KARACHI, June 21: While seeking an early resolution of a number of anomalies in the budget 2006-07, the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has urged the government to give special incentives to the coal mining industry which could help the country meet rapidly growing demand for fuel and energy.

The apex body of trade and industry is of the view that huge reserves of coal could benefit the country, particularly in the wake of rising cost of imported oil. The FPCCI points out that in terms of cost, two tons of coal is equivalent to a ton of imported oil, therefore it is suitable for producing electricity, and efforts should be made to make better use of coal.

The FPCCI demands that the mining industry should be given special incentives by abolishing sales tax, allowing concessions in income tax and exemption from duty on import of machinery and equipment.

These were the observations and demands made by FPCCI Vice-President Akbar Abdullah at a seminar on sales tax, central excise duty and customs jointly organized by the FPCCI and the Karachi Sales Tax Association (KSTA) here on Wednesday.

A number of anomalies and irritants were highlighted by the FPCCI and two other speakers, Khashnood Ahmed Khan, KSTA President, and Sheikh Jalaluddin, chartered accountant, at the post-budget seminar.

Mr Abdullah pointed out that rule 14 of the Sales Tax Special Procedure Rules-2004 and 2005 provided that the payment of sales tax on value-addition basis as prescribed under these rules shall be mandatory and the commercial importer shall be exempted from the requirement of

audit.

However, he said in the Sales Tax Special Procedure Rules-2006, the provision of exemption has been omitted, although value-addition of minimum 10 per cent in general and 15 per cent in case of pesticides will be made and sales tax paid accordingly at import stage on such value-addition. In view of this, the FPCCI asked the CBR that commercial importers be exempted from the requirement of audit, as before.

He said further that section 8A has been added in the Sales Tax Act, 1990 by the Finance Bill 2006-07. The section provides that a registered person receiving a taxable supply from another registered person is in the knowledge or has reasonable grounds to suspect that some or all of the tax payable in respect of that supply or any previous or subsequent supply of the goods supplied would go on unpaid, such person as well as the person making the taxable supply shall be jointly and severally liable for payment of such unpaid amount of tax.

Mr Abdullah argued as to how it was possible for a purchaser to have access to the record of supplier which is implied in the use of words “in the knowledge” in this section. The purpose of this section, he said, appeared to confirm that the payment of tax and its deposit into government treasury. He suggested that to ensure payment it would be wiser to make amendment in section 3(3) and responsibility of depositing tax should rest with the purchaser.

The imposition of GST on import and sale of computer hardware, printers and accessories, the FPCCI vice-president said, would have adverse effect on the promotion of computer literacy. The imposition of GST, he feared, would increase prices of computers by at least 25 to 30 per cent which will defeat government’s objective to create and promote computer literacy in the country. He suggested that present practice of levy of customs duty instead of GST might be continued. Through an amendment to sub-section 3 of section 26 of the Sales Tax Act, a revised return can now be filed within 90 days after obtaining permission to do so from the collector of sales tax. Prior to this there was no time limit and no permission was required from collector. However, this amendment, he cautioned, would unnecessarily enhance the power of sale tax officials, which should be withdrawn.

Mr Abdullah said that through an amendment to section 3 of the Sales Tax Act a penalty of Rs25,000 had been prescribed for a person who failed to file summary of sales and purchases. “This is very harsh penalty as it does not take into account special circumstances which may prevent the registered person from doing so.” Above all, he said, justice required that penalty should only be imposed after giving a fair chance to a person to explain reasons for non-compliance with legal requirement.

Referring to some proposed amendments to central excise duty, he said the levy of five per cent excise duty on non-fund services provided by the financial sector would increase the cost of doing business, therefore it should be withdrawn. Increasing excise duty on insurance from three per cent to five per cent will also increase the cost of doing business. Mr Abdullah said that every business had to insure plant and machinery, building, stocks, etc., on which substantial amount is paid to insurance companies towards premium. Similarly, he said the increase in excise duty to 15 per cent on mobile telephone would also increase the cost of doing business.

He said the FPCCI in its budget proposal had requested that customs duty on raw materials of the ceramic tiles industry i.e. luster powder (HSC 3207.4090) and ceramic roller (HSC6902.9090) be reduced from 10 to 15 per cent in order to make the industry competitive against imports but it had not been done. He demanded that this should be immediately done and duty be reduced to five per cent from 10 per cent.