Third Schedule items: Budgetary changes create serious problems for taxpayers

Taxpayers are facing serious technical and legal difficulties in payment of sales tax after budgetary changes (2019-20) for Third Schedule items and payment of minimum value addition sales tax by commercial importers. Talking to Business Recorder, Arshad Shehzad Karachi-based prominent sales tax expert informed that the FBR has to understand the implication of minimum payment of sales tax on third schedule items after implementation of the Finance Act 2019.
The FBR Inland Revenue Policy Wing is required to resolve this major problem of the sales tax registered persons without further delay to avoid revenue implications. He said that the minimum payment on account of value addition on Third Schedule items is a major issue of concern in filing sales tax return. The last date for filing of sales tax return is extended due to different reasons but taxpayers are still facing technical and legal issues. According to the information, Arshad Shehzad explained that under the two different provisions i.e. section 8-B and section 7(A) of sales tax law the taxpayers are required to pay minimum value addition sales tax. The section 8-B comes into play upon the filing of the sales tax return and in case of excessive purchase over sales, the electronic sales tax return filing system requires a minimum payment of 10 percent.
Likewise, in the case of imports, the minimum value addition of 3% is required to be paid in terms of section 7(A) read with the 12th Schedule of the Sales Tax Act 1990. On the other hand, Third Schedule items are liable to sales tax at the highest value of the retail price. In this budget, the provision of the third schedule is also extended to the import stage. Now the question arises if the importer is dealing in third schedule items and paying sales tax on retail price then what is the rationale for collecting value addition sales tax from such importers since they had already been charged sales tax on retail price?, top sales tax expert questioned.
Likewise if the local manufacturer of third schedule item has charged sales tax on retail price their subsequent supply chain is only supposed to make purchase and sales on the same amount for sales tax purpose without any involvement of value addition and thus their supply chain should be excluded from minimum payment against adjustable input tax in terms of section 8-B, Arshad Shehzad maintained.
The law provides exclusion in both these scenarios. The SRO 647(I)/2007 provides an exclusion from payment of section 8-B on certain categories of persons. The same however does not include the registered supply chain of a third schedule item. Exclusion from minimum value addition sales tax in terms of Section 7-A is also provided under the 12th schedule but it does not include imports of a third schedule item.
The last date of sales tax return for the tax period of July 2019 is extended thrice, however, the board has yet failed to forestall the legal implication of the budgetary measures. The government over-burdened the business community in this budget, however, it appeared failed to gear up tax machinery to facilitate and ease-out their genuine problems, Shehzad added.