Retailers may pay sales tax at 10 percent value-addition

ISLAMABAD (August 10 2004): The Central Board of Revenue (CBR) announced here on Monday that retailers have been given the facility to pay sales tax on the basis of 10 percent value-addition, instead of 15 percent, on their purchases.

For this purpose, the Board has issued a one-page simplified retail tax return-cum-challan form for retailers.

The CBR has amended special procedure for payment of retail tax 2004 through SRO 673(I)/2004 to attract more retailers for GST registration.

Official sources told Business Recorder that CBR has no intention to open previous cases, and retailers who would pay sales tax on minimum 10 percent value-addition would be exempted from audit. However, tax authorities hoped that a large number of retailers would avail the amended scheme.

The retailers who want to pay sales tax for the month of July 2004, can file return on the new pro forma by August 15.

Officials said that a simplified scheme for payment and collection of sales tax was introduced in budget (2004-2005), envisaging payment of sales tax on value addition basis at the retail stage.

However, retailers having annual turnover of Rs 5 million and above approached the Board for incorporating some improvements in the scheme making it more acceptable.

The United Retailers Association, representing all four provinces, opined that 15 percent value-addition was harsh and contrary to government's intent to facilitate non-compliant sectors by redressing their genuine problems.

A large number of items manufactured by multi-national companies including every day toiletries and kitchen consumable were sold at a lesser value addition against the rate specified under the rules.

The CBR has reduced the rate of value-addition up to 10 percent and they are now required to pay this value-addition on the value of their purchases during that month. This will also remove the anticipation problem of sales tax payment regarding seasonal bulk purchases.

Officials said that it is a long-term policy decision and retailers who register under the said scheme will be immune from audit of the period prior to registration.

Similarly, the retailers who discharge their liabilities under the scheme shall be also be immune from audit. It is expected that the retailers shall duly contribute their share of tax in the national exchequer.

Under the notification, the retailers would issue cash memo for each supply in the given form and maintain record of purchases indicating description, quantity and value of goods purchased both excluding sales tax and value inclusive of sales tax, separately and the name and address of the seller.

The 'value addition' means the value added by the retailer on the value for which the goods are acquired (purchased) by him and calculated as per rules.

For a particular tax period, the value for which the goods are acquired shall be the sum of the values indicated in all the invoices, bills, vouchers, cash payment slips and cash memos against which the goods are purchased by a retailer in a tax period.

The value addition will not be less than 10 percent of the total value of purchases made during the said period, notification added.

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