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Revenue Board orders prompt GST recovery from six five-star hotels

ISLAMABAD (January 27 2003) : On recommendations of Directorate General Revenue Receipt Audit (DGRRA), the Central Board of Revenue (CBR) has ordered prompt GST recovery from six leading five-star hotels and an international food chain of Karachi.

The cases relate to the non-payment of sales tax on the supply of beverages/bakery items and 'takeaway items' by hotels and food chain, respectively.

The Large Taxpayer Unit (LTU), Karachi, has conveyed to the CBR's Sales Tax Audit, Islamabad, that the supplies made in Pakistan, except those specified in the Sixth Schedule of the Sales Tax Act, 1990, are liable to sales tax at the rate of 15 percent under section 3 and section 13 of the Sales Tax Act.

Similarly, according to a CBR clarification, beverages (both alcoholic and non-alcoholic) and bakery items are liable to sales tax.

The audit objected that the Collector of Sales Tax, Karachi (East), failed to collect sales tax on beverages and bakery items supplies made by six five-star hotels during and prior to 1998-99. This irregularity resulted in the loss to government revenue to the tune of Rs 1,164,765.

The audit pointed out the omission to CBR in 1999, but no reply was furnished.

Large Taxpayer Unit (LTU), Karachi, giving latest position, said that cases of all these hotels were decided against them. In this regard, recovery notices were issued.

Responding, the hotels managed to get stay orders from the tribunals and further action would be taken on receipt of orders from tribunals/adjudication officers.

Referring to another audit objection, the LTU, Karachi, stated that a food chain in Karachi is not paying sales tax on the supplies made/sales at 'takeaway' counter, which is exclusively selling packed 'food articles'.

Non-levy of sales tax at this stage resulted in loss of revenue to the extent of Rs 613,055.

According to the break-up, total sale was Rs 3,715,487.85; central excise duty (CED) at the rate 10 percent, Rs 371,548.79; DPV, Rs 4,087,037.00 and sales tax at the rate of 15 percent was Rs 613,055.

Audit said that since the payment of sales tax of Rs 613,055 was not made within the due dates the unit is liable to Rs 803,102 additional tax.

According to the latest position, on appeal against the Order-In-Original (OIO) of November 30, 2001 passed by the deputy collector adjudication-III, the tribunal vide order of April 18, 2002 has remanded the case back to the adjudicating authority to decide it afresh.

Adjudication officer has issued SCN. Last hearing was held on December 11, 2002. Further action will be taken on the receipt of fresh 'OIO'.

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