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Importers given immunity from audit, sales tax on value-addition

ISLAMABAD (August 05 2004): Fulfilling a major demand of importers, the Central Board of Revenue (CBR) has given immunity from audit to all those commercial importers who would pay sales tax on the basis of value-addition.

The CBR has also withdrawn the condition of detailed audit of commercial importers under new amended rules.

The CBR has amended Sales Tax Special Procedures Rules 2004 through SRO 657(I)/2004 issued here on Wednesday.

Official sources told Business Recorder that commercial importers were confused over the term 'detailed audit' as specified in the procedure for collection of sales tax.

They opined that the sales tax auditors have the authority to conduct audit even in cases where the commercial importers pay sales tax on minimum value-addition of 10 percent. Thus, the CBR should revise the rule pertaining to 'Exemption from Audit'.

Under the previous rule (Exemption from Audit), a commercial importer who paid sales tax on value-addition basis as prescribed under these rules for a year would not be subjected to any audit for that year, and detailed audit would be conducted of a commercial importer who would pay sales tax in any manner other than prescribed in these rules.

Now, the CBR has redrafted the rule, which says that 'payment of sales tax on value-addition basis shall be mandatory and the commercial importer shall be exempt from the requirements of audit'.

According to CBR officials, the immunity from sales tax audit does not mean that the auditors may not conduct audit in cases where there is definite information of evasion or fraud etc under the Sales Tax Act, 1990.

There would be detailed audit in cases of information, while immunity from audit would continue provided the commercial importers pay sales tax on 10 percent value-addition.

FOLLOWING IS THE TEXT OF THE NOTIFICATION ISSUED ON WEDNESDAY: In exercise of the powers conferred by section 71 of the Sales Tax Act, 1990, read with clause (9) of section 2, sections 3, 3AA and 4, sub-section (2) of section 6, section 7A, clause (b) of sub-section (1) of section 8, clause (a) of sub-section (2) of section 13, sections 26AA and 34A, and the first and second provisos to section 45 thereof, the Federal Government is pleased to direct that the following further amendment shall be made n the Sales Tax Special Procedure Rules, 2004, namely:-

In the aforesaid Rules, for rule 14, the following shall be substituted, namely:-

“14 Exemption from audit.-Payment of sales tax on value-addition basis as prescribed under these rules shall be mandatory and the commercial importer shall be exempt from the requirements of audit.”

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