KARACHI (June 28 2003) : The government intends to gradually withdraw central excise duty from a number of items and restrict it to only those five to six non-essential items whose consumption is not very desirable such as cigarettes, alcohol, etc.
Talking to the editorial board of Business Recorder, Ramzan Bhatti, member sales tax, on Friday said that the central excise duty would be shortly withdrawn from a number of items that are needed for industrial use and are essential in the production of exportable items.
During the discussion Bhatti highlighted the salient features of the taxation system and stressed the need for clear understanding of the entire regime so that the purpose of taxation and rationale behind different rates is clear to the taxpayer.
He explained that the irritants pointed out by associations had been removed to a considerable extent to make the law easily enforceable.
Defending the 15 percent GST, Bhatti said its rate could not be reduced as it was the main source of government revenue.
“Only one percent reduction in the GST would cost Rs 17 billion to the exchequer and this loss would be very high and unaffordable,” he said.
He said that it would be wrong to presume that after reducing the GST rate the loss could be made up as the tax net was expanded.
This presumption would be misleading. “Reducing the GST rate and finding new avenues to offset the effect and making the exercise tax-neutral is neither easy nor a feasible proposition,” he said.
Bhatti said that the SRO 507 had led to a controversy over the sale of taxable goods to any person who is not registered under the Sales Tax Act and if such supply is made, the registered person shall not be entitled to claim or deduct input tax on it.
Goods whose sale SRO 507 restricts to unregistered persons, Bhatti clarified, are goods manufactured with new materials, parts, sub-components and components imported under various concessionary notifications only, this SRO will encourage more people to get registered.
Bhatti said many incentives were provided in the sales tax law, under which equipment in the agriculture sector had been zero-rated.
“It would bring relief to farmers, induce them to increase production and provide employment.”
He said that 45 amendments/improvements had been made in the tax laws to make it easy for the people to follow.
More than 35 amendments were made to remove irritants. The list includes measures from facilitating filing of return/declaration and details of transactions to taking refunds.
He referred to Section 66 relating to refunds and said the revised returns could also be filed now.
Facilities of self-correction in revised returns had been provided.
Those who availed of these facilities before a notice from the department or before an audit was conducted would not be penalised but to deter them from defaulting on deadlines and shirking their responsibilities after a notice was issued the defaulters would be required to deposit one-fourth or 30 percent of the evaded amount would have to be deposited.
He said that penalty for late filing had been changed from Rs 5,000 to Rs 100 per day of delay.
Additional tax rate had been reduced from 2 percent to 1 percent.
He said that legal protection had been granted to one audit to a taxpayer's accounts in a year.
After the audit the auditors would discuss their findings with the taxpayer and settle objections.
In such cases where notices would be necessary, first observations of the auditors would be conveyed in writing to which the taxpayer would be expected to reply within 15 days before any further action is initiated.
Bhatti said that alternative dispute resolution committee had been strengthened.
This committee would have at least three members, two from the private sector and one representative of the CBR.
Those who would approach this committee for the settlement of their disputes would also retain their right to appeal in a court of law.
This facility would doubly assure relief to the aggrieved party.
As soon as the matter is referred to this committee a stay order would be issued and the department would not be able to proceed against the applicant as long as the matter remain unsettled.
He said that changes had been made to streamline taxes on the disposal of scrap or second-hand goods.
“Earlier, you were supposed to pay sales tax but now it is no more there. Therefore on an item on the purchase of which we do not allow input tax, we do not feel ourselves entitled to claim tax on its sales proceeds.”
Referring to SRO 575, Bhatti said that improvement in the system of refund of claims had been made and a committee working under the chairmanship of the Export Promotion Bureau was already in place.
He said that STRR (Sales Tax Refund Repository) software had been prepared and was accessible to anyone interested in knowing the status of his case.
This software receives applications and issue receipts, points out defects and weaknesses in each case and calculates all claims.
“We have suggested trade bodies and associations to take advantage of this software.”
The software would also introduce complete transparency in the system. We keep our data open.”
Bhatti said that earlier the CBR was not able to take legal action against certain tax evaders but now there would be legal cover for any action.
“We can now investigate, issue show-cause notice and advertise a person as blacklisted for, business malpractices. This would protect all those who want to do legal business keep their transactions and accounts clear.”
He said he conceded this would not deter a blacklisted person from doing business but would, at least, provide protection to those who want to remain in the legal framework of business.
He said that the introduction of Section 40-B had brought many into the tax net and had increased the revenue.
Under the law the CBR is competent to post one of its officers or investigators at a business concern to know/judge/evaluate the size and kind of business.
“Many hotel owners after the introduction of this system have come to us on their own with the offers to increase the tax amount they are paying more than 10 to 15 times.”
Bhatti said that Section 40-B had been introduced on the recommendation of different associations who had complained about tax evasion by certain groups of businesses.