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Federal Board of Revenue (FBR) has received a budget proposal from Inland Revenue officials to revise mechanism for administration of sales tax and federal excise duty (FED) by establishing separate Sales Tax Zone in each field formation on the pattern of Withholding Zone in the upcoming budget (2019-20).
The budget proposals have been floated by Sales Tax Officers Association of Pakistan (STOAP) for 2019-20 for consideration in the budget (2019-20). The main rationale behind the budget proposals is to increase domestic sales collection as well as sales tax collected on local supplies.
The STOAP has observed that the domestic sales tax revenue growth has been the lowest amongst all federal taxes of FBR in the last five years. As a result of non- assigning of statutory functions to sales tax officers, the FBR has witnessed steep fall in revenue collection of domestic sales tax during current fiscal year. Under the budget proposal, the sales tax officials proposed administration of sales tax and federal excise duty (FED) by the sales tax officials. Sales Tax Zone may be created in each field formation comprising of one director, two additional directors, a number of deputy directors and assistant directors.
The similar nature of amendments may be incorporated in Federal Excise Act, 2005 & Income Tax Ordinance, 2001 accordingly. It has also proposed that all defunct sales tax as well customs staff (who opted sales tax later on) staff be posted in this zone. The STOAP has also proposed establishment of Special Revenue Monitoring Cell for revenue monitoring to ensure sector-wise/commodity-wise minimum value addition, Assessment & Processing Cell to ensure filing of sales tax returns, Investigation & Prosecution cell to arrest tax fraudsters and discourage malpractices by issuing fake/flying invoices, Specialised Audit Cells be established to conduct investigative audits and Specialized Refund Cells be established for the issuance of genuine refunds.
It has also proposed Specialized Recovery Cells be established for ensuring recovery, Specialized Sales tax registration Cells be established for genuine registration and Specialized FED Cell be established to ensure proper compliance and recovery of FED.
The FBR has also received proposal to impose fixed tax on brick kilns at the rate of 5 percent because no tax has been collected from this sector since July, 2018 due to enjoying lacuna of condition utility bills u/s 2 (5AB) of the Sales Tax Act 1990.
It has also proposed 5 percent fixed tax on sweet shops and bakeries because nominal tax has been collected from this sector since July, 2018 because of exempt supplies, 3rd Schedule supplies & zero rated supplies. They are enjoying business of taxable sweets & bakery items but showing other supplies.
Fixed Tax at the rate of 5 percent is also proposed on mining sector by declaring them in Section 14 like wholesaler / manufacturer and there should be no threshold limit for any lease holder for sales tax registration.
It has also proposed that a new chapter may be introduced in Sales Tax Rules 2006 and Sales Tax Special Rules 2007 for minimum value addition (sector wise) ie. sugar sector, beverages sector, cement sector, textile sector (ginning, spinning, weaving, dying, printing and made-ups), and packaging sector.
In the definition of cottage industry as defined u/s 2 (5AB), after the word utility bills, following wording may be inserted: "or any other alternative source of energy ie. diesel, petrol, wood, LPG, LNG, cob shell, coal, rice husk etc."

Copyright Business Recorder, 2019

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