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Three percent additional sales tax on spun yarn removed

ISLAMABAD (December 31 2002) : Giving major tax relief to the textile industry, the government has exempted the manufacturer-cum-suppliers of spun yarn from 3 percent 'additional' sales tax ('further tax') from January 1 to April 30, 2003, countering the phenomenon of flying invoices.

The decision was notified following Special Procedure for Manufacturers-cum-Suppliers of Spun Yarn Rules, 2002 through an SRO.966(I)/2002 here Monday. The provisions of section 3(1A) and section 73 of the Sales Tax Act, 1990 have been relaxed only for those suppliers of spun yarn who are certified members of All Pakistan Textile Mills Association (Aptma).

The concession would be available after fulfilment of following conditions.

First, the units have to furnish agreed information of supplies to collectors of sales tax as per provisions of section 73 on monthly basis.

Second, they would also provide the data pertaining to supplies made from July 1, 2001 to December 31, 2002, the sale proceeds of which have been received other than through the bank instrument without complying with the provisions of section 73 of the Sales Tax Act, 1990.

The CBR would not extend this concession to the units where contravention reports have already been framed for non-fulfilment of provisions of section 73.

The Central Board of Revenue (CBR) has given this relaxation to textile units for a period of four months on a proposal floated by Aptma. The tax authorities would review the revenue impact during March 2003 in consultation with Aptma to decide on further extension of the facility.

The CBR and Aptma have mutually agreed that the relaxation of 'further tax' would not only check the menace of flying invoices, but would also enhance the general sales tax (GST) revenue, as lesser refunds were being claimed.

The CBR has noted that some of the unscrupulous businessmen get themselves registered with the collectorates of sales tax using fake/incomplete addresses to avoid payment of 'further tax'. This was identified in the yarn sector, which pays largest amount of sales tax. Furthermore, the phenomenon of flying/fake invoices is also common among the yarn units. On the assurance of Aptma that the concession would be instrumental in increasing revenue from textile industry, the CBR notified the exemption of 'further tax' for a period of four months.

Following is the text of the Special Procedure for Manufacturers-cum-Suppliers of Spun Yarn Rules, 2002 issued on Monday:

S.R.O.966(I)/2002: In exercise of the powers conferred by sub section (1) of section 71 of the Sales Tax Act, 1990, read with clause (a) of sub-section (2) of section 13 thereof, the Federal Government is pleased to make the following rules namely:

1. Short title, application and commencement – (1) These rules may be called the Special Procedure for Manufacturers-cum-Suppliers of Spun Yarn Rules, 2002.

(2) They shall apply to such supply of spun yarn of all sorts by manufacturers-cum-suppliers of spun yarn who are members of the All Pakistan Textile Mills Association (hereinafter abbreviated as Aptma) and duly certified by Aptma.

(3) They shall come into force at once.

2. Definitions.- (1) In these rules, unless there is anything repugnant in the subject or context-

(a) “Act” means the Sales Tax Act,1990;

(b) “Annexure” means the Annexure to these rules;

(c) “manufacturers-cum-suppliers of spun yarn” means a person registered as manufacturer of spun yarn under section 14 of the Act, and who is a member of Aptma; and

(d) “spun yarn” means yarn spun from cotton or other natural and man-made materials or any blends thereof.

(2) The words and expressions used but not defined in these rules shall have the meaning assigned to them under the Act.

3. Exemption.- Supply of spun yarn by manufacturers-cum-suppliers of spun yarn shall be exempt from the levy of further tax under sub-section (1A) of section 3 of the Act provided that,-

(i) the manufacturer-cum-supplier makes supplies of spun yarn against crossed cheque or any other banking instrument showing transfer of payment in the bank account of seller from the bank account of buyer and the information about the supplies made is furnished to the Collector of Sales Tax having jurisdiction over the manufacturer-cum-supplier, in the form as set out in Annexure-A (hard copy along with soft copy in Excel format) by the 15th day of the following month;

(ii) the supplies for which the information cannot be provided as required under clause (I) above shall be deemed to have been made to an unregistered person for which there will be no levy of further tax if the information about such supplies is made to the Collector of Sales Tax having jurisdiction over the manufacturer-cum-supplier in the form as set out in Annexure-B (hard copy along with soft copy in Excel format) by the 15th day of the following month;

(iii) the manufacturer-cum-supplier shall issue sales tax invoice in case of supplies as specified in clause (ii) above giving all the particulars of the buyer except the sales tax registration number; and

(iv) the manufacturer-cum-supplier supplies the information in respect of supplies made after the 1st July 2001, but prior to the issuance of these rules without receipt of sale proceeds through a banking instrument showing transfer of the payment from the bank account of the buyer to the bank account of the supplier of spun yarn in the form as set out in Annexure-C (hard copy along with soft copy in Excel format) provided that such information from the 1st July, 2001 to the 30th June, 2002, shall be supplied up to the 30th April, 2003, and information for the 1st July, 2002 to the 31st December, 2002, to be supplied by the 28th February, 2003; and

(v) the Federal Government or the Central Board of Revenue shall neither initiate any adverse action for non-compliance of section 73 of the Act nor charge or recover the amount of further tax on supplies prior to the issuance of these rules, provided that besides the information required to be furnished under clause (iv) above, no contravention report has already been initiated against the manufacturers-cum-suppliers for non-payment of further tax by issuing flying invoices.

4. Miscellaneous.- All provisions of the Act and the rules made thereunder, insofar as these are not inconsistent with these rules shall, mutatis mutandis, apply to manufacturer-cum-supplier of spun yarn.

5. These rules shall remain in force from the day of 1st January, 2003 till 30th April, 2003.

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