Proposal under consideration: Small shops to pay fixed tax, big according to power bills

by Tauqeer Abbas
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The Federal Board of Revenue (FBR) Chairman, Shabbar Zaidi, has said a proposal is under consideration to impose fixed sales tax on small shops, while the big shops and trading premises will be bound to pay sales tax according to their electricity bills.

Addressing members of the Lahore Chamber of Commerce and Industry (LCCI) and representatives of various manufacturing and trade sectors here on Saturday, Zaidi said the small shops, measuring 240-square-foot area, were retained in the fixed sales tax regime.

The majority, he added, fell in that bracket, he added. However, tax on big shops or trading premises with an area exceeding 240 square feet to 1,000 square feet, would be charged on the basis of their electricity bills, the FBR chief said. The traders having shops above 1,000 square feet would have to register under normal tax regime, he added.

In reply to a question, he ruled out withdrawal of statutory regulatory order (SRO) 1125 relating to sales tax zero-rating regime, but assured exporters of prompt refunds. He identified smuggling, under-invoicing and Afghan transit trade as the biggest threats to domestic industries. While patiently listening to the grievances of trade and industry representatives, he remained polite but firm on the tax measures, introduced by the government.

However, he assured that flaws, if any, in the budgetary measures would be adequately addressed. Shabbar said the decision to withdraw zero-rating facility was taken after careful deliberations. He said the refunds to the exporters would be made immediately after filing of goods declaration (GD) and there would be no delays. Zaidi said the board would be refunding the refundable sales tax and it would not require the government funds.

Regarding past refunds, the FBR chairman said accumulation took place before he assumed the charge, but from now onwards, he added, there would be no delays. He promised if refunds were delayed this time, he would consider some other alternatives. He said the new budget was prepared with a view to promote domestic industry and employment. He said the FBR had identified that the domestic industries were under severe pressure because of smuggling, under-invoicing and Afghan transit trade. He said measures were being taken to stop these malpractices. He said until these evils are controlled at borders and customs, there is no use of conducting raids on shops, selling smuggled or duty unpaid goods.

Regarding the condition of presentation of computerised national identity card (CNIC), Zaidi said the system would become functional from August 1, and the reason for reluctance to buy from producers was not CNIC but something else. He said the dealers do not want to come into the tax net and it is an unfair stance. He lamented the tax-evading culture in Pakistan.

Out of 341,000 industrial connections, only 43,000 users were paying income tax and less than 19,000 were registered with the sales tax. The FBR Chairman said the governments could not operate smoothly if tax liable persons avoid paying taxes. Similarly, he added, overwhelming majority of 3.1 million commercial power users did not pay any tax at all. He said the turnover tax on cement and sugar dealers was reduced from 1.5 to 0.25 per cent. He said the dealers of all suppliers should pay income tax according to their income like the other taxpayers. He wondered that a study of the profits declared by many large industries revealed that it ranges around 1.5 per cent.

Moreover, he added the dealers of companies are living more luxurious life. About the real estate, he said, the government wanted to promote construction activities and not the plot culture. He said measures taken in the budget would facilitate builders, but make parking of illegal wealth in real estate difficult.

The FBR chairman later left for Governor’s House where he met the representatives of textile bodies. His stance remained the same during deliberations there as well.

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