Entities be brought under tax net: KCCI The Karachi Chamber o | Regulatory Updates Of Pakistan

Entities be brought under tax net: KCCI

The Karachi Chamber of Commerce and Industry (KCCI) has proposed that all the entities engaged in business having commercial and industrial utility connections but are out of tax base should be brought under the tax net.

According to NEPRA Industry Report 2019 and FBR Tax Directory Data 2018, the number of commercial and industrial consumers are higher as compared to registered taxpayers with a huge difference who must be brought into tax-net as they are commercial and industrial entities but out of tax-net.

The chamber noted that currently the taxpayers and filers, particularly the industries, are overburdened with multiplicity of taxes.

The chamber observed that overburden of taxes on already registered taxpayers deprive them of level playing field and business viability against non-taxpayers.

It will ease the burden of taxes over registered taxpayers and shall also broaden the tax base resulting in further documentation of economy.

The chamber pointed out that currently WHT is charged at various levels and items such as import of raw material, registration of new vehicles etc. which is adjusted or refunded later.

Exporters whose customs rebate claims, sales tax claims and WHT claims are pending face severe liquidity crunch which is causing them great hardship.

The chamber proposed that exporters fall under final tax regime u/s 154(3B) and should be exempted from payment of WHT and be given exemption certificates. This will greatly benefit them and also lower workload of the FBR which is busy in a futile exercise. They will be getting more time to focus on broadening of tax base which is a dire need of the time. Withholding Tax should be reduced from 1% to 0.50%.

This would also help our exporters in using the cash liquidity for enhancement of the exports of Pakistan.

The chamber noted that due to inclusion of motorcycle and automobile spare parts in the third schedule, to the Sales Tax Act’1990 vide new serial No.49 in column (1) through the Finance Bill’ 2019-20, serious hardship is being faced by importers of motorcycle and automobile spare parts.

Under the amended procedure, importers are required to print MRP (Maximum Retail Price) on the imported parts and pay Sales Tax and additional sales tax on customs value.

Outcome: (1) Importers do not have any means to determine the landed cost at the time of delivery of cargo at destination due to the fluctuations in exchange rates; (2) It is not possible to determine the sale price of imported auto parts at which the retailers will sell the same to end-users. There is wide variation in sale prices by wholesalers and retailers. Importers cannot pre-determine and declare MRP as required under the new regulations.

Due to market fluctuations and rapidly changing demand and supply situation, importers cannot determine the final sale price and GST accordingly at import stage.

Frequent and unpredictable fluctuation in exchange rates make it impracticable to forecast the actual landed cost and sale prices.

The chamber proposed that motorcycle and auto parts are not a consumer product/grocery item which may require MRP to be printed on the product. It is an industrial use product, supporting Pakistan’s auto industry and meeting the requirements of after-market.

Therefore the automobile/motorcycle spare parts may be taken out of third schedule and included in normal tax regime for assessment of customs duty, sales tax and WHT etc.

Customs authorities have the competency to assess the values and levy the customs duty and taxes accordingly.

Benefits: Facilitate importers and dealers in customs clearance and avoid detention and demurrage charges.

Curtail rampant smuggling which has been on the rise after inclusion of auto-parts in Third Schedule.

Support automobile industry and prevent delays in clearance and resulting costs.