The Lahore Chamber of Commerce and Industry has urged the government to withdraw amendment in Finance Act 2016 to change the definition of input tax to exclude sales tax paid under the provincial laws.
LCCI President Sheikh Muhammad Arshad on Thursday said that the amendment would cause dual taxation in the country as indirect taxes paid to Provinces shall not reduce the incidence of sales tax paid to Federation. Moreover, input tax adjustment will not be available, if the supplier has not declared such supply in his return or has not paid tax due as per his return. Consequently, an eligible input tax shall become inadmissible for the buyer only for the reason that supplier of goods has not declared such supply in his return of sales tax or has not paid the tax due.
The government should withdraw amendment as a buyer would not have control over the conduct of supplier. This adjustment would increase cost of production and also make our products uncompetitive internationally, he said. He said that 2 percent further tax under section 3(1A) is charged from commercial importers on sales made to unregistered persons. He said that it is a matter of fact that 2 percent further tax is also borne by importers as it is very difficult to recover the same from unregistered customers due to cut throat competition and smuggling. It is responsibility of government to register the businesses with tax department whereas registered businesses are constantly penalized for being in the tax net, he added.
He said that government should not charge 2 percent further tax as it will not only cause huge revenue loss to the government but would also lead to boundless harassment and corruption. Moreover, commercial importers already pay sale tax at higher rate of 20 percent (17 percent and 3 percent %) at import stage.
The LCCI President said that government should take prompt action and resolve these issues at the earliest as business community is already facing number of problems and hoped that the Federal Finance Minister Ishaq Dar would take notice of the situation and withdraw Finance Act 2016 proposal to amend definition of input tax to exclude sales tax paid under the provincial laws.