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CBR to launch recovery drive against service providers

ISLAMABAD (May 04 2005): The Central Board of Revenue (CBR) has decided to launch a recovery drive against service providers who did not deposit a single penny in the national kitty being not within the tax net during last one year.

Official sources told Business Recorder on Tuesday that there are certain service providers who deposited meager amount just to fulfill the formality of operating as a registered taxpayer during the tax year 2004-05. There are no chances that CBR would withdraw GST from any service in the coming budget. However, if any service provider has not deposited any amount, the CBR would take strict action against him.

On the issue of tax rate, officials admitted that the CBR should introduce 'concessional rate' of general sales tax (GST) for professionals.

The CBR has not yet taken any decision regarding the rate of sales tax to be levied on new services. But it is international practice that the GST rate is less on services as compared to manufacturers who obtain input tax adjustment. On the other hand, service providers can not claim adjustment like persons engaged in supplies of taxable goods. Persons providing services are using their skills and are not actually engaged in production or supplying of taxable goods.

Sources said that one of the arguments is to introduce below 15 percent tax rate for new service providers. This would not only help in avoiding reaction from the professionals, but would also gradually increase the revenue, whereas sudden slapping of 15 percent GST might have negative impact.

Tax consultants say that if the CBR brings the service providers within the tax net in the budget, it is likely to impose standard excise rate of 15 percent. Service providers will collect the tax from the consumer and subsequently deposit the same in the national kitty. Service providers would not have any disadvantage by coming into the tax net as they would not have to pay a single penny from their pocket. However, they would have an additional advantage of claiming adjustment against electricity, telephone and other excisable/sales tax services.

Tax experts added that the GST rate on services and goods is not different in developed countries, as claimed by tax officials.

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