RATE OF ADDITIONAL TAX

RATE OF ADDITIONAL TAX <!--[if gte mso 10]> RATE OF ADDITIONAL TAX By Akhtar Javed, Advocate, Lahore In terms of section 34 of the Sales Tax Act, 1990, if a registered person does not pay tax due or any part thereof well in time or claims a tax credit, refund or makes an adjustment, which is not admissible, he is required to pay additional tax at simple rate of 2% of the tax due per month or any part thereof. Between the period from 18-6-2000 to 15-3-2001, the rate of additional tax was simple 1.5%. From June, 1996 June, 2000, the rate of additional tax remained 5% compound. 2. A number of cases were framed against the taxpayer where default had occurred during the period between 1996 to 2000 when rate of additional tax was 5% compound but the demands were raised after June, 2000 when the rate of additional tax was either simple 1.5% or 2%. 3. A question had arisen whether the taxpayer was liable to pay additional tax at the rate when default or short payment occurred or when the demand of additional tax was raised. In one such case, Messrs Nestle Milkpak paid certain amount of short paid tax alongwith additional tax @ 1.5%. The Department required Messrs Nestle Milkpak to pay additional tax on compound rate of 5% as in the opinion of the Department, the default had occurred during the year 1999 when the rate of additional tax was 5% compound. 4. The Collector (Adjudication) upheld the view-point of the Department and passed order requiring the company to pay additional tax @ 5% compound. An appeal was filed against the said order of the Collector Adjudication. While accepting the appeal, the learned Members of the Appellate Tribunal in judgment in Sales Tax Appeal No.55/LB of 2002 have observed that "the compound rate of 5% has been abolished long ago and in any case, we are not going to enforce it even if it is still applicable". 5. Through the aforesaid order, the learned Tribunal has resolved the long-outstanding controversy. In view of the aforesaid judgment, the taxpayers are required to pay additional tax at the rate presently applicable instead of 5% in spite of the fact that the default/short payment had occurred during the currency of higher rate of additional tax.