NTN condition has no legal backing in ST Act: proposed return form sparks controversy

The new proposed sales tax return form contains controversial provision of submitting National Tax Number (NTN) or Computerised National Identity Card Number (CNIC) for sales and purchases made from unregistered persons, which has no legal backing in the Sales Tax Act, 1990.
Talking to Business Recorder on Saturday, a renowned sales tax expert, Arshad Shehzad, informed that the new proposed sales tax return form has number of new annexure which required detailed information to be filled by taxpayers, the burden of compliance seems to have increased almost on all sectors.
According to him, the most controversial part of the proposed return are the remarks given at the foot note of annex ''A'' and ''C'' pertaining to purchase and sales respectively, which suggest that all manufacturers, importers and exporters have been required to record CNIC or NTN for all purchases whether acquired from registered or unregistered person. Interestingly, there is no such legal bar under the Sales Tax Act, 1990 for such compliance. Without legal backing such a controversial provision has been introduced in the sales tax return for providing CNICs/NTNs of the sales and purchases made from unregistered persons.
The FBR, though couple of years back has proposed amendment to section 23 for requirement of NTN or CNIC, however the same was not endorsed/approved by the National Assembly on the pretext that there is already a very narrow tax base and in case of introducing such compulsion, the registered and documented sector simply can''t operate. Therefore in the absence of the backup legal clause in the Sales Tax Act, such requirement simply becomes arbitrary, unwarranted and unlawful and could not sustain the test of judicial scrutiny.
Furthermore, the person registered other than manufacturer, importer and exporter did not mandatorily require provision CNIC and NTN of unregistered buyer/supplier, which creates discriminate treatment as well.
Karachi-based tax expert said the summary of carry forward is one of the new features in the proposed sales tax return, provided under annex ''F''. The statement apparently suggest that registered persons are required to provide complete details of purchases, consumption, opening and closing stock in terms of value and incidence of tax to workout actual value addition declared by the taxpayers. The suggestive chart though apparently looks simple but in-fact involves detailed voluminous working and feedback. In his opinion monthly submission of such details overburden taxpayers with cumbersome compliance and it would be appropriate if the requirement of the same be restricted to filing of annual return.
The proposed return suggests that stock statement now mandatorily been required from all the refund claimants through insertion of annexure ''H''. Earlier though refund claimant was required to furnish the stock statement but the same may file with their refund claim within 120 days of filing of sales tax return which gives them sufficient time for its preparation with due diligence for proper compliance, furthermore in case of zero rated sector the refund claimant usually file statement to the extent of taxable purchases as there are no consequence of zero rated stock in relation to their refund claim, which means the sector is burdened with additional details as well, Arshad Shehzad stated.
He stated that the most important feature due to which it seems that amendment on the sales tax return is inevitable, is inclusion of annex ''P'' which relates to sales tax involved on services after practical participation of provinces in the revenue collection mechanism. However, it is also observed though province has passed the bill providing law and procedure for collection of sales tax Federal Board of Revenue did not issued notification yet for deletion of excise duty from the Federal Excise Act., hence insertion of annexure without legal jurisdictional would have legal implications.
Arshad Shehzad further informed that sales tax law has already been considered one of the complex, technical and immature law in Pakistan. This is among one of the reasons for its unsuccessful and smooth implementation at ground level. The simplification is an essential requirement for achieving smooth application of this value added law which is found missing in suggested return form. In his view, if the policy makers are serious in broadening the tax base then impression of complex compliance should be avoided.