Islamabad, March 26, 2013 (PPI-OT): Haji Fazal Kadir Khan Sherani, President, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and Zakarya Usman Chairman FPCCI Working Group on Federal Budget, Mr. Shaukat Ahmed and Mian Zahid Hussain, Chairmen of Direct Taxes and Sales Tax Standing Committees of FPCCI respectively have urged the Chairman Federal Board of Revenue (FBR) to immediately rescind the series of anti-business SROs recently issued unilaterally and without consultation of the representatives of concerned stakeholders merely to generate additional revenues by squeezing the same taxpayers already in the tax net.
The FPCCI Chief, disclosed that the “Zero-rated Scheme” introduced after a great deal of consideration on 6-6-2005 for five export oriented industrial sectors viz textiles, leathers, carpets, surgical goods and sports goods to encourage exports and relieving exporters from the hassle of long and cumbersome refund process has now been replaced with a value added Sales tax @ 2% vide SRO 154(I) 2013, thus pushing them again into the refund regime and open the flood gate of corruption, and pave the path for the fake refund claims.
There is no logic in collecting the tax at 1st stage and then refunding the same on later stage. “Such negative trend in taxation would mount further”, he feared and added that the FBR has abolished the zero-rated sales tax scheme without improving sales tax refund system as according to a recent statement of FBR Chairman, “There is negative collection of sales tax as the refunds are more than the collection”.
Citing another example, Shaukat Ahmed lamented for arbitrarily and exorbitantly increasing the withholding tax deduction rate from 1% to 1/5th (20%) of the sales tax involved and extending the scope of withholding tax agents vide SRO 98(I) 2013 dated February 14, 2013. Referring to commercial importers who pay advance value added tax at import stage, the FPCCI Chief said that they might not be in a position to absorb such additional amount of input tax arrived in shape of withholding and thus accumulation of tax credit would lead to accrual of refund, an uphill task, and open the flood gate of corruption. Moreover, “According to a FBR clarification, the commercial importers are restricted from claiming refund and as such the anomaly may be removed by excluding them from the purview of the SRO”, he proposed.
Mr. Zakarya Usman argued that the provisions of section 8-B of the Sales Tax Act., restricts registered persons from adjustment of input tax over 90% of output tax. it means that the lesser adjustment of 10% u/s 8-B followed by 20% withholding tax make their input tax increased to the extent of 30% and thus they need to secure at-least 30% value addition to achieve self adjustment, otherwise accumulation of input tax eventually force them to seek refunds.
He said that SRO would also come in the way of documentation of the economy because either the manufacturers or importers would start making supplies to unregistered persons or to such registered persons who are not withholding agents. On the other hand, he said, the withholding agents would also be facing great difficulties in getting raw material from registered persons, therefore, these withholding agents would change their status from companies to AOPs or to Sole Proprietorship.
Mian Zahid Hussian lambasted FBR for reverting back to refund regime and said “We need business-friendly policies to boost our businesses but it is unfortunate that the authorities at the helm of affairs are creating more irritants to retard the economy.” He said those changes would not add revenue to the government exchequer rather they would create hardship for smooth running of businesses that were already suffering from liquidity crunch.
For more information, contact:
Syed Masood Alam Rizvi
Federation of Pakistan Chambers of Commerce and Industry (FPCCI)
B-1, Federation House, Main Clifton Road,
Tel: 0092-21-35873691, 93-94
Fax: +9221 3587 4332