PRE-BUDGET PROPOSAL IN RESPECT OF SALES TAX ACT, 1990

PRE BUDGET PROPOSAL IN RESPECT OF <!--[if gte mso 10]> PRE‑BUDGET PROPOSAL IN RESPECT OF SALES TAX ACT, 1990 By Shaukat Baluch, F. C.M.A., Rawalpindi Presently Sales Tax Act, 1990 has failed to achieve desired goals. It rather has not only created frustration amongst the tax payers but also compelling them to find out ways and means, which may be as foul as may be, to stay away from the Sales Tax net. This Law has created a disparity amongst the class of traders. It has placed the registered persons on most disadvantageous footing. Instead of registered person feels proud, is feeling ashamed or foolish to be a registered person. The customers even Government Departments are not happy to pay G.S.T. The registered persons in many cases pay some portion of tax out of their profit or they try some foul play to compensate themselves. The registered persons to get refund or to get more adjustment of input tax adopt different ways and means. The department officials have further aggravated the situation. The nation is being dragged directly or indirectly towards uncivilized activities such as fraud, smuggling, substandard and false productions etc. A patriot and true businessman, who wants to contribute honestly, cannot survive in the market. The C.B.R. has closed it's eyes on the real issues and problems and is rather creating more hurdles by further complicating the laws. It, instead of solving the root cause by making simple, understandable and practical laws, is creating more complications. Under the prevailing circumstances, on the one hand besides loss of Revenue the Government is also earning bad name and on the other hand none of the businessmen is happy over the situation. Now instead of going into details of problems and injustices of Sales Tax laws, I would like to suggest some of the practical solutions for consideration. I request to please peruse the proposals from, both angles i.e. from C.B.R. as well as from Businessmen Community's point of view, and you will find that these proposals shall assure that there will be highest Revenue collection with lowest efforts and shall assure documentation of economy. The businessman committee shall happily accept the levy and the tax evasions, frauds and tax refunds etc. shall be reduced to minimum level. The cost of collection of tax shall also be reduced. The proposals are:‑‑ Organization The Sales Tax Department may immediately be separated from Customs Department. The customs offices consider it to be a subordinate department. They are groomed and trained as custom's officers, therefore, they try to drive it like a custom's department. Both departments have different and peculiar operational requirements. The sales tax officials have to interact more with general public than the Customs Officers. Due to frequent inter‑departmental transfers, most of the officers either do not try to learn Sales Tax Laws or do not take sales tax laws seriously. In most of the cases, they instead of taking independent discussions, they depend upon the subordinate staff of Sales Tax i.e. Auditors etc. The officers are usually avoid meeting taxpayers, thus they are left on the mercy subordinate officials. Unless the Sales Tax Department is separated from the Customs, the desired results of Sales Tax cannot be achieved. Taxation (1) The GST may be restricted to only Importers, Manufacturers/Producers and Services Providers categories and all other categories of business be grouped under turnover tax. If Government desires to levy sales tax on every business, this change is necessary. (2) This change means that there shall be no input adjustment. The tax shall be built in the price and at the time of payment it shall be worked out as per following formula:‑‑ T/100 XR Where, T is Turnover and R is rate of Tax. (3) The importers shall pay GST at the time of import and they shall not charge tax at the time of Sales. The G.S.T. shall in this case become part of price. In case the imports are for, export, the G.S.T. paid at imports shall be reclaimed, (4) The manufacturers 'who use imported raw material in their production, they may reclaim GST paid on imports as input, but tax paid on local purchases may not be allowed for adjustment The sales of manufacturers shall be subject to GST, but those manufactures/producers who sell directly to end consumers may pay turnover tax. (The Manufacturers/Producers may be redefined.) (5) The Services which are subject to Sales Tax may charge GST, but no input adjustment be allowed. The hotels, restaurants and caterers may be placed under turnover tax instead of GST. (6) The exporters may be allowed to export at zero rate. (7) The rates of GST and Turnover tax may, if considered, be reduced to 10% and 1.5% respectively. (8) As there shall be no adjustment of input tax; therefore, there shall also be no GST on utility bills. This arrangement shall surely reduce the cost of production. Registration. From 1st July 2004 every person who is holder of NTN, except for salary and property income, may be asked to submit Sales Tax Return compulsorily and till he is not allotted sales tax registration Number the Sales Tax return be accepted on NTN. To confirm submission of Sales Tax returns by every businessman, the income tax returns should also indicate the amount of turnover/GST paid by him. Where it is not being paid, he may be charged with turnover/GST as per sales declared/assessed with Additional tax and penalty. Books. Every person shall maintain sale and purchase register and shall issue sale invoice. The manufacturer shall maintain manufacturing records. Any person or class of persons, who has exceptional books, may apply to Collector Sales Tax for permission to maintain such exceptional Books of Accounts. Returns. To match Sales and Purchases declared in the Income Tax Returns, the Sales Tax return may compulsorily show all types of Sales i.e. Taxable, Zero Rated and Exempted sales. Likewise, all types of purchases i.e. Taxable, Imported or Exempted purchases may be declared in the return. Those who are under turnover tax regime need not to show the tax paid on purchases. In monthly returns an average estimated value of Stock also be recorded. Audit The audit is big threat. The way it is being conducted, it has become a cause of fear and harassment. In this regard it is proposed. (1) The audit must be carried out once in twelve months and the period of audit may not be less than nine months. There should be no audit of the periods after the end of thirty‑six months. This shall bond the department to complete audit in time and regularly. (2) The letter of intimation of audit must clearly not only indicate the period of audit, but also contain the period in which the auditor shall complete his audit work. Presently it is the sweet will of the auditor to take as much time as he can. This practice is not only damaging the departmental reputation but also affecting the business activities of the Registered Persons. (3) Instead of going for detail audit of whole period, there may be a detail audit of maximum two months in a period of twelve months and the detail audit period should be indicated in the letter. In case audit of detail period warrants that whole period be audited in detail, a notice for special audit be issued by Collector sales tax. (4) At the end of an audit the auditor must endorse remarks on the Books and he has completed audit for the period and should fix his signatures with his official stamp and date, so that any delay in audit could be accounted for. (5) The Audit report must be issued with in 45 days from the last date of audit.