Value-added sector problems to be addressed in RAC July 12 meeting: FBR

Federal Board of Revenue Chairman Salman Siddiq on Saturday gave assurance to the value added sector that its problems will be addressed in the upcoming meeting of the Revenue Advisory Council, on July 12, 2011. He was talking to media after meeting with the representatives of value added sector at Sindh Board of Investment (SBI) office here.
He said the business community would be taken on board in policymaking process. He said the RAC is striving to remove anomalies being faced by the value added sector after having been inducted its supplies in tax net in current fiscal year.
The FBR chief said new tax measures were aimed at segregating bona fide taxpayers from non-bona fides besides bringing unregistered persons in tax regime. He said the suggestions of the value added sector regarding new tax measures would also be discussed in next meeting of RAC to find ways to resolve its problems. He said the government had decided to rationalise the rate of sales tax to get documentation and for proper tax collection on local sales.
Salman said the decision to impose sales tax on capital goods was made as a revenue chunk of Rs 7 billion was identified during monitoring of the transactions of commercial importers for three months. Answering a question, he said as per Record Note, which was promulgated in September 28, 2010, Sindh province would only collect sales tax on services where no inputs or cross adjustments was made. Earlier, the representatives of value added sector headed by Zubair Motiwala, advisor to the CM on investment, spelt out grievances on new tax measures.
He suggested to the chairman FBR to reduce the rate of withholding tax from 3.5 per cent to 1 per cent on dyeing and chemicals besides urging him to take positive measures regarding the issue of sales tax on capital goods. Later, an understanding, which is supposed to be finalised in upcoming revenue advisory council meeting, has been developed between the FBR and value added sector. The same are as follows:
--- The commercial or industrial importer will have to deposit 16 per cent sales tax to the customs authorities through post-dated cheques or bank guarantee against machinery import. And the same would be returned back after filing first sales tax return.
--- The policy to distinguish commercial and non-commercial importer would be drafted by the FBR.
--- The rate of withholding tax will be brought down from 3.5 per cent to 1 per cent on dyeing and chemicals.
--- The board will also take remedial measures to resolve the issue related to Duty and Tax Remission for Export (DTRE).