Alternate documentation measures to help collect 1pc tax

SOHAIL SARFRAZ

ISLAMABAD: The Federal Board of Revenue Member Inland Revenue Shahid Hussain Asad on Tuesday said the business community has strongly resisted sales tax SRO 191(I)/2011 for the last one year and now an alternate documentation measure would be taken by making mandatory for manufacturers to collect one percent tax against the sales made to traders/distributors under Finance Bill (2012-13).

Top tax manager informed the Senate Standing Committee on Finance that the FBR tried its level best to obtain the computerized national identity card numbers (CNICs) and National Tax Number (NTNs) of unregistered buyers of importers, exporters and manufacturers through SRO191(I)/2011. However, the business and trade is not ready to provide the CNICs, Sales Tax Registration Numbers or NTNs of their buyers. Despite efforts of the FBR, the business community is not ready to comply with the documentation measure of the SRO191(I)/2011. The FBR has time and again requested the business community to provide basic particulars of their buyers, but nobody is ready to provide the information. As an alternate measure, a new provision has been introduced in the Finance Bill (2012-13).   

To ensure documentation of the economy and to bring traders/distributors on tax roll, it is proposed that the manufacturers shall be made withholding agents to collect 1 percent tax against the sales made to traders/distributors. However, the tax so collected shall be adjustable against their income. "It is a substitute of the SRO191(I)/2011 and a major documentation measure to ensure that the manufacturers should collect one percent tax against the sales made to traders and distributors," Shahid Hussain Asad said.

Under Finance Bill (2012-13), every manufacturer, at the time of sale to distributors, dealers and wholesalers, shall collect tax at the rate specified in Part IIA of the First Schedule, from the aforesaid persons, to whom such sales have been made. (2) Tax credit for the tax collected under sub-section (1) shall be allowed in computing the tax due by the person on the taxable income for the tax year in which the tax was collected, it added.

FBR Member was confident that if the Parliament approves the proposal, it would play an important role in documentation of economy. As compared to SRO191, the new documentation scheme would be implemented with the help of manufacturers.

FBR Member Inland Revenue informed the committee that in the Finance Bill 2012 they have proposed changes and sought parliament's approval for making mandatory for the importers, exporters and suppliers filing of their income tax returns. These categories of taxpayers are at present functioning under Presumptive Tax Regime (PTR) and the FBR has decided to change this regime for these three sectors on an experiential basis. In case the said categories of taxpayers file their income tax returns the target of documentation of economy could be achieved. Even they pay low rate of taxes, but filing of income tax returns would expand the tax-base.