ISLAMABAD, Sept 18: The Federal Tax Ombudsman has proposed to the government a string of measures for removing 23 irritants of Sales Tax to provide facilities to taxpayers.

FTO Justice (retd) Saleem Akhtar identified the irritants in a report on "Irritants in Federal Tax Administration and Statutes" and recommended remedial actions.

The Ombudsman observes that incidence of sales tax is on the ultimate consumer. "Input is what is not consumed by a seller and adds directly to value of goods offered by him for sale. No conceptual distortions should be allowed to creep into the system."

The FTO recommended that in order to set the controversy at rest the term "input" might be redefined in accordance with the ISO Accounting Standard in the Sales Tax Act and the discretionary power allowed under section 8 was done away with. It was proposed that filing of periodical sales tax returns by all registered persons should be ensured on regular basis through software operating on nationwide network.

It was a fact that issuance of fake/flying invoices and evasion poses a grave threat to proper implementation of sales tax system, but it was also observed that in their over exuberance to curb these perils the tax machinery has been black listing or suspending the registration of genuine persons without giving them an opportunity to explain their point of view.

It was proposed that a time limit up to two months be fixed for the collector to complete the inquiry and finalize the case. Further, on receiving a clean audit report the name of such person should be immediately removed from the list of suspected/suspended persons/units.

In view of inordinate delay in finalization of de-registration of cases, it was proposed that if applications for de-registration were not disposed of within the prescribed period then applicant might be considered de-registered automatically.

The FTO recommended that the audit should be completed within the specific time frame as provided by the sales tax general order No.1 of 1999. If the time frame was to be changed for any reasons, it should be reasonable time. Where on the basis of audit report show-cause notice was issued, proper opportunity shall be provided to the person/unit to challenge the audit report and no order should be passed or action taken on the basis of oral request of any person unless the same has been duly recorded on the relevant file.

It was proposed that the definition under section 2 (44) might be suitably amended so that a registered person was required to charge the tax at the time of delivery and not at the time of taking the advances. It was also proposed that efforts should be made to process the refund claims totally on the computer without any manual process so that refund claims in true sense can be disposed off expediently.

The FTO recommended that the CBR might issue instructions to the collectors that the refund be disbursed within seven days of the receipt of order in appeal. It was proposed that if a refund claimant submits the copy of return filed by his supplier along with copy of his registration certificate then such refund claim might be processed without waiting for the correction of the record of the supplier by STAAR database in Lahore.

For pending refund claims, it was proposed that it might be processed under the direct supervision of the collector concerned so that they might be decided expediently.

Section 9 of the sales tax act restricts the issuance of debit and credit notes within a deadline of 90 days, which was illogical keeping in view the individual peculiarities of various production units. It was proposed that the time limit of 90 days be removed and adjustments to be allowed as per need of the hour.

It was recommended that the CBR might specify the minimum documents to be attached with the registration application. Intending manufacturers be provisionally allowed the status of a manufacturer for a period of up to three months in which if he fails to do the needful - installation of machinery, his status as manufacturer might be withdrawn.

It was proposed that the period for retention of accounts should be fixed from the date of audit observation. The non-essential documents should also be excluded from the list of prescribed records.

It was suggested to remove the requirement of posting of officer of sales tax on the premises of registered persons, be removed from the statute. The inter books adjustments, bad debts, late payment due to properly documented disputes and payment through creditors/brokers/guarantors of the buyer might also be allowed by making appropriate amendments in the section 73.

It is also proposed that the power to condone inadvertent defaults might be delegated to the collectorate for speedy and expeditious disposal of such applications.