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Paapam flays FBR for stuck up sales tax adjustments

Paapam flays FBR for stuck up sales tax adjustments

LAHORE: Pakistan Association of Automotive Parts Accessories Manufacturers’ (Paapam) Chairman Munir K Bana has said that billions of rupees of the industries have been stuck up, as the electronic system of Federal Board of Revenue (FBR) disallowed input tax adjustments of provincial sales tax in Sales Tax Returns for the month of August 2013.

The Paapam chairman in a statement urged the FBR head to expedite those stuck-up sales tax adjustments as it would become impossible for the auto parts manufacturers to operate if their ‘life blood’ (cash flow) is usurped by their own government.

He said the electronic system did not allow input tax adjustment being claimed in sales tax return, as the FBR had failed to reach agreement with the Sindh Revenue Board (SRB). Punjab Revenue Authority (PRA) and Khyber-Pakhtunkhwa Revenue Authority (KPRA) were to resolve the crucial issue of allowing input tax adjustments of sales tax paid on services to the provincial governments, he said.

He alleged that the industry is being crushed like grass, while the big ‘elephants; namely FBR, SRB and PRB are unable to reach an amicable settlement on a simple matter of principle. The Paapam chief said the delay in release of huge funds that ran into billions had triggered serious liquidity crunch for the manufacturers that might lead to closure of many industrial units. He said authorities concerned should take a realistic view of the matter and allow the adjustment/refunds of provincial sales tax to the manufacturers, as this tantamount to double taxation.

He said Federal Tax Ombudsman’s ruling dated May 2, 2013 on that issue was very clear but that had also not been implemented by FBR. In addition, it is worth noting that industries are already struggling to cope with harsh Sales Tax laws introduced by FBR like: Section 8B of Sales Tax Act which restricts registered persons from adjusting input tax over and above 90 per cent of output tax; SRO 98(1)/2013, which requires registered persons to withhold 20 per cent Sales Tax from supplies; levy of one per cent further ST and five per cent extra ST on certain sectors and levy of two per cent additional ST on auto parts removed from Third Schedule, he added.

Paapam Vice Chairman Usman Malik suggested that the role of FBR should not be only to collect taxes but the real role of FBR should be to create an enabling environment through policies that enhances export, trade, commerce, industrialisation and thus job creation. He said anti-business policies and stance of FBR was a significant contributory factor for business and industries leaving Pakistan and stagnant growth of industrialisation in the country.