KARACHI, July 14: The Karachi Chamber of Commerce and Industry (KCCI) has prepared a post-budget memorandum 2004-05, suggesting the government to reconsider and rectify some of its decisions taken in the budget with reference to sales tax
, income tax, customs duty and smuggling prone items.
The KCCI has also pointed out some duty anomalies in finished goods and raw materials of various items. In the current budget no relief has been given to powerloom sector of the textile industry, which employees a large number of persons.
Duty on fabrics is 25 per cent and the cumulative duty stands at 52 per cent. The duty on import of polyester yarn is 20 per cent having a total effect of 62 per cent and it goes to 70 per cent if production cost is also included. This renders local manufacturers, particularly the powerloom sector quite uncompetitive.
To remove the anomaly, import duty on polyester yarn be cut to five per cent as the local production of polyester yarn is not enough to cater to the local demand and a sizable quantity has to be imported.
The government has cut the customs duty on import of nylon, acetate yarn and cupramonium rayon to five per cent subject to the condition of imports by the textile sector only.
The KCCI says that in view of the fact that a major portion of textile weaving and knitting is unrecognized, trade and industry both handle the imports of these items. The condition of import should be withdrawn in order to accommodate the industry both organized and unorganized sectors.
The KCCI said that the import duty on pineapple, white pepper, long pepper and seed-lac be cut to five per cent to encourage genuine imports. In another anomaly, the KCCI said that the duty on sugar confectionery items has been reduced to discourage smuggling.
However, the duty on raw material used in sugar confectionery industry remains at the rate of 25 per cent. In order to enable the industry to compete with imported items, it is suggested that the duty on gum base, basic raw material of chewing-gum and wrapping film, should be brought at zero rate from 25 per cent to remove the duty anomaly between finished goods and raw materials.
Duty on lip make preparations, eye make-up preparations and nail polish has been cut to five per cent to discourage smuggling. But on the empty lipstick containers and empty glass bottles for nail polish which are used by local manufacturers are still at the rate of 25 per cent which increases cost of production and renders manufacturers uncompetitive. Duty on above containers be reduced to zero to remove the anomaly.
Audit U/S 177(I) empowers the CBR to lay the criterion which shall remain confidential for selection of any person for audit of his income tax and commissioner shall select such person for audit.
This step would further increase discretionary powers of the commissioner and increase interaction between an assessee and a tax official. The KCCI suggests that such discretionary powers be withdrawn and be vested with the CBR and audit be determined according to the pre-determined/identified parameters.
The nil sales tax return format annexed with the SRO 484(I)2004, June 12, contains many anomalies/flaws and needs to be corrected and rectified. Besides, submission of nil return in the Sales Tax Collectorate will create inconvenience as one place in the mega city is not enough.
Either more points for filing of nil return be set up of the nil returns be continued to submit in bank branches. The KCCI strongly protests against the blanket permission given to Collector to require any person, including a banking company to furnish information and statement in connection with any investigation and calls for its deletion.
The amendment brought in section 8 Clause (c) states that tax credit is disallowed if supplier is unregistered. The chamber's contention is that it is government's responsibility to register or deregister a unit.
Genuine and bona fide person doing business according to prevalent law of sales tax and discharging his tax liability honestly and making payment of taxes through negotiable instrument, cannot be denied the adjustment/refund of sales tax because responsibility of registering a person under the Sales Tax Act lies with the government.
The KCCI calls for abolishment of the law. Steel melters have been given simplified fixed sale tax (value added sales tax) of only Rs300 per ton on steel ingots/billets as against fully documented re-rollers having to pay Rs4,238 per ton on billets purchased from Pakistan Steel.
KCCI says that re- rollers should be allowed to pay fixed value added sales tax of Rs300 per ton to Pakistan Steel as is being done for melters since products (billets, CC billets and ingots) of Pakistan Steel and melters are same and identical.
Documented industries based on Pakistan Steel's billets will not be able to survive when the tax discrimination is in excess of Rs4,500 per ton. Two systems of sales tax cannot work within the steel sector. There should be a uniform sales tax system in the industry.
Although further tax of three per cent on sales to unregistered person has been abolished - importers/registered persons are still required to keep the records of their sales to unregistered persons. This condition should be waived.
The KCCI also calls for abolishment of excise duty at various items on import stage. The chamber calls for cutting customs duty on import of motorcycles to 50 per cent from 90 per cent. The KCCI also suggests for bringing import duty on auto parts to five per cent from 35 per cent to discourage smuggling.
