KARACHI, April 22: Tax experts and consultants have asked the Central Board of Revenue to remove all the anomalies as well as harsh sections from the Sales Tax Act, 1990 in order to make it more practical and taxpayers’ friendly.

Speakers at a seminar on ‘Practical Aspects of Sales Tax Act, 1990,’ organized by the Income Tax Bar Association, Karachi (ITBAK), were of unanimous view that general sales tax (GST) being a tax of future should not give discretionary powers to collecting machinery.

There were two main speakers — Farrukh V Junaidy and Rashid Malid — at the seminar which lasted for more than three hours and was attended by a large number of tax consultants and experts to update themselves with the rapidly changing tax laws.

Briefing the background and evolutionary process of the sales tax, Junaidy said once the GST constituted only 0.71 per cent of the GDP and now it was at 4 per cent. Similarly, he said the revenue collection through GST had now exceeded income tax collection by Rs50 billion.

However, the most interesting disclosure he made was with regard to the jurisdictions of the GST. He said under Sales Tax Act, 1990, all supplies made or created within geographical boundaries of Pakistan were subjected to GST.

On the contrary, he stated, the government, which does have constitutional powers to extend its jurisdictions for imposing GST, has so far failed to impose the sales tax in Azad Kashmir, FATA and PATA.

Consequently, Farrukh Junaidy said supplies to these areas and Azad Kashmir were tax free, though some revenue could be collected by making some adjustments in input and output definition.

He was highly critical about the practice being carried out by all the sales tax collectorates for asking the taxpayers to de-register themselves in case they change their place of manufacturing or taxable activity to another jurisdiction.

There should be no such condition of getting de-registered and then again get registered with another sales tax collectorates in case of change in jurisdiction, he added. He suggested that the case and file of such taxpayers should automatically be transferred to other collectorate.

In order to check false ST claims and refunds, he recommended that once invoice was issued it should not be destroyed or altered. Similarly, he said time restriction of 12 months for making refund claims is also against the constitution as well as fundamental rights.

Junaidy said the Sales Tax Act, 1990 gave discretionary powers to tax collectors for the recovery of tax. He said section 48 of the act was very harsh as it was used by the tax collectors to harass as well as for arm twisting for the recovery of tax and sometime it resulted in closure of business establishments.

Another cause of great harassment to taxpayers, he said, was the multiplicity of audit in one fiscal year. He said the law only allowed multiple audit in selected cases but it was being witnessed that tax collectors were using it across-the-board. Even the Supreme Court ruling says that there should be once and fair trial.

Rashid Malik at length dealt with practical issues confronting taxpayers under the GST. He pointed out that goods exempted from sales tax when exported could not claim input, whereas zero rate exports could claim input. He said this ambiguity should be removed immediately.

He said that there were problems in adjustment of tax in case of goods were returned by buyers to the sellers. Similarly, he said there was other situation where the GST adjustment was not possible and the law was silent on such matters.

Malik said presently input was not allowed on consumption of diesel whereas the same was allowed on furnace oil. He said it was discriminatory and both the fuels should be treated at par.

He also raised issues confronting taxpayers when making payment through banking instructions. Any transaction above Rs50,000 has to be paid through banking instrument, but in case when goods are not taxable what would be the situation, he asked. There are non-registered persons, he said, and therefore, it was not binding upon them to make payments through banking system.

Earlier, ITBAK president Abdul Qadir Memon briefly highlighted the performance and achievements of the Karachi tax bar. Honorary general secretary of tax bar Syed Wasim Hashmi concluded the seminar with vote of thanks.