Sialkot Chamber submits budget proposals for 2017-18

Sialkot Chamber of Commerce and Industry (SCCI) has submitted its budget proposals for 2017-18. The SCCI had prepared the proposals with the consultation of business community of Sialkot.
The income tax charged on exporters' income covered under section (u/s) 154 of the Income Tax Ordinance, 2001, is the final discharge of the income tax liability of income from export and any adjustable withholding tax charged from exporters is refundable. Hence, withholding tax on cash withdrawal from banks @ 0.3 percent and on import of raw material used for manufacture of exportable goods ultimately accumulates as exporters' refunds. Large sums of exporters' precious funds are held up in refunds under these two heads.
It is therefore strongly recommended that manufacturer cum exporters should be allowed to import raw materials and machinery used for manufacture for goods to be exported at the rate of zero percent and exporters should be exempted from levy of tax on cash withdrawal. It is proposed that a provision should be incorporated in section 159 to allow such exporters to apply for tax exemption u/s 231A.
This will prevent unnecessary blockade of funds of exporters. Export Oriented Units (EOUs) are exempt from payment of Custom duty and Sales tax for import and purchase under SRO 326/327. Yet they have to pay advance income tax on import and purchase of raw materials which is also accumulated as refunds and is paid back by the Government after considerable time. It is proposed that this SRO should be suitably amended to include income tax exemption for Export Oriented Units (EOU) as well, so that the exporters are not subjected to collection of advance income tax. According to clause 45 of part IV of Second Schedule, the manufacturer cum exporters are absolved from the obligation of withholding income tax u/s 153(1) from suppliers of goods and services used for manufacture of exportable goods. It is suggested that this clause 45 should be suitably amended to include "commercial exporter" as well. Moreover, the words "manufacturer cum exporter" should be substituted with the word "Exporter".
Taxpayers other than exporters are being affected due to Section 21L, whereby any payment made for purchase of goods otherwise than crossed cheque is being treated as taxable income. Previously this section was applied to profit and loss expenses only whereas now it is being applied to the cash purchases as well. It is proposed that a clarification should be added to this section to restrict its applicability to profit and loss expenses only. Moreover, restriction of payment of monthly salary of Rs 15,000/- or above through crossed cheque to claim it as deductible expense was imposed in year 2008, which limit is needed to be raised to Rs 25,000/- keeping in view current level of minimum wages fixed by the Government.
Amendment introduced in section 111 of the Income Tax Ordinance, 2001, in the year 2011, whereby any sales which in the opinion of the officer is suppressed is directly added to income, is harsh. It is therefore recommended that such addition may kindly be restricted to the gross profit on such sales instead of total sales.
The threshold of applicability of minimum tax u/s 113 for individual and AOP has been reduced from Rs 50 million to Rs 10 million through an amendment last year. This amendment again is very harsh and we strongly recommend that the original threshold of Rs 50 million should be restored.
Huge amount of income tax refund of exporters has piled up and processing of income tax refund is critically slow. Due to delay in payment of refunds, exporters are facing shortage of working capital, which is creating problems for their export business. It is suggested that automatic compensation to the exporters should be allowed equivalent to 14% per annum of the outstanding amount for the period after application of refund has been filed.
The limit of cottage industry for a manufacturer, which was at Rs 700,000/- of annual utilities bills, was fixed in the year 2008. The cost of electricity and gas has increased manifold since then but the threshold has only been increased to Rs 800,000/-. As the limit of annual turnover has been enhanced from Rs 5 million to Rs 10 million last year, it is therefore suggested that the limit of Rs 800,000/- should be enhanced to Rs 1.5 million. Section 73 of the Sales Tax Act, 1990 should be suitably amended to allow refund of sales tax in special cases where exporter has not realised export payments and payments to suppliers are delayed beyond 180 days due to existence of special credit terms with the customer abroad. Large sum of sales tax refunds of exporters has piled up and processing of sales tax is very slow. Due to delay in payment of refunds, exporters are facing shortage of working capital, which is creating problems for their export business. It is suggested that automatic compensation to the exporters should be allowed equivalent to 14% per annum of the outstanding amount for the period after 7th day of issuance of Refund Payment Orders (RPOs) by the concerned RTO.
There are number of small exporters who are registered with sales tax only to avail the facility of WEBOC but could not file NIL returns. There is no loss of revenue due to non-filing of such returns; hence no penalty should be charged. It is proposed that penalty should be linked with the tax liability involved. Moreover, the Commercial exporters who do not claim input/output tax and are not liable to be registered should be allowed to be registered with WEBOC without registration under the Sales Tax Act.