KARACHI, June 13: This year too the business leaders, after hailing the new budget on the day of its announcement, are now busy in digging out anomalies in sales tax, customs duty and income tax regimes.

It is too early to give exact number of anomalies that have cropped up in the new 2005-2006 but businessmen associated with various associations and apex trade bodies have put their heads together for the exercise.

On Monday, Karachi Chamber of Commerce and Industry (KCCI) gathered some businessmen and industrialists and initially found out “three anomalies in income tax, six in sales tax and two in customs duty relating to various sectors.”

In customs duty, the KCCI pointed out that the duty on all the raw materials, inputs and accessories used in export-oriented textiles industry has been cut to zero per cent but pigments used in textile printing were still subjected to 15 per cent duty. The KCCI urged the government to include the pigment (H.S.Code 3204.1700) in the SRO 536(I) 2005 and cut the customs duty to zero per cent.

Customs duty on finished zippers and its raw material brass flat wire is same at 20 per cent. The Chamber called for removal of this anomaly by reducing custom duty on brass flat to zero so that the local industry could compete with Chinese finished zippers.

In income tax, the KCCI said that under a new clause 56 (xi)(j), which had been introduced in Part IV of the Second Schedule, trading houses with paid-up capital exceeding Rs250 million and fixed assets exceeding Rs300 million at the close of the year had been exempted from withholding tax at import and supply stage. But the sane clause would make survival of small and medium houses difficult.

The KCCI urged the government to remove this anomaly and reduce the withholding tax Under Section 148 from six to two per cent.

The imposition of imposing 0.1 per cent withholding tax on cash withdrawn from bank of amount exceeding Rs25,000 was unrealistic and it would create problems for SMEs. The Chamber called for its immediate withdrawal. “If the government has no alternative, the threshold may be raised to Rs 100,000.”

The government had enhanced the tax by 0.25 per cent on export proceeds of textiles, carpets, leather, surgical instruments and sports goods as it would increase cost of export and might erode competitive edge of these products in global markets. Therefore, 0.25 per cent raise in income tax rate on export proceeds should be withdrawn.

In sales tax, The KCCI said that the amendment to do away with provision to carry forward the excess input tax to the next period was quite illogical and unrealistic. This would create a lot of problems and hardships not only for the tax payers but for the sales tax department as well.

In the new sales tax return-cum-payment challan regarding sales tax refundable and input tax from previous tax period (if any) specified as per SRO 522(I) 2005, the column number five, six and 13 of current sales tax return cum payment challan are abolished. This creates serious anomaly as this form does not account for the excess input tax over output tax in cases where part of goods remain unsold during tax period.

The Chamber said that it seems that as per proposed sales tax return every commercial importer had to sell his imported goods in the same month in which it was imported to get adjustment of sales tax paid at customs stage which was impossible.

Chemical and dyes importers in the meeting pointed out that some 19 industrial raw materials (chemical and dyes) used extensively in the manufacturer of exportable goods of listed industries have been erroneously left out of the list for zero rated goods which should be notified.

For textile raw materials zero per cent sales tax is allowed in the budget but for textile parts zero per cent sales tax is not mentioned in the SRO 536. There is a need to rectify this anomaly by including parts in the SRO 536.

Under SRO 525, it has been made compulsory for all registered persons engaged in import of supply of taxable goods (excluding certain classes/type of registered persons) to furnish a summary of their purchases and sales made during a tax period by 15th of the month following the said tax period. The Chamber said that this SRO would create hardships for registered persons as instead of focussing on productive business activities their clerical and paper work will be increased considerably.

The KCCI also urged the government to abolish 15 per cent federal excise duty on wireless local loop service.

Paper merchants, in the meeting, were more concerned over the budgetary measures, saying that the government has not given any incentive in shape of duty cut on paper and board imports. They demanded a level-playing field from the government for industrial and commercial importers of papers.

The meeting was chaired by former president KCCI, Siraj Kassam Teli and acting president KCCI, Mian Abrar Ahmed and leaders of business community.

Later, the chairman Site Association of Industry, Dr Mirza Ikhtiar Baig said that he had also sent a proposal to the Central Board of Revenue (CBR) relating to some anomalies in the 2005-2006 budget. He said the government had not brought zero rated duty on some seven to eight chemicals and dyes not manufactured locally and used for manufacturing sports goods. He urged the CBR to include such dyes and chemicals in the list of zero rated sales tax lists.

He said when the government had decided that there would be no sales tax on many items then there is a need to issue SRO for zero rated tax on utilities like KESC and gas.

The chairman Korangi Association of Trade and Industry, Abdul Haseeb Khan and chaiman FB Area Association of Trade and Industry, Rehan Zeeshan said that they have also found out anomalies in the budget and would send them to the government very soon for their rectification.

The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has also sought fiscal anomalies from associations and trade bodies to send them to the government.