ISLAMABAD, May 7: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has proposed reduction of general sales tax rate to 10 per cent from 15 per cent within a period of two years for consideration in the budget for the year 2005-06. The FPCCI’s Committee on Sales Tax in its proposals submitted to the Central Board of Revenue (CBR) suggested abolishment of sales tax on textile sector, which contributes about 65 per cent of the total exports.

According to the committee’s proposals, a copy of which was available with Dawn, suggested de-centralization of the sales tax registration process, which has created problems for the persons seeking registration.

It was proposed that without adjudication no unilateral demand should be deducted from the pending claims; abolish the condition of keeping record for supplies to unregistered persons and fixation of a maximum period of 90 days for sanctioning the payment of refund claim under section 66.

The committee suggested to withdraw the power of collectors, who could require any person including a banking company to furnish information or statement in connection with any investigation under section 38(a) of the sales tax act. It was proposed to reduce the retention period from five years to three years.

Section 33 and 34 of the sales tax act uses the word ‘shall’ for imposing penalty and additional tax. Therefore, any kind of delay in payment would automatically carry additional amount of sales tax by way of penalty/additional tax. It was suggested that the word ‘shall’ might be substituted with words “may be liable” so that the adjudicating officer might have the authority of waiving penalty/additional tax in cases, where delay was genuine and beyond the control of the person.

It was proposed that section 45B should be harmonized with income tax law where the provision of requirement for payment of 15 per cent of disputed tax demand for filing of first appeal has been removed. No recovery notice for the amount against which the appeal has been filed might be issued unless and until a decision of the case was made.

The committee suggested that since the tax attributed for the transaction was paid off by the supplier, the matter of settlement of credit remained very much between the supplier thereto. It was proposed that the mandatory credit limit of 180 days be omitted from the law as it failed to serve any purpose besides making the compliance difficult and impractical for the taxpayers.

It was proposed that input tax credit should not be denied to any taxpayer if he was able to prove the compliance of section 7, 8 and 73 of the Act. It was the department, which ought to be guided to enforce registration laws effectively and the taxpayer should not be penalized for procuring goods from a registered person, suspected later on by the tax officials.

The committee recommended that a clear definition of fake invoice be given in the Act. Fake invoice was a vague term. The boundaries, limitation and criteria of fake invoice be fixed and made a part of the Sales Tax Act.