KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has said that further sales tax at two percent has resulted in promoting menace of flying invoices causing generation of illegal refund claims.
The FPCCI, in its budget proposals 2017-18, said that further tax at 1 percent was introduced in the Finance Act, 2013-14 and subsequently increased to 2 percent on supplies made to unregistered persons.
The objective of further tax is to penalize with additional burden of sales tax where the buyer is not registered and government is not getting value addition sales tax. Keeping this objective in view, the law provides exclusion in certain conditions such as sales tax on retail price items falling under Third Schedule.
However, certain categories of persons who are paying value addition of sales tax in advance like commercial importer or persons who are paying extra sales tax under special procedure rules are not excluded from the purview of further sales tax.
The imposition of further tax resulted in:
- a) Inconsistency of the law.
- b) Unnecessary litigation on this issue already pending in Higher Courts.
- c) Menace to promoting flying invoice culture results in incremental refunds / adjustment.
The FPCCI recommended that:
- a) Commercial importers, items chargeable to extra sales tax levied by SRO 896(I)/2013 and fixed rate of sales tax falling under special procedure be excluded from application of further sales tax.
- b) All industrial raw material including chemical and dyes from Chapter 25 to Chapter 55 of Customs Act, 1969 be exempted from Further Tax.
- c) Rate of further sales tax be reduced to 1 percent from 2 percent on all items except raw materials given in Chapter 25-55 of Customs Act, 1969 which should be exempted from Further Tax.
The apex trade body said that the withdrawal of further tax would bring consistency within the sales tax law and procedure and reduction of litigation.
