Provision of CNIC number, NTN of unregistered buyers: sugar sector exempted

The Federal Board of Revenue (FBR) has exempted sugar sector from compliance of providing computerised national identity card numbers or National Tax Numbers (NTNs) of unregistered persons receiving supplies from the sugar mills. Sources told Business Recorder here on Saturday that the FBR has issued instructions to the Pakistan Sugar Mills Association (PSMA) to suspend a major documentation measure for obtaining CNICs and NTNs of the unregistered buyers/sellers of the sugar mills.
In this connection, the FBR has suspended the implementation of SRO 821(I)/2011 for sugar mills. This sector-specific instruction of the FBR would facilitate the sugar sector to avoid documentation of unregistered buyers and sellers within the said sector.
According to a letter of the FBR Sales Tax Budget Wing to the PSMA, issued couple of days back, the implementation of SRO 821(I)/2011 shall remain suspended with respect to manufacturers of sugar till finalisation of discussion between the FBR and the PSMA.
Under SRO 821(I)/2011, the FBR had directed that registered manufacturers, importers and exporters, making taxable or dutiable supplies to unregistered persons, shall issue an invoice containing "computerised National Identity Card number or National Tax Number" of such unregistered persons.
When contacted, a tax expert said that the FBR has relaxed a major condition pertaining to the documentation for the sugar industry. The CNIC or NTN is mandatory only for purchases and sales made by manufacturers, importers and exporters from or to unregistered persons with effect from September 01, 2011. Through SRO 821(I)/2011, the Board had obtained legal backing to implement documentation measure to obtain the CNIC or NTN of unregistered persons to whom sales tax invoices have been issued by registered manufacturers, importers and exporters. This SRO 821(I)/2011 had notified major amendments in the sales tax law on the pretext of broadening the tax base, which is one of the important measures to increase the number of sales tax registered persons. Resultantly, all registered manufacturers, importers and exporters are compulsorily required to provide CNIC or NTN against taxable supplies to the unregistered buyers.
It is learnt that similar exemption is expected to be issued to five exporter-oriented sectors, particularly textile sector. However, tax experts are of the view that this sort of treatment would ultimately be considered as discrimination with registered persons of other sectors which would be a direct violation of article 25 of the constitution.
Experts further said that this sort of special treatment would open a window of opportunity for other sectors as well to build their pressure to seek similar exemption from submitting CNICs/NTNs of the unregistered buyers and sellers. "In this way, it seems that a major dent has been put on FBR exercise of documentation within the sales tax regime after introduction of SRO 821(I)/2011. At the same time, the resistance would further increase by all segment of the trade to avoid these conditions of disclosing CNICs and NTNs of their unregistered buyers and sellers".
The manner in which exemption has been granted to the sugar industry was also criticised by the independent tax experts. They said that this particular instruction has not been placed in FBR''s WEB portal, despite the fact that this is one of the important issues of concern for all industrial segments. The corporate and documented sectors are almost forced to hold their deliveries after issuance of such important and impractical sort of legal requirement. On the other hand, few sectors seemed to be facilitated silently by issuing internal instructions which terms as major distortion and discriminatory treatment by the experts.
It is pertinent to mention that all major trade associations and chambers had strongly criticised FBR''s initiative of issuing notification 821(I)/2011. The traders are contesting that documented regime in Pakistan is far less than undocumented regime and therefore they being a part of documented regime can not dictate undocumented regime to operate according to terms and condition set by the tax policy maker. The trade is of the view that government rather than using registered documented sector as a tool for broadening of tax base, should enforce its measures through the field formations to achieve such high level of compliance from undocumented sector. The registered sector in fact deserves hassle-free and simplified level playing field so that all undocumented sectors are encouraged and motivated for self-compliance, sources in trade added.