The government needs to announce a package for the industrial revival and for businesses which are under tremendous pressure owing to multiple reasons including high oil prices, inflation and energy shortage. The cost of doing business is increasing with every passing day as a result of the depreciating rupee and the high energy cost including electricity, gas and petrol. Under the circumstances, the limit of minimum exemption of Rs100,000 for income tax requires upward revision.The minimum exemption limit for individuals in business needs to be increased to Rs200, 000.
And the issues related to general sales tax also demand a careful review. The industry has suggested recently that the tax refund policy should be revised. Presently, only cash invoice exceeding Rs25,000 is eligible for claiming Input Tax Refund, which is too low and must be enhanced to at least Rs.100,000 per cash invoice.
A retailer whose value of supplies or turnover in any period during last 12 months preceding the fiscal year exceeds Rs5 million, an importer, a wholesaler including dealer or distributor are also subject to compulsory registration under the Sales Tax Act. This threshold should be raised to Rs10 million. On late submission of monthly/quarterly sales tax return, a heavy penalty of Rs25000 is imposed. It is harsh and demands a rational revision. A fairly sufficient period say 45 days should be allowed for submission of returns.
The industry faces tiresome procedures in filing tax returns which result in wastage of precious time, energy and resources. One such case is the submission of NIL Return where statement of sales/purchase is required to be submitted along with it. This condition is unjustified and to ad salt to injury, even late or non-submission of such a statement is subject to penalty of Rs25000. Such a penalty should be withdrawn. When NIL return is submitted, there is no use of submitting nil purchase/sales statement.
Industry representatives have suggested that penalties on account of various delinquencies or defaults should be in line with the Income Tax Law. Also the Sales Tax Return is too complicated and lengthy. A common trader/ person finds it difficult to fill the return.
To be eligible to get refund of Input Tax, it is necessary that the seller should also report the sale to the department and its record should be available in the sales tax computer duly registered. The problem gets aggravated when due to any reason, e.g. the data is not available, the seller is not registered under the Sales Tax Act or transaction has not been recorded by the department, no refund /adjustment of Input Tax is admissible. The industry has proposed that the submission of purchase invoice should be considered sufficient proof of Sales Input Tax paid by the purchaser for input adjustment.
In case of dispute, appeals are made to the Custom and Sales Tax Tribunals, which make the process too lengthy. To facilitate the industry, all the appeals relating to sales tax disputes should be dealt by the RTOs /Income Tax Tribunals only. Moreover, since there is lot of delay at the Appellate Tribunal level, taxpayers are facing serious problems of recovery on the basis of order-in-original/order-in-appeal. Hence, the issue should be resolved amicably by correcting the flaws in this regard.
The government needs to ponder over the ratio of sales tax on various industries as well as its rationality. It should curtail the rate of sales tax from the existing 15 to 10 per cent, as it had already been proved through experience that a cut in tax rate gets more revenues for the government. The exemption of sales tax for specified period would also be a great help to those industries that need to encouraged. As the budget for the year 2008-09 would impact on industry as well as national economy, the government needs to apply an “out-of-box”, approach to ensure a better economic future. To quicken the industrial growth, government should also consider allowing all raw materials not produced domestically at zero duty, while the duties on finished products should be enhanced to protect the local industries.
The industry needs a favorable environment to grow. It is industry that provides employment and self-reliance.
The writer is senior vice-president of Islamabad Chamber of Commerce & Industry (ICCI).