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Sales Tax Act 1990: Revenue Board vetting consultant's proposal to annul Third Schedule

ISLAMABAD (January 31 2003) : The Central Board of Revenue (CBR) has made some observations on the Maxwell Stamps proposal to bring fruit/vegetable juices, ice cream, aerated waters/beverages, syrups and squashes and cigarettes in the normal GST regime.

A top sales tax official told Business Recorder on Thursday that the Third Schedule is against the basic concept of VAT mode of payments as different countries collect tax from different categories of taxpayers considering their own circumstances and Third Schedule is effective in Pakistan to certain extent keeping in view the tax culture prevailing here.

However, the CBR is examining the pros and cons of the proposal to abolish Third Schedule of the Sales Tax Act, 1990.

This proposal is a part of the sales tax reforms strategy document prepared by consultants, which is being examined by the tax authorities. The CBR has submitted its observations to the consultants.

He pointed out that, if the CBR agrees to withdraw Third Schedule from the Sales Tax Act, it would increase the documentation and book keeping cost of the government, private/public sector as well as taxpayers operating under the Third Schedule.

Similarly, the tax authorities were required to register a large number of taxpayers after the abolition of the above-mentioned law, which may require extra effort to register these persons under standard 15 percent GST regime.

He added that nothing is final in this regard and CBR is still in the phase of analysis in consultation with the Maxwell Stamps.

Maxwell Stamps, tax consultants of Central Board of Revenue (CBR), have strongly recommended to abolish Third Schedule of the Sales Tax Act, 1990 and asked the authorities to bring fruit/vegetable juices, ice cream, aerated waters/beverages, syrups and squashes and cigarettes in the normal GST regime to encourage retailers and wholesalers to register with the sales tax department.

The consultants were of the view that the production line of the items listed in the Third Schedule eg fruit juice, ice cream and cigarettes is such that an audit trail from manufacture through distribution could be established. Moreover, including these commodities in the normal sales tax system is likely to encourage wholesalers and even larger retailers to for Sales Tax registration.

They will then be able to obtain the benefit of input tax deduction on their purchases of these products.

Another benefit of removal of the Third Schedule is that it would make computer checking of sales tax returns more reliable.

At the moment there are inconsistencies in the value and tax figures on a return from a taxpayer dealing in these products, consultants added.

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