Government forgets to give effect to one percent reduction: 70 items attracting higher ST rate

The government forgot to give effect of one percent reduction in sales tax on around 70 items/raw materials attracting higher rate of sales tax ie up to 22 percent applicable through notification 644(I)/2007.
Explaining the legal and procedural changes introduced in the sales tax regime through the Finance Bill (2011-12), a leading Karachi-based sales tax expert, Arshad Shehzad said the government has offered significant relief to the existing taxpayers' by reducing sales tax from 17 to 16 percent. The removal of special excise duty is a major breakthrough for them in particular. The accumulative relief on these accounts comes to around 18 percent, which eventually reduced the cost of production and may offset the inflationary pressure. However interestingly the government has forgotten to give effect of same one percent cut of sales tax rates on items/raw materials attract higher rate of sales tax.
The government has tried to equate the burden of indirect taxes on existing taxpayers from reduction in rates in general to offsetting the impact with exemptions granted to specific sector. However, the review of withdrawn exemption suggests that some deserved exemptions like diapers for adult (patient) were also hit in this exercise. He further commented that while reduction of 1% sales tax on standard rate of sales tax government has forgotten to extend same reduction on higher rate of sales tax applicable through notification 644(I)/2007 on certain raw material, he added.
Interpreting the Finance Bill, legal expert said that the input tax on fixed asset or capital goods has been proposed to exclude from the restriction of input tax adjustment of 90% in excess of output tax through insertion of new proviso under the Finance Bill (2011-2012).
Arshad Shehzad said that the section 8B contains a restrictive provision for adjustment of not more than 90% input tax, where the output is lesser than input tax during any tax period. However since already adjustment of fixed asset or capital goods is regularise by allowing adjustment in 12 equal instalments, its adjustment was excluded from the purview of section 8B of the Sales Tax Act.
He said that the new bill has proposed to insert a new sub section 3 in section 21. It seems that regulators has considered it necessary to strengthen legal substance in the Sales Tax Act, against un-lawful input tax adjustment on issuance of fake and flying by black listed registered person. The section earlier does not spell out the consequences of blacklisting/suspension of a registered person and reliance was purely made on Rule-12 of the Sales Tax Rules, 2006 for recovery of refunded amount/disallowance of claimed input tax credit on invoices issued by blacklisted units. Here it is important to mention the input tax adjustment against invoices of black listed person is one of the most disputed matter under the Sales Tax Act, and large number of cases are under litigation at different legal fora.
On the issue of sales tax return, he said that the bill has proposes provision of filing revised special return by inserting relevant section 27(a) & (b). Earlier the Sales Tax Act, was silent about filing revision of special sales tax return and in case of any omission or mistake there was not provision for legal backing for correction of bona fide mistake. However it seems that considering the genuine hardship in this account the regulator has propose insertion of this necessary provision under the law.
Arshad Shehzad further explained that the bill proposes to authorise inspector inland revenue as a designated officer under the Sales Tax Act, accordingly word inspector was also proposes to be added at sub section 3 and sub section 4 of this section to empower them to perform and exercise their powers under the instructions of the commissioner and the additional commissioner.
He said that the word CBR appearing with Directorate General, Intelligence and Investigation in section 30-A proposes to replace with word Inland Revenue. Apparently it seems that now the Separate Directorate General of Intelligence and Investigation Inland Revenue has been formed to work and cover the investigative affairs of Inland Revenue.
The bill has proposed to delegate powers for requisition of record and to carry out investigative audit under this section to Assistant Commissioner. Earlier these powers were rested with officer not below the rank of Deputy Commissioner. It's appears to be a mere administrative nature amendment.
About the Alternative dispute resolution, he said that the bill proposes to modify sub sec. 4(A) of Sec. 47, so that in case of any rectification of the order or decision of the ADRC, only be done by the Chairman FBR and a Member nominated by him.
He further said that it is proposed to suitably amend section 66 of the Sales Tax Act, 1990, to empower officer of Inland Revenue to reject such refund claims filed under section 66, where the incidence of the tax has been passed on to the final consumer. Under section 66, no refund of tax claimed to have been paid or over paid through inadvertence, error or misconstruction or refund on account of input adjustment not claimed within the relevant tax period, shall be allowed, unless the claim is made within one year of the date of payment. Here it is pertinent to mention that section 3-B of the Sales Tax Act, exclusive deal in such scenario as well.
He further explained that the Bill proposes to add explanation under sec. 74 pertaining to con-donation of time limit in delay for various actions by taxpayers or by the tax authorities. Earlier tax authorities were not provided under the law, hence Appellate authorities have interpreted that the power of the Board under this section is restricted to condoning delay on the part of the registered person only and the Federal Board of Revenue cannot condone the delay on the part of the department.
Vide sro.480(i)/2011 three SROs has been rescinded. SRO 1240(I)/2005 Dated: 16th December 2005:- This SRO relates to exemption from whole of Sales Tax leviable on Dump trucks for off-highway use on-highway dump trucks of 320HPand (PCT heading 8704.2290 and 8704.2390 and transit concrete Mixer, subject to certain conditions. SRO 542(I)/2006 Dated: 05th Jun 2006:
This SRO relates to exemption sales tax on certain locally manufactured/ Imported agricultural Machinery, Equipment and Implements. 275(I)/2008 Dated: 12th Mar 2008:- This SRO relates to exemption sales tax on Import and supply of CKD kits of single cylinder agriculture Diesel engines of 3 to 36 HP.
Through SRO.487(I)/2007, amendments has been made in Sales Tax Rules, 2006. The facility for revising the Sales Tax Return without approval of authorities has been withdrawn. Time limit given for submission of report by ADRC has been enhanced to ninety days from sixty days, Arshad Shehzad added.