NTN and CNIC conditionality by FBR: industry being maligned after waiver: PSMA

Chairman Pakistan Sugar Mills Association (PSMA) Javed Kayani has said that the industry is being maligned after waiver of NTN and CNIC conditionality by FBR. He said, as a matter of fact FBR on 26th July 2011 had asked for suggestions and proposals in the proposed amendment to Sales Tax and Excise Duty Returns and subsequently issued detailed explanation to frequently asked questions in the print media.
PSMA after going through all the new proposals and formalities and wrote a letter to FBR on August 16, 2011 referring to its letter No 3(9) STL&P/2010 dated 26th July 2001 along with FAQs issued by the department regarding amendments in sales tax and federal excise returns.
According to a PSMA Chairman statement issued here on Tuesday, the letter said that the new proposed sales tax return form contains controversial provision of submitting National Tax Number (NTN) or Computerised National Identity Card Number (CNIC) for sales and purchases made from unregistered persons, which has no legal backing in the Sales Tax Act, 1990.
That the new proposed sales tax return form has number of new annexure, which require detailed information to be filled by taxpayers, the burden of compliance seems to have increased almost on all sectors. That most controversial part of the proposed return are the remarks given at the foot note of annex 'A' and 'C' pertaining to purchases and sales, respectively, which suggest that all manufacturers, importers and exporters have been required to record CNIC or NTN for all purchases whether acquired from registered or unregistered person.
Interestingly, there is no such legal bar under the Sales Tax Act, 1990 for such compliance. Without legal backing such a controversial provision has been introduced in the sales tax return for providing CNICs/NTNs of the sales and purchases made from unregistered persons.
The quantum of work desired to be performed by manufacturers by requiring recording of NTN or CNIC numbers of all sales and purchases has altogether been ignored. For instance, every sugar mill installs a number of depots far away from the mills premises for procurement of maximum cane. The number of such depot range from 50 to 100 depending upon crushing capacity of a sugar mill.
The cane supplied at a depot is instantly recorded/acknowledged by issuing a CPR to the grower against it. The growers are illiterate and un-registered persons and even do not operate any bank account at all. Since a number of CPRs (say 500 - 800 depending upon the crushing capacity of a mill) are issued to the growers daily, hence it would become impossible for the sugar mill to record CNIC number of each purchase at the mills. In the same way sugar is sold not only to unregistered shopkeepers for sale in retail but also directly to poor community in small packing of 1 Kg-2 Kgs. Requiring copies of NTN or CNIC from such unregistered persons would not be possible.
The FBR, though couple of years back has proposed amendment to section 23 for requirement of NTN or CNIC, however, the same was not endorsed/approved by the National Assembly on the pretext that there is already a very narrow tax base and in case of introducing such compulsion, the registered and documented sector simply can't operate. Therefore in the absence of the backup legal clause in the Sales Tax Act, such requirement simply becomes arbitrary, unwarranted and unlawful and could not sustain the test of judicial scrutiny.
Furthermore, the person registered other than manufacturer, importer and exporter did not mandatorily require provision CNIC and NTN of unregistered buyer/supplier, which creates discriminate treatment as well.
That the summary of carry forward is one of the new features in the proposed sales tax return, provided under annex 'F'. The statement apparently suggest that registered persons are required to provide complete details of purchases, consumption, opening and closing stock in terms of value and incidence of tax to workout actual value addition declared by the taxpayers. The suggestive chart though apparently looks simple but in-fact involves detailed voluminous working and feedback. Monthly submission of such details overburden taxpayers with cumbersome compliance and it would be appropriate if the requirement of the same be restricted to filing of annual return.
That the provision of providing H.S. Code mandatory with sale/purchase items in Annexure - A (Domestic Purchase Invoices) & Annexure - C (Domestic Sales Invoices) cannot be fulfilled. Every registered person purchases a number of minor purchases from the market/unregistered persons who do not have any such records.
The proposed return suggests that stock statement now mandatorily been required from all the refund claimants through insertion of annexure 'H'. Earlier though refund claimant was required to furnish the stock statement but the same may file with their refund claim within 120 days of filing of sales tax return, which gives them sufficient time for its preparation with due diligence for proper compliance, furthermore in case of zero rated sector the refund claimant usually file statement to the extent of taxable purchases as there are no consequence of zero rated stock in relation to their refund claim, which means the sector is burdened with additional details as well. Chairman PSMA Javed Kayani has said that a responsible statement should be made and the industry should not be made a target for uncalled criticism, which is extremely damaging and we reserve the right to challenge the same.-PR