ISLAMABAD, June 9: The government has rationalised sales tax rates, removed irritants and reduced the cost of doing business.

To encourage taxpayers to clear their outstanding tax liabilities and to reduce legal disputes, amnesty of default surcharge and penalties has been announced in the Finance Bill 2007. Taxpayers who wish to avail the amnesty may deposit the principal amount of tax by June 30, 2007.

To provide relief to industries in FATA/PATA, it is proposed to exempt the arrears of sales tax against the units in NWFP subject to the condition that disputed excise duty and customs duty is duly deposited by them.

To rationalise collection of sales tax on supplies made by the CNG stations, the responsibility to charge and deposit sales tax is being given to gas distribution companies. CNG stations will not be required to remain registered with sales tax or keep any records.

To simplify the sales tax regime, sales tax leviable on advance payments received by registered persons is being abolished. Now registered persons shall be required to charge sales tax at the time of delivery of goods.

To check malpractices in input tax adjustment, the adjustment of input tax is being restricted to 90 per cent of output tax.

The system of adjustment notes and adjustment advices causing problems for the taxpayers is being abolished.

The scope of sales tax refund is now being limited to zero-rated supplies or exports only. A scheme is being envisaged whereby exporters of five zero-rated sectors shall be able to obtain sales tax refund on packing material, chemicals along with customs duty drawback.

With a view to remove distortions in the sales tax system, a number of special treatment procedures are being abolished.

Now commercial importers, iron and steel sector, restaurants and biscuit and confectionery sector shall operate in standard sales tax procedure of payment of due tax after adjusting the input tax on purchases from the output tax charged on supplies. To plug the revenue gap in government supplies and to collect the due tax from general orders supplies and wholesalers, the system of withholding of sales tax by government agencies is being introduced.

To expedite the sales tax refund of large taxpayers registered in large taxpayers units, a new procedure has been issued whereby they can claim their sales tax refunds within three days of filing on submission of a bank guarantee equivalent to the refund amount.

Based on international best practices, the period of record retention is being enhanced to five years from existing three years.

Abolishing various sales tax returns and a separate invoice summary, a single sales tax return has been introduced and invoice summary has been made an annexure to the return for facilitation.

Apart from the existing registration threshold of supplies of Rs5 million per annum, a new parameter based on utility bills is being introduced by amending the Sales Tax Act, 1990 whereby manufacturers having utility bills of more than Rs600,000 per annum shall also be required to obtain sales tax registration.