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ISLAMABAD: The sales of goods through an online marketplace have been subjected to 17 percent sales tax by incorporating the same under the Sales Tax Act, 1990.

Through the Finance Bill (2021), the scope of sales tax is expanded to online sales using third-party platform.

Sharing sales tax revenue measures, sales tax expert Arshad Shehzad informed, presently, there was no specific provision of collecting sales tax on sales made from the online marketplace using third-party platform by tier-1 retailer. In recent years, the sales tax online platform has been increased remarkably.

The sales tax act; however, does not provide specific law and modus operandi for reporting and collection of sales tax through such channel.

In this budget, the amendment has been brought under Section 3 of the Act to expand the scope of sales tax on the supply of goods through the online marketplace.

Similarly, the definition of tier-1 retailer is also expanded to include a retailer operating an online marketplace supplying goods through the e-commerce platform, whether or not the goods are owned by him, Shehzad explained.

Explaining another measure, he informed sugar is included under the third schedule. By virtue of this amendment sales tax on sugar is now required to be paid at retail price. Additionally, this retail price is also required to be printed on packaging or sugar bags.

The supplies of sugar to pharmaceutical, beverage, and confectionery industries will remain excluded from the purview of the third schedule.

Commenting on this amendment, Shehzad pointed out an exclusion from the retail price on supplies to industries is a correct decision. However, the government has overlooked providing a mechanism for the application of this exclusion on imported sugar.

Shehzad informed that the imported fine sugar is generally used by the industries.

The commercial importers, importing crystallite fine sugar for such industry might need to pay sales tax on the retail price at the import stage irrespective of the fact they supply this sugar to the notified industrial sector or not.

The government; therefore, needs to either exclude extra-fine imported sugar from the ambit of the third schedule or worked out any other reasonable way out to sort out this problem arising out of the proposed amendment.

The time limit for assessment and recovery of sales tax under Section 11(5) is extended through a proposed amendment in this budget. According to the board's explanation, audits are being undertakenon a full six-year basis where the time limit of five years under sales tax is calculated on a month-to-month basis resultantly, some of the periods get lapsed if the audit proceeding is not completed by such time.

It was therefore proposed to increase the time limit of five years up till the end of the financial year in which the relevant date falls. Shehzad has strongly criticised this amendment and said instead of reducing the time period of six years to five years, the amendment has been proposed to increase the time limit.

He said if the tax machinery having all the resources, electronic means and computerised record could not able to complete audit within five years, they should not be given the luxury to enjoy the further extension of time.

He said the government in media articulates to control audit-related issues and harassment, however, these sorts of amendments suggest a step towards altogether an opposite direction.

Copyright Business Recorder, 2021

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