Three New Ordinances Promulgated
Sunday, March 20, 2011
President Asif Ali Zardari on Tuesday promulgated three ordinances. Details are as under;
1:17 percent sales tax on
- fertilisers,
- agricultural tractors,
- pesticides,
- plants,
- machinery and
- equipment including its parts,
2: 15 percent income tax surcharge for Tax Year 2011 and
3: Raised special excise duty (SED) from 1 to 2.5 percent.
4: Federal Board of Revenue (FBR) has restricted the sales tax zero-rating facility of five export sectors -
- textile,
- leather,
- surgical,
- sports and
- carpets
to only registered manufacturers-cum-exporters or exporters for export purpose by amending SRO509(I)/2007.
5: The domestic supplies of these five zero-rated sectors will now be liable to sales tax at the standard rate of 17 percent.
6: The FBR has rescinded SRO.564(I)/2006 whereby sales tax was charged on sugar at the rate of Rs. 28.88 per kg. Now, the sales tax would be assessed on the actual market price of sugar. The rate of sales tax on sugar would remain unchanged at 8 percent. The assessable value of Rs 28.88 is creating a market distortion since ex-factory prices range between Rs 50 and Rs 60.
7: The FBR has withdrawn sales tax zero-rating facility on plants, machinery and equipment by amending the SRO.549(I)/2008. The sales tax exemption has been withdrawn on fertilizers, pesticides and tractors. The FBR has also withdrawn sales tax exemption of input tax on agricultural tractors. The Sales Tax (Amendment) Ordinance, 2011 has been issued to impose 17 percent sales tax on agricultural tractors.
8: One-time 15 percent income tax surcharge and raise in the SED from one to 2.5 percent respectively for the remaining period of the current fiscal.
9: The government would generate an additional revenue of Rs 53 billion through these fresh taxation measures in the remaining period of the current fiscal year.
10: The government has taken a number of measures to reduce its expenditure. These include a ban on the purchase of durable goods till July 1, 2011.
11: The government has also imposed a temporary ban on fresh hiring and recruitment. In addition, the government has totally banned capital expenditure and effected a 50 percent cut in travel and stationery budget. The cut in travel and stationery would help government save Rs 1 billion.
Labels: Economy and Business, Income tax, Sales Tax
posted @ 5:41 PM,
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RGST and Banking Sector
Tuesday, November 30, 2010
The General Sales Tax (GST) Bill 2010 is silent over some key issues of banking sector particularly services provided by banking companies. There are some important issues of banking sector have not been clarified in the General Sales Tax Bill 2010.
Issuance of Tax Invoice:
In the existing FED Rules, banks are not required to issue tax invoice, the proposed law is silent in this regard. The Rule 40 A (6A) of the FED Rules exempt the banks from issuance of tax invoices to their clients. The question arises whether such tax invoice would be required under the GST Bill 2010 or not?. Secondly, whether such exemption would continue under the RGST regime.
Exemption of Some Services:
Existing federal excise duty (FED) is applicable on all services provided by a banking company at the rate of 16 percent except for services against mark up/interest income, Hajj, Umrah, Cheque Book Issuance, Insurance Premium, Musharika and Modaraba Financing and Utility bills collection. After promulgation of GST Bill 2010, the FED at the rate of 16 percent will be converted into GST at the standard rate of 15 percent. However, it is not clear as to whether these services of the FED would remain exempted under the RGST.
Federal or Provincial Jurisdiction:
The main difference between FED and GST is that the former falls under federal jurisdiction, whereas the later falls within the provincial jurisdiction but collection rights may remain with FBR in certain cases. About the issuance of tax invoice, in the existing FED Rules banks are not required to issue tax invoice, the proposed law needs to clarify the issue. In case of sales tax return, this also needs to be clarified by FBR, whether the monthly return shall be filed province wise separately or a combined return is required to be filed with breakups of income and sales tax thereon for all provinces.
Maintenance of Record:
As far as maintenance of record is concerned, he said, all the branches shall be required to keep proper records of GST and related income for the purpose of audit. It is not clear as to whether it will be centralised or will have to deposited province wise; needless to state that the claim of input will also be on the similar lines if the bank so decides to claim the same.
Labels: RGST, Sales Tax, Taxation
posted @ 5:44 PM,
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Implementation Of Reformed GST In Pakistan
Monday, November 15, 2010
1. Pakistan is in dire need of increasing its tax revenues by implementing a broad-based modern form of sales tax on goods and services. The Sales Tax Act, 1990, was originally designed on the basis of accepted value added taxation doctrines but due to political compromises and revenue exigencies, it increasingly became distorted and narrow-based because of ever-expanding exemptions, special regimes, multiplicity of rates and several other deviations from international best concepts and practices. Resultantly, not only the tax base of sales tax and income tax has been eroded but also lack of documentation of the national economy has proved a big hindrance in the development of effective tax policy options.
2. Under the existing constitutional framework, the Federal government can impose taxes on the sales and purchases of goods imported, exported, produced, manufactured or consumed. The Federal government has been levying excise duty on services. After passage of the 18th Constitutional Amendment, taxation of services now wholly falls within the domain of Provincial governments.
3. Presently, apart from sales tax on the supply and import of goods, Federal excise duty is chargeable on communication (including telecom) services, certain categories of advertisements, insurance services other than life, marine, health and crop, banking services, franchise services and services provided by property developers/promoters, stockbrokers and port/terminal operators. Besides, Provincial sales tax is chargeable on services provided by hotels/clubs/caterers, custom agents, ship chandlers and stevedores, courier services and advertisements on TV & radio. Except franchise services, Federal excise duty and Provincial sales tax on all the aforesaid services is being collected under GST mode with backward and forward cross-crediting (inter-tax adjustment) with Federal sales tax.
4. Tax-to-GDP ratio on account of the said sales taxes has stagnated on lower side although internationally, the standard rate of 17 percent sounds on higher side. The principal reason of lower tax to GDP ratio of sales taxes has been widespread and unbridled concessions and waivers on both local supply and import stages including zero-rating on several categories of domestic supplies, besides non-coverage of the services sector in general.
5. The consultations with tax professional circles have over the passage of time convinced that there is an overdue need to thoroughly reform and revamp the whole existing sales tax system to bring it closer to international standards. The new GST system will change the mindset of the public at large as well as of the tax machinery and will strengthen government’s efforts to formally depart from excise-style of sales taxation on goods and services.
6. The GST Bill, 2010 will replace the present Sales Tax Act, 1990. While the issues of collection and administration of sales tax on services are being separately negotiated with the Provinces in the light of recent NFC award, a provision has been included in the Federal Bill to integrate Provincial sales tax on services with the Federal sales tax on goods as and when the Provinces authorize FBR to collect and administer sales tax on services.
7. Under the new GST law, exemptions have been kept intact in respect of basic food items including wheat, rice, pulses, vegetables, fruits, live animals, meat and poultry etc. Edible oil chargeable to Federal excise duty will remain exempt from GST as before. Exemptions earlier available for philanthropic, charitable, educational, health or scientific research purposes or under international commitments/agreements including grants-in-aid will also continue. Moreover, life saving drugs, books and other printed materials including newspapers and periodicals have been kept exempt.
8. Local consumption of sectors like textile (including carpets), leather, surgical and sports goods has however, been subjected to tax. Similarly, defence stores, stationary items, dairy products, pharmaceuticals (other than lifesaving), agricultural inputs, agricultural machinery and implements, aviation/navigation equipments including ships & aircrafts etc. have also been proposed to be taxed. Acquisition of capital goods will be facilitated through expeditious adjustment/refund of input tax involved therein.
9. GST will be chargeable only on value added component of each stage of the supply chain. Due to the provision for set-off of the tax paid at earlier stages in the chain, net tax incidence remains as a single stage levy. Due to automatic input tax adjustment facility, businesses are attracted towards voluntary registration so that they may avail such adjustments and improve their cash flows. For this reason, GST always promotes documentation and encourages self-compliance.
10. Other salient features of the new GST system are as follows.
- GST will replace the existing regimes of sales tax and excises on services.
- GST will apply on both at import and local supply stages.
- Standard rate of 15% has been proposed instead of the present rate of 17% or multiple other rates going upto 25%.
- There shall be no fixed tax, reduced tax, enhanced tax, retail price-based tax or special tax scheme under the new GST system.
- A uniform enhanced annual exemption threshold of Rs.7.5 million (which is presently Rs. 5 million) shall be applied to keep small businesses including small traders/retailers/cottage industry out of mandatory tax compliance.
- All exports shall be zero-rated.
- Input tax adjustment of both direct and indirect constituents shall be allowed on “totals” basis (excluding entertainment and non-business use passenger vehicles).
- Sales tax on goods and services where so authorized by the Provinces shall be mutually adjustable so that double taxation does not occur.
- No general zero-rating shall be admissible on any commercial form of domestic supply or on any local consumption.
- The GST system will work purely on “self-assessment and self-policing” basis.
- Cash flow of businesses shall be facilitated through expeditious centralized (Electronic) refund payment system.
- Tax compliance shall be encouraged through transparent and fair audit system with increased use of modern information technology.
- Adjudication, appeal and alternative dispute resolution (ADR) systems have been provided as before.
- FBR will issue simplified rules to regulate the GST procedures and processes.
- The GST Bill 2010 shall take effect from such date as may be notified by the Federal government.
- The new GST system will be applied in FATA/PATA, the Province of Gilgit-Baltistan and AJ&K in due course.
11. The proposed GST system will certainly not generate any sudden increase in revenue yield. It will however, increase the overall tax-to-GDP ratio from the present below 10% to about 12% in next 3-5 years. Pakistan has a strong potential to implement such value added tax type sales tax because of the reason that besides having a properly-reformed collection infrastructure, it has a long-operating sales tax system and substantial hidden sales taxation on inputs of exempt outputs (exempt supplies are input taxed) is already being borne in the aggregate national consumption.
12. The proposed GST system is expected to operate without any serious inflationary impact. It will rather promote economic equity and enable the country to direct national resources towards more productive goals of national development. Reformed GST is also likely to progressively minimize the grey component of the national economy and facilitate fair income redistribution. It will eventually cast healthy impact on income tax receipts and enhance fool-proof tax culture in the country.
Labels: Reformed GST, Sales Tax, Taxation
posted @ 11:59 AM,
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Sales Tax Query
Monday, June 8, 2009
From Adnan
Currently FBR give us the option to file revise sales tax return before 30th of June (if any discrepancies involved) and they send the discrepancy reports to both parties (Buyer & Seller) and told to resolve that discrepancy by contacting each other. The purpose for this is just to remove the differences Occur in either of one rupee Output taken by one company and the declaration by other company.
Now, i will give you a situation. Any body able to give me a answer is highly appreciated.
Situation:
Now, i will give you a situation. Any body able to give me a answer is highly appreciated.
Situation:
If Our company made a sale in the month of January 2009 and file that in the same period (i.e, Sales Tax return of January 2009), but the company to whom we made a sale declared and file this as a purchase in the month of February (i.e, Sales Tax Return of February 2009) for input tax claim. Then, due to this difference in month we have received a discrepancy report from FBR.
So, how could we tackle this problem?
What is the best way to resolve this issue?
Labels: Sales Tax
posted @ 11:17 AM,
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