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PRE BUDGET SEMINAR ON SALES TAX

PRE BUDGET SEMINAR ON SALES TAX. Presented by: Mr. Rashid Malik. ISSUES TO BE ADDRESSED. Section 8-B Notification SRO 647(I)/2007 Dated: 27th June, 2007 Persons Registered in Electrical Energy Sector Importers, Wholesalers, Distributors Payment of Sales Tax @ 17.5% and 20% on purchases

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PRE BUDGET SEMINAR ON SALES TAX

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  1. PRE BUDGET SEMINAR ON SALES TAX Presented by: Mr. Rashid Malik

  2. ISSUES TO BE ADDRESSED • Section 8-B • Notification SRO 647(I)/2007 Dated: 27th June, 2007 • Persons Registered in Electrical Energy Sector • Importers, Wholesalers, Distributors • Payment of Sales Tax @ 17.5% and 20% on purchases • Persons Registered as Manufacturer-cum-Retailer • Special Procedure for Commercial Importers • Audit by the DRRA • Sales Tax on Utilities • Refund Related Issues of Industries Zero Rated • Penalty for Non-Compliance of Section 73

  3. ISSUES TO BE ADDRESSED • Issues Related to the Sales Tax Refund Rules issued vide notification SRO 555(I)/2006 Dated: 5th June, 2006 • Time Limit of 60 Days • Removal of Objections at the Time of Processing of Refund Claims • Adjustment of Sales Tax Refund with Income Tax Liability • Time Frame for the Issuance of Orders by Board on the Recommendations of ADRC • Manufacturing In Bond Rules • Levy of 1% Special Excise Duty • 1% R&D Surcharge

  4. Section 8-B Sub-section (1) of newly inserted section 8B in the Sales Tax Act, 1990 which overrides all the other provisions of the Act and prescribes that in relation to a tax period, a registered person shall not be allowed to adjust input tax in excess of ninety per cent of the output tax for that tax period. PROPOSAL Registered person may be allowed to adjust his input tax in total from the output tax as was the procedure prior to the issuance of notification SRO 666(I)/2005 dated: 30/06/2005.

  5. Persons Registered in Electrical Energy Sector Notification SRO 647(I)/2007 Dated: 27th June, 2007 OUR VIEW • Every registered person who is producing and supplying electricity in any capacity will be covered in the above said notification . • If a person is engaged in multiple activities then he will be out of the scope of section 8-B . b) Importers, Wholesalers, Distributors • The registered person who is engaged in procuring goods will be covered by the above said notification and hence will out of the ambit of section 8-B. c) Payment of Sales Tax @ 17.5% and 20% on purchases

  6. Persons Registered as Manufacturer-cum Retailer • It is not clear that whether a person engaged in the manufacturing of goods which are zero rated but are directly sold by him through his outlets are liable to sales tax at the rates prescribed in the Special Procedure for Payment of Sales Tax by Retailers? • If yes, then is he required to file his return quarterly as prescribed for retailers or on monthly as prescribed for the manufacturers?

  7. Special Procedure for Commercial Importers • Complications in computing the Sales Tax on Local Supplies where the Supplies of Imported goods made by various consignments at different Sales Tax values. • Procedure for adjustment of sales tax paid by commercial importers on clearing & forwarding charges, utility bills etc has not been provided in special procedure for payment of sales tax.

  8. Audit by the DRRA Board vide its letter C.No. 1(26)STAS/2004 dated: 8th November 2004 has suspended the audit till further notice but sales tax department has been directing the registered persons to submit their sales tax record in the department for its audit by the auditors of the DRRA. PROPOSAL Board may pass necessary instructions to field formations to immediately stop the practice of calling sales tax records from the registered persons for the purposes of audit by the auditors of DRRA.

  9. Sales Tax on Utilities The Federal Government has tried to extend the scheme of zero rating of raw materials/ goods used in the exports in the Budget of 2005-06. In order to minimize the element of refund sales tax on utilities has also been zero rated through various notifications PROPOSAL Sales tax on utilities may be zero rated across the board instead of allowing zero rating to individual registered persons.

  10. Refund Related Issues of Industries Zero Rated Federal Government has directed registered persons to charge sales tax on number of products mentioned in various notifications at the rate of zero percent. However, as the raw materials consumed in the above said products were not zero rated, therefore, huge amounts are stuck in pending refund claims. PROPOSAL Sales tax on the raw materials consumed for the manufacturing and supply of zero rated products may also be zero rated so that that the benefit of zero rating may be enjoyed in true sense by the ultimate consumers.

  11. PROPOSAL Penalty for Non-Compliance of Section 73 Penalty of Rs. 5000/- or 3% of tax amount has been added in the amended section 33 for violation of provisions of section 73 of the Sales Tax Act, 1990. We, therefore, would like to propose that the above said penalty may be imposed only where a registered person fails to make the payment within 180 days, however, his refund may be sanctioned

  12. Time Limit of 60 Days Issues Related to the Sales Tax Refund Rules issued vide notification SRO 555(I)/2006 Dated: 5th June, 2006 SUGGESTED PROPOSALS • Remove the un-necessary limitation of 60 Days on filing of his supportive documents. b) Removal of Objections at the Time of Processing of Refund Claims • Board may do a profiling of the registered refund claimants • Simple and unambiguous procedure may be notified for adjustment sales tax refund with the income tax liabilities c) Adjustment of Sales Tax Refund with Income Tax Liability

  13. Time Frame for the Issuance of Orders by Board on the Recommendations of ADRC No time limit has been prescribed for the officers of the Board to issue an order on the recommendations of the committee PROPOSAL A time limit of 15 days from the date of receipt of the recommendations from the committee may be prescribed for the issuance of the order by the Board, which may be extended by another 15 days where Board may need any clarification from the committee

  14. Manufacturing In Bond Rules Manufacturing in bond rules issued vide notification SRO 450(I)/2001 wherein a manufacturer is allowed to import/ purchase input goods without payment of leviable customs duty, excise duty and sales tax as the case may be, for the manufacture of goods primarily meant for export. PROPOSAL Keeping in view the economic situation prevailing in the country Board is requested to grant a two year extension in the time limit provided in the notification SRO 450(I)/2001 for the utilization of input goods in the export.

  15. Levy of 1% Special Excise Duty • 1% Special Excise Duty on Machinery, Raw Materials/ Packaging Material for Industries Zero Rated Under Various Notifications • Refund of Special Excise Duty PROPOSAL • Kindly withdraw the above said duty with immediate effect • Amend the notification and include the raw material and packaging material of the industries zero rated as well as add machinery imported or purchased under notification SRO 530(I)/2005 in the serial number 25 of the notification SRO 655(I)/2007 dated: 29th June, 2005 • Issue a procedure for processing and sanctioning of the pending as well future drawback claims of the exporters.

  16. 1% R&D Surcharge • 1% Surcharge was levied on all imports at the time of announcement of Budget of 2007-08 PROPOSAL Board may be requested direct the relevant Customs Authorities to process and sanction the pending refund claims of registered persons

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