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Amendments in Sales Tax Act proposed by MNCs

ISLAMABAD (April 14 2006): Foreign investors have proposed various amendments to Sales Tax Act, 1990 pertaining to payment of the tax on the basis of value addition and audit of registered taxpayers to simplify the revenue collection procedure.

In their budget proposals for fiscal 2006-07, a group of multinational companies has suggested amendments in sections 7A, 10, 25 and 45 of the Act along with relevant Statutory Regulatory Orders (SROs).

The companies had strongly opposed collection of sales tax on the basis of retail price from the manufacturers of consumable goods. They opined that the manufacturers of many consumable goods, listed in the Third Schedule of the Sales Tax Act, are required to pay sales tax on retail price instead of value addition. More items were included in the Third Schedule in the last budget.

This decision is against the principles of VAT mode to levy sales tax on all locally-manufactured goods, they viewed.

The levy of sales tax on retail price also creates recovery problems. Therefore focus must be on expanding the tax-base by registering more retailers, they added.

The companies pointed out that sales tax laws do not specify the time limit for the auditors to complete the audit, which is creating problems for the registered taxpayers, adding amendment is needed in indicating time for the audit.

Presently, it is mandatory for the commercial importers to pay sales tax on 10 percent value addition. The companies observed that the requirement of sales tax payment on the basis of minimum value addition was mandatory for the commercial importers for audit exemption.

They were of the view that the provision is creating problems for the registered person carrying out multiple business activities under a single sales tax registration number (STRN). They demanded amendment in the Act to check the misuse of the facility by the importers conducting more than one business.

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