The All Pakistan Textile Mills Association (Aptma), in its budget proposals for 2005-06, has demanded of the government to announce zero-rated tax on textile raw materials and finished goods to combat smuggling. The Aptma has recommended that sales tax on all inputs of entire textile products' chain must be zero-rated to have parity with imported/foreign origin goods and to completely relieve exporters from hassles of sales tax refunds. It was also proposed that the customs department should allow variation in weight up to 5 percent, so that deduction of input tax at sales tax collectorates on weight basis could be tapped.
The proposed procedural amendment may be effected with retrospective effect, so that input sales tax already deducted by sales tax collectorates could be refunded to genuine manufacturers-cum-exporters.
Talking about tax fraud, Aptma has proposed that wordings of the proposed amendment be modified to "making of taxable supply without applying for registration". It further recommended that the department may complete its routine verification of applicant's identity, but, once it was done, he may be awarded registration from the day he filed his application.
This will save thousands of applicants from harassment and penal provision applicable to tax fraud.
Expressing concern over delay in refunds, Aptma has suggested that the rate of additional tax under section 34 of the act should be brought down to 6 percent per annum (ie, 0.5 percent per month) in accordance with the rate applicable under section 67 of the act.
This would facilitate taxpayers that were always deprived of the benefit admissible to them under section 67 of the act.
Aptma has also proposed that in order to streamline fiscal laws and to provide cheap and speedy justice, condition of mandatory payment of 15 percent in section 45-B should be withdrawn forthwith.
About alternate dispute resolution, the association has proposed that concerned laws may be suitably amended to remove anomalies.
It is further proposed that necessary amendments be made in rules so that only persons importing taxable goods for trading purposes are subjected to special procedure.
The rate of sales tax should be lowered down anywhere between 5-10 percent. In line with concessions provided for local supply of plant and machinery, customs duty and sales tax should be zero-rated on import of all industrial machinery without any condition.
This is expected to accelerate the pace of capital investment and would boost capital-oriented industries. Aptma has also proposed that import of raw material, component, sub-component and assembly, etc, should also be zero-rated to eliminate hassles of processing refunds, both for the department and taxpayer.
About sales tax refunds, Aptma proposed that submission of original tax invoice and related support under section 73 should be deemed to be an order for adjustment of related tax under the proviso of section 66 of the act.
This move is expected to remove 'technical' barriers usually created by auditors during scrutiny of records under section 66.
Duty rate on spare parts/accessories should also be slashed downward. It has also been demanded that imports of second-hand machinery and spare parts be allowed to textile units.
The value of OBM license should be calculated on the basis of machinery intended to be stored in godowns/open bonded warehouse meant for this purpose.
The rate of withholding tax should be kept at par for purchases of all kinds of supplies. A flat rate of 1 percent instead of present 3.5 percent may be considered for tax deduction at source, so that negative impact of the privilege presently available to individuals may be countered.
A new provision in the Income Tax Ordinance 2001 be introduced to provide relief in the form of tax credit or reduction in tax to those companies offering cash dividends to their shareholders.
This will convey positive signals to prospective investors, who would be encouraged to foresee quick payback of their investment.
It is proposed that definition as contained in sub-section 4 and 4A of section 147 should be amended to provide credit of previous quarter's excess over tax liability/refunds in succeeding quarters.
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