Details of un-registered buyers: Karachi LTU issues controversial notices to big companies

Large Taxpayers Unit (LTU) Karachi has issued notices to big companies and corporate entities seeking details of their un-registered buyers retrospectively and encompassing the period 2010-11, which is totally against the provisions of SRO821(I)/2011, applicable from January 2012.
It is learnt on Wednesday that a number of sales taxpayers registered with LTU Karachi, were served with the notices contending that sales tax return of the units for the period ended June 2011 have been reviewed and element of sales to un-registered person were found, accordingly they were required to furnish details of National Tax Number (NTN) and other particulars of such buyers under section 176 of the Income Tax Ordinance 2001.
In case of non-compliance, the LTU Karachi has cautioned that penal action will be taken against the non-compliant taxpayers under section 182 of the Income Tax Ordinance 2001. The show cause notices of the LTU Karachi have also directed the taxpayers to provide complete addresses and other particulars of un-registered buyers and distributors etc.
Commenting on notices of LTU Karachi, Arshad Shehzad, a prominent sales tax expert of Karachi told Business Recorder here on Wednesday that issuance of notices by LTU Karachi has sparked new debate over controversial notification 821. The FBR has implemented the SRO.821(I)/2011 from January 2012, but the LTU Karachi has directed the corporate sector registered with them to provide details of their un-registered buyers for the period of July 1, 2010 to June 30, 2011. Legally, the SRO.821(I)/2011 for the documentation of the un-registered buyers cannot be enforced retrospectively. The SRO.821(I)/2011 has been implemented from January 2012 to be applicable on the sales tax returns to be filed in February 2012.
Mandatory provision for furnishing NTN/ CNIC of unregistered buyers were recently made part of the sales tax law through notification 821(I)/2011 dated 6th September 2011. The said notification was overwhelmingly criticised by the trade and industry, thus thereafter forced the government to hold the notification in abeyance till December 31, 2011. The implementation of the notification is yet not decided and generally there are perception for it''s extension till next Finance Bill.
When the Karachi based tax experts was questioned about such notices, he replied that under such situation where government is in the process of dialogue with trade and industry for bringing some modalities to tap the un-registered segment of the tax net, issuance of these sorts of notices may directly hurt the efforts of the policy makers.
He was in the view that legally under the Sales Tax Act, the sales tax payers are not obliged prior to issuance of notification 821(I)/211 to report details of NTN, CNIC or any other particulars of such buyers who are not registered. In his opinion issuance of such notices creates further resentment among the registered taxpayers community to accept any such condition. He further said that government should not create hassle and botheration for registered taxpayer, they must be treated them as an asset. Any damage of their confidence and faith on the tax management may back fire rather any achievement, Arshad Shehzad added.