Clarification required –SRO No.603 (1) dated 25-06-2009
In the seminar held on 14th July, 2009 organized by Karachi Chamber of Commerce & Industry in collaboration with Sales Tax Bar Association, the following Questions were raised relating to above SRO for which necessary clarification is required immediately as tax payers assessed withlarge tax payers unit have stopped the payments to small & medium suppliers.
KARACHI SALES TAX BAR ASSOCIATION
Clarification required –SRO No.603 (1) dated 25-06-2009
In the seminar held on 14th July, 2009 organized by Karachi Chamber of Commerce & Industry in collaboration with Sales Tax Bar Association, the following Questions were raised relating to above SRO for which necessary clarification is required immediately as tax payers assessed withlarge tax payers unit have stopped the payments to small & medium suppliers.
SRO 603(1) of 2009
According to the SRO taxpayers falling in the jurisdiction of Large Tax Payers Unit for the purposes of sales tax, federal excise duty or income tax are specified as withholding agents for the purpose of deduction and deposit of sales tax.
"(3) A withholding agent, including a person registered in a Large Tax Payers Unit and a recipient of advertisement services, who purchases goods and services from unregistered person, shall deduct sales tax at the applicable rate of the value of taxable supplies made to him from the payment due to the supplier.
Provided that a person registered in a Large Taxpayers Unit shall be entitled to adjustment of sales tax so deducted by him from the output tax due, subject to conditions specified in Section 7, 8, 8B and 73 of the Sales Tax Act 1990, and the rules made there under."
OBJECTIONS ROSE DURING THE MEETING.
a)The first and most important objection raised by the members that implementation of the said rule will defiantly increase their production cost because in most of the cases the buyer has to deposit from his own packet If the vendors are informed that their payments will be subject to Sales Tax Withholding, they will inflate their prices, thus increasing the cost for the product/services.
b)That SRO allows adjustment of sales tax so deducted from the output tax due.
But how a person registeredin LTU will adjust this deduction made from the unregistered person with out observing requirements of section 7(ie. Without having any sales tax invoice in Hand)of the sales tax act as mentioned in the amended Rules issued vide SRO No. 603.
c)In case of Manufacturers and retailers whose turnover is below threshold limit and are not liable for registration, What evidences they are required to submit to the large tax payer unit for non deduction of Withholding sales Tax?
d)What about invoices already issued before the SRO was issued but paid subsequent to the SRO?
e)What about contracts inked with unregistered person prior to the SRO?
f)The General applicable rate of Sales Tax is 16 percent. However, n certain cases the applicable rate is 18.5 percent or 21 percent.The applicable rate is very high. How the large tax payer unit will determine the applicable rate?
g)How the person registered in sales tax with LTU will enter this as input tax in his e-filing Return as the supplier is unregistered?
KHUSHNOOD A.KHAN
PRESIDENT(KSTBA)