Central Excise Act being redrafted

ISLAMABAD (February 26 2005): The Central Board of Revenue (CBR) is redrafting Central Excise Act, 1944 to make it more compatible with the Sales Tax Act, 1990 and will rescind all the provisions and rules which have become redundant. Official sources told Business Recorder on Friday that by reducing the scope of Central Excise Act, 1944, central excise duty (CED) has been withdrawn from a number of commodities and central excise department has been made part of sales tax department.

There is a need to rewrite the Excise Act keeping in view the international business dynamics and day to day business practices in the country. Hopefully, the new Central Excise Act will be issued in the budget of 2005-2006, officials added.

Member Sales Tax Shahid Ahmed on Friday told quarterly conference of collectors of sales tax and central excise that the board was currently in the process of rewriting/revising the Central Excise Act. The purpose of undertaking this exercise was to simplify and streamline the whole law in accordance with present day requirements, member sales tax added.

While commenting on the sales tax audit suspension, Chairman, CBR, M. Abdullah Yusuf said that audit has already been suspended, but it would not remain suspended forever. The suspension case will be reviewed and CBR will devise modus operandi for effective audit mechanism.

He said that the influx of smuggled foreign polyester cloth is one of the major irritants, which needs to be addressed by the CBR and the collectorates through effective measures including rationalisation of tariff structure.

Abdullah Yusuf observed that the smuggling of foreign cloth was not only causing huge revenue loss to the country but also hindering growth of local textile industry and adversely affecting exports of the country which were predominantly cotton-based.

“We have to rationalise tariff structure to discourage smuggling as the administrative measures taken in the past failed to give desired results”, the chairman said. The views of all stakeholders including manufacturers-cum-exporters will also be sought before taking any final decision in this regard.

Officials quoted chairman saying that there is a need of tariff rationalisation for checking under-invoicing of Chinese yarn and fabrics.

Tariff rationalisation discourage smuggling, as CBR is getting handsome amount of custom duty from tyres, tubes, tea, beetle nut and the smuggling of these items has been considerably reduced.

Smuggling should be replaced with the regulated imports which would contribute in the form of custom duty, he said.

Highlighting sales tax refunds procedure, the chairman said that the collectors must make all efforts for substantial reduction in disposal of pending refund claims. There is a need to accelerate payment of refund by removing defects, drawbacks and loopholes of the existing system he emphasised.

Talking about the recently introduced system of alternate dispute resolution (ADR), the chairman said that it has already produced encouraging results. Out of total 200 sales tax cases filed by the taxpayers under ADR, over 50 percent of the cases have been decided in favour of taxpayers and the remaining cases would be shortly finalised by the ADR committees.

He called upon the tax managers to apprise the taxpayers about the advantages of the ADR system, which would help reduce the level of litigation.

He advised the collectors not to indulge in unnecessary litigation, as this is only wastage of time, energy and money not only of taxpayers but also of the department. Chairman observed that the past experience revealed that the actual recovered money through litigation was not more than two or three percent.

He called upon the collectors to discuss and debate the issue and come up with meaningful suggestions to revamp and regulate the refund system in an electronic environment.

Member Sales Tax, Shahid Ahmed, speaking on the occasion, briefed the conference about overall performance of the collectorates of sales tax and central excise. He said that the performance of most of the collectorates was up to the mark but there are few which have not performed well during the second quarter of current financial year ending on December 31 last. He reminded the collectors that revenue collection targets were the main criterion to judge their performance.

Talking about the process of registration of firms/individuals, the member said that the issue was not simply to register the companies but to enhance the number of return filers.

Collector (Audit), large taxpayers unit, Karachi, in his presentation, briefed the conference on zero-rated delivery of goods and services scheme. Performance of STARR (Sales Tax Automated Refund Repository) and STREAM (Sales Tax Risk Evaluation & Management) also came under review during the conference.

It was informed that out of the total number of 67,475 refund claims, 65,041 claims were verified by STARR and consequently an amount of Rs 99.96 billion was sanctioned. However, an amount of Rs 6.3 billion was held on account of blacklisted/suspended/deregistered unit etc.

Outstanding amount recovered through STARR was Rs 0.94 billion. Under STREAM project, the total number of token allotted till February 24, 2005 in sales tax collectorates of Lahore, Karachi and Faisalabad were 196.

It was further informed that CBR is currently in the process of notifying new refund rules and had established central refund office. Provisions for online payments were also under consideration. Removal of the shortage of technical staff in STARR and STREAM projects is also under active consideration of the board.

The conference was also briefed on various other issues confronting with sales tax and central excise including bottlenecks in registration process at local registration office, revised form of sales tax return and automation of collectorates. Strategy to be adopted to achieve tax collection targets set for third quarter was also evolved during the meeting.

The conference was also attended by CBR's Member Legal Saeed Ahmed Zaidi, Member(IMS) Aamir Z. Chaudhry and Member(Admn) Iftikhar Ahmed.

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