The Lahore Chamber of Commerce and Industry (LCCI) has urged the Central Board of Revenue (CBR) to withdraw section 8 B of the Sales Tax Act 1990 for being totally against the business ethics.
In a joint statement issued on Wednesday, the LCCI President Shahid Hassan Sheikh, Senior Vice President Yaqoob Tahir Izhar and Vice President Mubasher Sheikh said the section 8 B of Sales Tax Act 1990 restricts the claim of input tax to the extent of 90 percent of the output tax for each tax period, which is unjustified and would render all businesses uncompetitive.
The LCCI office-bearers said that the new section of Sales Tax Act pre-supposes that inputs are purchased for consumption in the same tax period and no industry carries any inventory beyond one tax period/one month, therefore, the supposition does not even remotely reflect the actual business realities. There are many industries, which purchase or import raw materials for consumption in the next 2-3 months, they pointed out. Similarly, there are seasonal purchases. In addition to that, 10 percent value addition is not applicable in all sectors of manufacturing. The excess input tax of these manufacturers will remain stuck up with the department for long period ie up to 14 months, they said. It, they feared, will increase their liquidity crunch, financial cost and will result in blockage of huge funds with the Sales Tax Department.
The LCCI office-bearers said that it also goes against the very spirit of a value-added tax, which is intended to tax consumption without disturbing the cash flows of business.
The LCCI is of the considered view that the proposal has been initiated on behalf of people who do not align with business environment, they said. The change must be done away with immediately; otherwise, the industry/businesses will suffer irreparable business loss, he concluded.
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