The All Pakistan Textile Mills Association (Aptma) has proposed that the General Sales Tax (GST) at the rate of 15 percent on ginned cotton should be abolished in view of its adverse affects.
THE APTMA, IN ITS SUGGESTIONS AND PROPOSALS FOR THE 2004-05 FEDERAL BUDGET, FORWARDED TO THE GOVERNMENT, HIGHLIGHTED THE FOLLOWING REASONS:
-- Over 90 percent of the total production of cotton was exported in one form or the other, which proved that the raw cotton procured locally was a basic input of zero-rated goods.
-- Cotton prices had increased from Rs 2,100 to Rs 3,500. The higher amount of the sales tax was being paid by the spinning sector, which remained stuck up in the collectorates for an average period of two to 12 months.
-- Raw cotton was a seasonal supply and the industry procures over 70 percent cotton in only three to four months of the year.
-- Sales tax liquidity problem was created due to the stuck up of billions of rupees in the sales tax refunds. It also added to the financial cost of the production.
-- Unproductive use of man-hours of the management, while chasing sales tax refunds.
-- Unproductive deployment of the tax machinery on producers prescribed under the special procedure for the ginning industry rules, 1996.
On the text of proposed Section 73 of the Sales Tax Act, Aptma proposed that the text of Section 73 needed to be drafted carefully in the light of the suggestions, already submitted by the chambers and leading trade bodies like Aptma.
Since, the proposed text was suggested to be finalised with the investment-friendly approach, it had been suggested that.
THE FOLLOWING PROVISION MIGHT BE ADDED TO THE PROPOSED TEXT:
-- The Central Board of Revenue (CBR) had offered for the comments through newspapers in the month of February 2004.
"In case, the payment of the sales tax amount was not made within 180 days of the issuance of the sales tax invoice, the buyer should pay one percent per month of the sales tax amount of the unpaid invoice with the each tax return, until he deposited the input tax of the unpaid invoice claimed by him, or make payment of the sales tax amount, so deposited after the payment of sales tax amount to the seller in the manner prescribed in Sub-section (1).
-- On frequent audits, it suggested that without adjudication, no unilateral demand should be deducted from the pending refund claims and the frequency of the audits be curtailed to the minimum.
This suggestion has been made because of frequent audits of the manufacturers-cum-exporters, too much time of the mills as well as of the collectorates was being wasted, which was proving to be of no use to either of the parties.
The department was to provide copies of the audit reports to the manufacturers-cum-exporters.
-- The department every year conducted annual audit of the sales tax. The queries, found during the course of audit, were conveyed to the sales refund department by the audit department.
The refund department, without giving any opportunity of being heard, immediately deducted the demand involved in the said queries. The demand raised during audit was always unilateral and requires adjudication.
-- On the issue of blacklisted/suspected units, the Aptma proposed that a specific timeframe of not more than one month, in any case, may be laid down, in which the collector was required to complete his inquiry, and in case of clean audit report, the registered/enrolled person's name might also be removed from the list of suspected/suspended units, forthwith.
-- Regarding the draft of the proposed sales tax refund rules 2004, which was circulated by the CBR in February, which had been reviewed, it offered the following areas for improvement:
a) The excessive documentation required should be minimised.
b) Payment records, including banking instruments, should not be required for audit purposes in relation with the refund claims.
This requirement would result in unavoidable delays in sanctioning of the refunds to the exporters.
c) No timeframe for sanctioning of the refunds was given in the rules for either of the green, yellow and red channel claimant.
Highlighting the customs and income tax related issues, the Aptma specifically pointed out to the audits.
-- There were three auditors for checking the income tax assessment order. Besides two, within the tax department, there was one auditor from the revenue department, Islamabad.
-- No parameters were fixed for these auditors.
-- The revenue department auditors checked the assessment orders after two to four years on the completion of the assessments. -Due to non-availability of the scope of the audit, these auditors tended to start re-assessment of the completed assessment.
-- The audit objections were thrusted upon the income tax officers. Frivolous demands were created to the determent of the assessee.
THE APTMA, THEREFORE, PROPOSED THAT:
-- Audits should be taken up within six months of the completion of assessment, and the parameters of the audits by internal auditor and revenue department auditor be fixed and made known to the department and the assessees.
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