ISLAMABAD: An analysis report of the Federal Board of Revenue has raised apprehensions over the concept of single stage sales tax proposing to replace 17 percent sales tax by 5-6 percent non-adjustable levy. It is learnt that Shafqat Mehmood, Director General Automation FBR, has submitted an analysis report on the study “Single Stage Sales Tax System”.
According to the DG Automation FBR, the subject study report has been examined by the FBR’s Computerized Risk-based Evaluation of Sales Tax (CREST) team thoroughly. Subsequently, an analysis report has been prepared and submitted to the FBR. The “Single Stage Sales Tax System” has proposed that sales tax will be charged at single stage like consumption tax and sales tax charged cannot be claimed as input adjustment. No refund or adjustment will eradicate corruption besides increasing tax base and revenue.
Shafqat Mehmood informed the FBR that with the existing model of single stage sales tax (SSST), following issues will further compound the existing confusion:
- Disallowing of input tax credit will add to the cost of the products/items. The incidence of the same will further add to the woes of common man.
- It is very simplistic to levy the tax on one stage of production. The fact is that in production there is always a supply chain, it has not been spelled out at which stage the tax will be collected. It will further be difficult to ascertain as the supply chain is not linked electronically. The Board has earlier conducted experiments in form of issuing Adjustment Notes or Form-S and in the DTRE scheme. On paper the single stage collection looks appealable but in practice the things may turn out to be nightmarish.
- In the indirect taxes the incidences of indirect taxes is always zero-rated in case of goods being exported. The obvious choice for the exporter will be to get the zero-rated invoice which in fact will boast fake or flying invoice menace.
- Asking for the manufacturer to give the CNIC number of buyer failed miserably in the past. In the telecom, POL, natural gas and sugar sectors all the sales are generally made to unregistered persons. It is also not certain the very purpose of capturing the CNIC since the liability has already been discharged by the manufacturer. Maintaining the CNIC by the manufacturers will be an uphill task and it will further add the GST in value added tax (VAT) mode that essentially require to retain the identity number of buyer. It means that this is a policy flaw which does not have root in GST in VAT mode.
- The informal economy will swell when the buyer does not have the incentive of claiming input tax credit, Director General Automation FBR report added.
