Rate of further sales tax proposed to be increased to three percent: applicable from July 1

The rate of further sales tax is proposed to be increased from 2 to 3 percent which would be applicable from July 1, 2018. Explaining significant sales tax measure, Arshad Shehzad Karachi based tax lawyer explained that government has proposed to increase rate of further sales in terms of section 3(1)A of the Sales Tax Act 1990. The further sales tax is chargeable on supplies to unregistered persons in addition to the rates provided under standard or special rate regime.
The further sales tax is a penalty in nature to discourage undocumented trade as well as significant revenue measure with the objective to increase cost of business of undocumented trade. He however contends that law of further sales tax needs to be rationalizing and transaction undertaken under special procedure and liable to payment of extra tax or fixed rate regime should be excluded from its purview. In his opinion rate of extra sales tax may also needs to be increased in-line with the increase in further sales tax since rationale behind both these taxes are same.
Through another major amendment, the Chief Commissioner is remains no more empowered to depute officer at business premises. These powers were delegated to Chief Commissioner under section 40-B through Finance Act, 2013. Under this section board and chief commissioners were empowered to placed posting of officer to monitor production, sale of taxable goods and the stock position as they deem fit.
Whereas same powers are also available to Commissioner, who can only exercise it in cases of tax fraud substantiated by material evidence after recording the reasons in writing. The powers under this section to board (ie discretionary) and to Commissioner (Conditional) are still intact, The discretionary powers available to Chief Commissioners are stands withdrawn subject to approval of the bill, he informed.
Condition for payment of automatic stay against recovery demand is relaxed to 10% from existing 25% on appeals pending at first appeal stage. The provision of automatic stay was recently introduced through Finance Act, 2017 where automatic stay is available upon payment of 25% of tax due.
The reduction of payment from 25% to 10% is proposed in this bill, which is another beneficial amendment. However we understand that recovery demand should not be enforceable until unless the appeal is decided by at-least one independent appeal forum. The High Courts has already passed number of judgment on this issue and therefore government is also under legal compulsion to follow these judgments in letter and spirit.
It is also observed that in-spite, this legal provision the tax officers while pursuing recovery demand are yet issuing notice for payment of full adjudged amount, without appreciating the law that once they recovered the prescribed percentage of recoverable amount, technically they cannot enforce recovery of full amount. The board thus needs to monitor this exercise and clarify the impact of this legal amendment to their field formation, Arshad Shehzad added.