The Friends of Economic and Business Reforms (FEBR), has urged the FBR chairman to bring amendments related to the purchases in income tax returns of retailers, not registered in sales tax as business activities had grinded to a halt due to uncertainty in this regard.
FEBR President Kashif Anwar in a letter to FBR Chairman Shabbar Zaidi said that the supplies shown by sales tax registered entities in their sales tax returns should be automatically shown as purchases are shown in the annual business income tax returns of those who are only registered in Income Tax.
"This will complete the supply chain from sales tax registered suppliers to the Income Tax registered purchasers," he added.
He said that various steps have been taken in last budget to increase the Tax to GDP ratio and achieve the mountainous tax collection target of Rs 5500 billion for tax year 2020. In this regard, a major and prominent condition of mentioning CNIC on invoices has been added in the Finance Act 2019-20 which is under discussion at all forums.
The law has made it mandatory for every sales tax registered person either manufacturer, importer, dealer, distributor, wholesaler or retailer to mention STRN (sales tax registration number), NTN (national tax number or CNIC on sales tax invoice above Rs 50,000 value to feed Annex-C (Domestic Sales Invoices) of sales tax return which automatically verifies the particulars of buyers and compiles their record internally. If one does not provide NTN or CNIC, the proportionate input sales tax will be disallowed to registered person, he said.
On the other hand, all the purchases of sales tax registered persons either local or imported are updated automatically to avail the benefit of input tax in their sales tax return and no purchase entry can be manual.
He said FEBR is not against documentation rather it propagates for the benefits of becoming filer. But, in order to avail full sales tax input against purchases in sales tax return, the condition of CNIC is adding tensions for sales tax registered suppliers, and it goes without saying that all the legal formalities are for those who are in the tax net and who are more documented, he added.
"The condition of mentioning STRN, NTN or CNIC to avail full amount of input tax is for sales tax registered suppliers. But how the chain of supplies from supplier to purchaser will complete when the retailer would not mention those particular purchases in their business income tax return? There is no doubt that retailers submit their business income tax returns and do mention the figure of their annual purchases against their turnovers but those purchase figures are not verifiable and have no supporting evidence in actual."
He said that the retailers normally hesitate to get sales tax invoice from registered suppliers. Mostly, there is no proof with retailers regarding the justification of their purchases which they mention in their annual business income tax returns.
With regard to purchases made by all retailers, individuals, suppliers, agents and others, not registered in sales tax, it is requested that they may be enjoined to make purchases from sales tax registered persons for their businesses income tax returns. As in case of sales tax registered persons, all purchases are automatically shown in Annex-A (Domestic Purchase Invoices) & Annex-B (Imports) to avail the benefits of input sales tax.
Copyright Business Recorder, 2019