has also set up eight camps for the traders who want to avail the scheme. A total of 15 camps are being established including those set up by the trading community," he added. The traders questioned the introduction of new form in Urdu under the VTCS. The Chief Commissioner opined that the FBR was in the process of finalising the new form in Urdu language under the VTCS.
The traders also asked the RTO to withdraw notices under section 114 of the Income Tax Ordinance 2001 served on traders, intending to avail the scheme. He initially responded that the scheme would cover the traders, who had received notices. However, he clarified that he could only suggest policy changes to the FBR as he was empowered only to execute the Board's decisions in the field formations.
The Chief Commissioner added that traders should file simplified income tax returns for Tax Years 2015-2018. Secondly, working capital up to 50 million could be declared under the scheme in Tax Year 2015 and income tax @ 1 percent of the working capital should be paid and turnover tax for tax years 2016-18 would be payable on specified rates. For tax year 2016, the trader should declare at least three time turnover on the working capital declared and pay turnover tax. For tax years 2017 and 2018, traders shall pay tax that is higher by 25 percent over the preceding year's tax paid. Earlier, senior officers of the RTO briefed the business community on the salient features of the scheme and Income Tax (Third Amendment) Act 2016.