Abolition of forum sought
recorder report
ISLAMABAD: Tax Reform Commission's (TRC) sub-committee on sales tax and federal excise duty recommended abolition of Commissioner Appeal forum with the facility to directly file appeals to the Appellate Tribunal, restoration of Alternative Dispute Resolution Committee (ADRC), allowing revision of sales tax returns without Commissioner's approval and rationalizing discretionary powers of Commissioners Inland Revenue. Sources told Business Recorder here on Thursday that the TRC's sub-committee has recommended procedural and legal changes in sales tax and federal excise laws. It has also given detailed recommendations on the hardships and compliance issues being faced by taxpayers.
The TRC has proposed that the decisions of Commissioner Appeals usually favor the exchequer. It is therefore suggested that this forum should be eliminated and registered persons should be allowed to file the appeals directly to the Appellate Tribunal. Alternatively, administrative and procedural changes should be brought so as to make the role of Commissioner Appeals more independent and authoritative.
In line with the provisions of Income Tax Law, a new section may be introduced in the Sales Tax Act, 1990 to the effect that any question of law decided by Appellate Tribunal Inland Revenue and High Court will be given an effect in the returns/orders for the subsequent period, until the order or decision is reversed by a superior forum, it recommended.
TRC recommended that the scheme of Alternative Dispute Resolution Committee (ADRC) should be restored. The decision of ADRC should be made binding on FBR and only in case of serious reservations and compelling reasons to be given in writing, an authority may be given to reject the ADRC orders after obtaining mandatorily written permission from Chairman FBR. All decisions of ADRC should be placed on web-site. TRC recommended that restrictions on claiming input tax on building materials etc introduced in 2013 should be removed as it discourages investment in large projects.
It said that section 8B of the Sales Tax Act, 1990 restricting the claim of input tax up to 90 percent of output tax be removed. Until Section 8B is in the Act, a suitable amendment be made in the SRO 647 of 2007 to exempt the reduced rate sectors (which were zero rated previously) from the application of section 8B.
TRC recommended that Extra tax at 5% is recovered on supply of electricity and gas to unregistered or registered but inactive taxpayers, having commercial or industrial connections where the monthly bill exceeds Rs. 15,000.The initiative was for broadening the tax base, however, in the process if a genuine taxpayer suffers in the following manner:
1. Person is registered with provincial sales tax authorities instead of FBR.
2. Certain industries, like banking and telecommunication companies, have numerous branches and outlets; however Sales tax registration certificate issued to them usually shows particulars of principal place of business, resultantly other places suffer sales tax withholding on their utility bills. Updating of the record on FBR database will take considerable time.
The above issues needs to be streamlined.
About the concept of bad debt, it recommended that the procedure for issuance of Debit Credit notes under section 9 of the Sales Tax Act, 1990 may be amended to allow reclaim of sales tax which becomes a bad debt subsequent to supplier's payment thereof to the exchequer, and consequent to irrecoverability of payment from buyer. In order to avoid misuse of the facility, only the FBR should have the exclusive powers to allow reclaiming of sales tax on bad debts.
It is recommended that sales tax should be made applicable on actual delivery of goods instead of advances received, as the law existed prior to the Finance Act 2013. Sales tax on advances has created unnecessary hardships for registered persons. It results in discrepancies on CREST system.
TRC recommended that registered persons should be allowed to adjust Further Tax, which is payable at the rate of 1% on sales made to unregistered persons against input tax.
About the Active Taxpayers' List (ATL)-Sales Tax General Order (STGO) 34/2010, TRC recommended that the mechanism of ATL needs to be streamlined. Presently, non-filing of income tax/sales tax return/withholding statements render the taxpayer inactive although delay/non-filing is a result of technical issues on FBR portal which are beyond the control of the taxpayer.
TRC further recommended that the Large Taxpayer Unit (LTU)-registered taxpayers should not suffer tax withholding, as they are generally tax complaint. It recommended that Rule 14A of Sales Tax Rules, 2006 should be revised to allow revision of return, without approval of Commissioner, where payment of tax/duty is involved. In Annexure B, a list has been compiled highlighting discretionary powers of the Commissioner-Inland Revenue under the Sales Tax Act, 1990 and there is a proposal for amendment in rationalization of these powers.
It has further recommended alignment of concept of adjudication under section 11, with the Audit Policy of FBR. The procedure for adjudication under different provisions e.g. section 21, 25, 27 should be clubbed with section 11; like-wise sections 25, 32 and 32A should be aligned with FBR's Audit Policy.
