ISLAMABAD: The Senate Standing Committee on Finance on Thursday turned down the government proposal to increase sales tax to 20 per cent for unregistered persons on grounds that it was an unrealistic move and a futile exercise.

As the new taxation measures were being discussed, the committee was informed that the proposal was to raise the sales tax rate by 1pc – that is 17pc plus 3pc for unregistered persons.

However, Senator Mohsin Aziz said that the sales tax was 17pc for registered persons but around 99pc of the retailers and wholesalers were unregistered. “So what impact will it have as the entire market is unregistered and the manufacturer is compelled to sell goods to unregistered persons,” he said, adding, “first the Federal Board of Revenue (FBR) increased it by 1pc, now it was higher by 2pc yet the registration rate has not improved.”

As committee chairman Senator Farooq Naek asked Aziz for his suggestion in this regard, his response was to increase the rate by 10 percentage points. “Either leave it as it was or make it pinching at 27pc for non-registered persons,” said Aziz.

Despite resistance from the FBR officials, the committee rejected the recommendation and suggested not to increase the sales tax. The meeting was informed by Senior Member Inland Revenue Policy FBR Dr Muhammad Iqbal that income and sales tax measures would be applicable from July 1.

He pointed out that it includes revenue measures of income and sales tax as well as legal/procedural changes introduced in the Income Tax Ordinance 2001, Sales Tax Act 1990 and Federal Excise Act through Finance Bill 2018.

It was also told that increase in the Federal Excise Duty (FED) on cigarettes and cement will be enforced at the start of next fiscal year ie from July 1 to discourage profiteers from exploiting the proposed rise in FED.

The committee further discussed the proposed new alternative dispute resolution committee (ADR) to which Dr Iqbal clarified that it will be different from the earlier one as its decision will be binding on both FBR and the tax payers.

However, the Senate body directed Law Division to frame the clauses regarding ADR in legal language and present it to the committee again.

Published in Dawn, May 4th, 2018