KARACHI, Aug 8: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has identified anomalies in the 2007-08 budget — nine in customs, five in sales tax and one in income tax.
The FPCCI in its last post-budget negotiations with chairman of the Federal Board of Revenue (FBR), Abdullah Yousuf, had resolved many irritants, but many more still need to be resolved.
In sales tax category, the FPCCI’s post-budget memorandum said the government had allowed large taxpayers unit to get the sales tax refund within three days against the bank guarantee. This facility should also be allowed to other tax-payers at least of the corporate sector whose heavy amounts are stuck-up in the sales tax department and a long period is required for completion of formalities.
Section 24 of the Sales Tax Act has been amended whereby the period of retention of record has been enhanced to five from three years. The FPCCI said it is not justified as three-year period was decided by the President of Pakistan on FPCCI request. The federation said there was huge disparity in taxation for some similar products.
One such example is of titanium dioxide classifiable under HS No 2823 and 3206.1100. Under 2823, the sales tax is zero-rated and presumptive income tax is one per cent, whereas under 3206.1100 the applicable sales tax rate is 20 per cent and presumptive income tax is five per cent.
It is recommended that either taxes be brought at same level to remove chances of misdeclaration or specific fiber grades should be mentioned in the SRO to provide zero-rating facility only to the intended sector.
Clause (b) of Rule 26 of Sales Tax Refund Rules has been amended through SRO 470 (I) 2007 (dated 9-six-2007) whereby provisions of refund rules shall be applicable only where registered persons acquire tax paid inputs for use in the manufacture of goods which are supplied to registered persons at the rate of zero per cent under the Sales Tax Act. The provision of refund rules shall not be applicable where the registered persons acquire tax paid inputs for use in the manufacture of goods which are supplied to non-registered persons.
The FPCCI says in sectors like textiles, leather and leather products, milk, bicycles, etc., the buyers are not registered, therefore, such registered suppliers will not be entitled to claim refund of input tax paid on zero-rated local supplies. This will be a big disincentive to the industries.
In pesticides, the fixed value-addition on pesticides finished products, as well as on active ingredients of pesticides, is leviable at the import stage under SRO 645(I) 2006 (June 21, 2007).
In the Income Tax, the FPCCI has taken up the case of polyester yarn industry. Under Section 148, all manufacturing units, registered with sales tax, are allowed import of capital goods and raw material at one per cent withholding tax with the exception of polyester yarn industry whose raw material has been subjected to five per cent withholding tax.
The federation urged the government to withdraw the five per cent withholding tax while withholding tax on import of polyester fabric should be enhanced to five from one per cent.
In customs, the FPCCI requested that customs duty on monitors for computers up to 17 inch only may be levied at zero rate while monitors above 17 inch may be maintained at the present rate i.e. 25 per cent in the best interest of industry.
In caustic soda, the FPCCI urged the government to implement SRO 567 for import of caustic soda to textile processing industry for their own genuine consumption and also place the caustic soda on zero rated for sales tax.
Phthalic anhydricle (PA) (HSC 2917.3500) is the raw material to produce various chemicals, like DOP, polyester resin and color. These chemicals are used in making artificial leather, PVC sheets, PVC shoes, cable, flooring, PVC pipes, paints, buttons, inks etc.
The import duty on PA has been increased to 15 from 10 in the budget. There is only one domestic producer of PA which also produces DOP. While the raw material for DOP is levied at the rate of 15 per cent the raw material for PA i.e. orthoxylene is zero per cent. This is making producers of DOP uncompetitive with the producer of PA. This anomaly needs to be removed by reducing duty to five per cent on PA.
The local calcium carbide making industry is facing problem as the government has reduced import duty on calcium carbide to 15 from 25 per cent. The FPCCI has sought protection for the local industry.
The welding electrode industry in Hattar is facing problems as the government has reduced the import duty on finished welding electrode to 20 from 25 per cent.
The chemical liquid paraffin and white oil are same but customs tariffs for these items fall in two different categories.
In budget, the duty on liquid paraffin has been cut to 15 from 20 per cent on white oil to five from 20 per cent.
The difference in duty of same items will open the door of corruption and this anomaly should be removed.
The FPCCI had also taken up the case of anomalies relating to adhesive tape industry and ceramic tiles.
