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INDIRECT TAXES SALES TAX & FEDERAL EXCISE. Presented by: Mehmood A. Razzak Partner. The Income Tax Bar Association, Karachi June 16, 2009. Contact Address:. 103-104, Amber Estate, Main Shahrah-e-Faisal, Karachi Phone: 021 – 4535712-3 Fax: 021 – 4546291
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INDIRECT TAXESSALES TAX & FEDERAL EXCISE Presented by: Mehmood A. Razzak Partner The Income Tax Bar Association, Karachi June 16, 2009 Contact Address: 103-104, Amber Estate, Main Shahrah-e-Faisal, Karachi Phone: 021 – 4535712-3 Fax: 021 – 4546291 E-mail: mim@mimandco.com
KIBOR • KIBOR introduced for the first time in the Indirect Tax Regime. • It means Karachi Inter Bank Offered Rates (KIBOR) applicable on the first day of each quarter of the financial year. • Default surcharge (1.5% per month) at a flat rate is proposed to be replaced with KIBOR plus 3% per annum. • Compensation an account of delayed refunds shall be paid at the rate of prevailing KIBOR. • Right to receive compensation in case of delayed refunds of Excise Duty is recognized for the first time.
ASSESSMENT OF SALES TAX & FED • Similar to Section-11 of the Sales Tax Act, a new Section-4A is proposed to be inserted in the Federal Excise Act. • Assistant Collector and his superior shall be empowered to determine minimum liability of duty if a a registered person fails to file a return. • Notice of payment is proposed to be abated in case of voluntary payment of duty alongwith default surcharge and penalty. • The manner of assessment prescribed in Sales Tax Regime shall be adopted for FED purposes also. • Order under these section shall have to be passed within 120 days or further extended 60 days (previously 120 days).
LIABILITY TO PAY DUTY • Law holds manufacturer, exporter, service provider and persons bringing goods to the tariff area as liable to pay duty. • The Board is proposed to be empowered for specifying the goods or services in respect of which the liability to pay Duty shall be on any other notified person.
CNIC / NTN OF BUYER • An aggressive step towards documentation and broadening of tax base. • In both the regimes, CNIC / NTN of unregistered buyer will be required to be mentioned on the Invoice.
RETENTION OF RECORDS • A registered person is required to retain records prescribed in Sales Tax and Federal Excise regimes for 5 years and 3 years respectively. • This condition is now also linked with finalization of pending decision / assessment appeal, revision, reference, petition or ARC. • Therefore, the time period shall be reckoned as later of 5 or 3 years as the case may be, and finalization of pending decision, etc..
OFFENCES AND PENALTIES • In sales tax regime, denial or obstructing the access of the Officer of Sales Tax to the premises or stocks of the registered person shall be an offence punishable with a penalty of Rs, 25,000/- or 100% of the amount involved plus imprisonment for five years or a fine to the extent of loss involved. • Failure to print retail price, health warning and name of manufacturer on packets of cigarettes will be an offence subject to levy of FED at the rate of 500% add valorem.
POWER OF ADJUDICATION • Powers of adjudication with respect to threshold of amount involved have been revised as follows:
APPEALS TO APPELLATE TRIBUNAL • Procedure laid down in Section-194A, 194B and 194C of the Customs Act, 1969 and rules thereunder have been adopted in both regimes. • There will be harmony in all the three regimes with respect to appeals to Appellate Tribunal. • Consequently, provisions dealing with the procedures of appeal proceedings have been proposed to be deleted.
ALTERNATIVE DISPUTE RESOLUTION (ADR) • The concept is still undergoing evolutionary process. • The Committee will have to finalize its recommendations within one hundred eighty days with no extension of time available. • Else, the Board will reserve the right to dissolve the Committee and constitute a new one to replace it. • The Board to pass order within forty five days of the receipt of recommendation.
RELIEF MEASURES • Wheel chairs have been zero – rated under Sales Tax Regime. • Raw material for poultry feed (Lysine Sulphate) has been exempted from sales tax. • FED on cement reduced from Rs. 900/- per metric ton to Rs. 700 per metric ton. • Fed @ 5% on motor cars has been withdrawn. • FED on telecommunication services has been reduced from 21% to 9%. • Activation charges of cellular phone reduced from Rs. 500 to 250.
REVENUE MEASURES • FED on cigarettes, cigars etc., enhanced at respective prices. • FED levied on advertisement in newspapers, periodicals, hoarding board, pole signs, sign boards and shop board @ 16% of the charge. • Re. 0.20 levied as FED on each SMS. • FED on insurance and re-insurance increased from 10% to 16%. • Both funded and non-fuded services by banks and NBFCs shall be subject to levy of 16% FED. Services with respect to Haj, Umrah, Cheque Book, Utility Bill Collection, Musharika, Modaraba financing shall be excluded. • FED @ 16% levied on services provided by Stock Brokers. • Services rendered by port and terminal operators in relation to imports shall also be subject to FED @ 16%.