INDIRECT TAXESSALES TAX & FEDERAL EXCISE

Presented by:

Mehmood A. Razzak

Partner

103-104, Amber Estate, Main Shahrah-e-Faisal, KarachiPhone: 021 – 4535712-3Fax: 021 – 4546291E-mail: mim@mimandco.com

Contact Address:

The Income Tax Bar Association,

Karachi June 16, 2009

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KIBOR

KIBOR introduced for the first time in the Indirect Tax Regime.

It means Karachi Inter Bank Offered Rates (KIBOR) applicable on the first day of each quarter of the financial year.

Default surcharge (1.5% per month) at a flat rate is proposed to be replaced with KIBOR plus 3% per annum.

Compensation an account of delayed refunds shall be paid at the rate of prevailing KIBOR.

Right to receive compensation in case of delayed refunds of Excise Duty is recognized for the first time.

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Similar to Section-11 of the Sales Tax Act, a new Section-4A is proposed to be inserted in the Federal Excise Act.

Assistant Collector and his superior shall be empowered to determine minimum liability of duty if a a registered person fails to file a return.

Notice of payment is proposed to be abated in case of voluntary payment of duty alongwith default surcharge and penalty.

The manner of assessment prescribed in Sales Tax Regime shall be adopted for FED purposes also.

Order under these section shall have to be passed within 120 days or further extended 60 days (previously 120 days).

ASSESSMENT OF SALES TAX & FED

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LIABILITY TO PAY DUTY

Law holds manufacturer, exporter, service provider and persons bringing goods to the

tariff area as liable to pay duty.

The Board is proposed to be empowered for specifying the goods or services in

respect of which the liability to pay Duty shall be on any other notified person.

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CNIC / NTN OF BUYER

An aggressive step towards documentation and broadening of tax base.

In both the regimes, CNIC / NTN of unregistered buyer will be required to be

mentioned on the Invoice.

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RETENTION OF RECORDS

A registered person is required to retain records prescribed in Sales Tax and Federal

Excise regimes for 5 years and 3 years respectively.

This condition is now also linked with finalization of pending decision / assessment

appeal, revision, reference, petition or ARC.

Therefore, the time period shall be reckoned as later of 5 or 3 years as the case may

be, and finalization of pending decision, etc..

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OFFENCES AND PENALTIES

In sales tax regime, denial or obstructing the access of the Officer of Sales Tax to the

premises or stocks of the registered person shall be an offence punishable with a

penalty of Rs, 25,000/- or 100% of the amount involved plus imprisonment for five

years or a fine to the extent of loss involved.

Failure to print retail price, health warning and name of manufacturer on packets of

cigarettes will be an offence subject to levy of FED at the rate of 500% add valorem.

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POWER OF ADJUDICATION

SALES TAX CASES U/S 11 & 36 Additional Collector No Limits Deputy Collector Not exceeding Rs. 2.5 Million Assistant Collector Not exceeding Rs. 1 Million Superintendent / Senior Auditor Not exceeding Rs. 10,000 Sales Tax Officer As notified by the Board.

Powers of adjudication with respect to threshold of amount involved have been

revised as follows:

FEDERAL EXCISE Deputy Collector Not exceeding Rs. 2.5 Million Assistant Collector Not exceeding Rs.1 Million Superintendent / Senior Auditor Not exceeding Rs. 10,000

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APPEALS TO APPELLATE TRIBUNAL

Procedure laid down in Section-194A, 194B and 194C of the Customs Act, 1969

and rules thereunder have been adopted in both regimes.

There will be harmony in all the three regimes with respect to appeals to

Appellate Tribunal.

Consequently, provisions dealing with the procedures of appeal proceedings have

been proposed to be deleted.

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ALTERNATIVE DISPUTE RESOLUTION (ADR)

The concept is still undergoing evolutionary process.

The Committee will have to finalize its recommendations within one hundred eighty

days with no extension of time available.

Else, the Board will reserve the right to dissolve the Committee and constitute a new

one to replace it.

The Board to pass order within forty five days of the receipt of recommendation.

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RELIEF MEASURES

Wheel chairs have been zero – rated under Sales Tax Regime.

Raw material for poultry feed (Lysine Sulphate) has been exempted from sales tax.

FED on cement reduced from Rs. 900/- per metric ton to Rs. 700 per metric ton.

Fed @ 5% on motor cars has been withdrawn.

FED on telecommunication services has been reduced from 21% to 9%.

Activation charges of cellular phone reduced from Rs. 500 to 250.

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REVENUE MEASURES

FED on cigarettes, cigars etc., enhanced at respective prices.

FED levied on advertisement in newspapers, periodicals, hoarding board, pole signs, sign boards and shop board @ 16% of the charge.

Re. 0.20 levied as FED on each SMS.

FED on insurance and re-insurance increased from 10% to 16%.

Both funded and non-fuded services by banks and NBFCs shall be subject to levy of 16% FED. Services with respect to Haj, Umrah, Cheque Book, Utility Bill Collection, Musharika, Modaraba financing shall be excluded.

FED @ 16% levied on services provided by Stock Brokers.

Services rendered by port and terminal operators in relation to imports shall also be subject to FED @ 16%.

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Thank

You