Unregistered buyers: Legal changes in CNIC condition likely

Some legal changes are expected in the condition of providing Computerized National Identity Card (CNICs) numbers of the unregistered buyers including enhancement of limit from Rs50,000 to Rs100,000 in the coming budget (2020-21).

The condition of the CNIC from the unregistered buyers was made applicable from February 1, 2020 onwards, but not practically enforced by the Federal Board of Revenue (FBR).

The FBR officials believe the implementation of the CNIC condition would help identify the people operating in the undocumented economy.

Business community has proposed to the FBR to abolish the condition of the CNIC in the upcoming budget (2020-21).

However, so far, no such proposal has been finalised to abolish the CNIC condition through the Finance Bill, 2020.

A tax expert told Business Recorder here on Wednesday that the CNIC condition was impracticable as it could not cater to out of books transactions taking place whether on imports, local manufacturing, domestic sales or Afghan transit trade. The CNIC condition can only cater to those transactions, which are declared within the sales tax regime.

The CNICs of the un-registered buyers were sought only in cases of sales tax registered persons. The business transactions taking place out of the books cannot be catered for the CNIC.

Most of the transactions in the country are taking palace out of the books; these business transactions cannot be registered or catered for the CNICs condition.

The CNIC condition is not applicable in cases where the businessmen are not engaged in taxable activities.

In a country, where certain areas such as tribal areas are exempted from taxes, it is not practically possible to enforce the CNIC condition across the country, he explained.

The tax expert added that so far the condition was not practically enforced across the country.

The under-invoiced goods, smuggled items and other goods are ultimately sold at the level of retail outlets.

This stage needs to be captured for documentation purposes instead of seeking CNICs of buyers at retail outlets.

The question of the CNIC does not arise in cases where the sales are not declared or not shown in the sales tax returns.

The condition of the CNIC remained limited to the extent of sales declared/shown within the supply chain, the tax expert mentioned.

Convener of Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Standing Committee on Sales Tax and Chairman Indenters Association of Pakistan (IAOP), had urged the federal government to defer CNIC condition for six months on sale of goods to unregistered persons in view of the current economic situation created after COVID-19 pandemic.

He also requested for acceptance of sales tax returns without enforcing the condition of the CNIC as in the current economic crisis, the business would depend largely on the local consumer industry, which was already facing problems due to the CNIC condition. Pakistan Chemicals and Dyes Merchants Association (PCDMA) has requested the FBR to defer condition of the CNIC on sale of goods to unregistered persons for six months.

President Karachi Chamber of Commerce and Industry (KCCI) had urged the government to immediately waive CNIC requirement for sale to unregistered persons and three percent Further Tax in order to revive the economic activities and business transactions.

The Lahore Chamber of Commerce and Industry (LCCI) had also urged the government to relax the condition of providing a copy of CNIC of non-filer buyers till June 30, 2020.

The disallowing of input tax relating to supplies made to an unregistered person without disclosing his CNIC was an uphill task when markets were deserted due to lack of customers.

Textile industry has already expressed grave concern on the issue of submission of CNIC, wef, 1st February 2020 onwards.

It was committed and assured by the government that all hurdles and problems faced by the textile industry would be resolved prior to implementation on the condition of submission of the CNIC under Section 23 of Sales Tax Act, 1990.

It is also clearly understood that without having registered buyers how industry would be able to furnish identity card of a buyer, and fact remains that they are legally allowed to remain unregistered by paying three percent extra, this policy is actually creating problems and letting people to continue themselves not registering, what is the fault of the industry? The FBR should give clarity on the issue of CNIC prior to last date of filing of sales tax return or date of filing of sales tax return for the month of February be extended till the rectification of the problem, they added.