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INDIRECT TAXES SALES TAX & FEDERAL EXCISE

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 TAXES SALES TAX & FEDERAL EXCISE

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  1. 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

  2. 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.

  3. 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).

  4. 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.

  5. 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.

  6. 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..

  7. 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.

  8. POWER OF ADJUDICATION • Powers of adjudication with respect to threshold of amount involved have been revised as follows:

  9. 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.

  10. 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.

  11. 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.

  12. 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%.

  13. Thank You

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