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Aptma proposes abolition of 15 percent GST on
ginned cotton
KARACHI (April 20
2004): The All Pakistan Textile Mills Association
(Aptma) has proposed that the General Sales Tax (GST)
at the rate of 15 percent on ginned cotton should
be abolished in view of its adverse affects.
THE APTMA, IN ITS SUGGESTIONS AND PROPOSALS FOR
THE 2004-05 FEDERAL BUDGET, FORWARDED TO THE
GOVERNMENT, HIGHLIGHTED THE FOLLOWING REASONS:
-- Over 90 percent of the total production of
cotton was exported in one form or the other,
which proved that the raw cotton procured locally
was a basic input of zero-rated goods.
-- Cotton prices had increased from Rs 2,100 to Rs
3,500. The higher amount of the sales tax was
being paid by the spinning sector, which remained
stuck up in the collectorates for an average
period of two to 12 months.
-- Raw cotton was a seasonal supply and the
industry procures over 70 percent cotton in only
three to four months of the year.
-- Sales tax liquidity problem was created due to
the stuck up of billions of rupees in the sales
tax refunds. It also added to the financial cost
of the production.
-- Unproductive use of man-hours of the
management, while chasing sales tax refunds.
-- Unproductive deployment of the tax machinery on
producers prescribed under the special procedure
for the ginning industry rules, 1996.
On the text of proposed Section 73 of the Sales
Tax Act, Aptma proposed that the text of Section
73 needed to be drafted carefully in the light of
the suggestions, already submitted by the chambers
and leading trade bodies like Aptma.
Since, the proposed text was suggested to be
finalised with the investment-friendly approach,
it had been suggested that.
THE FOLLOWING PROVISION MIGHT BE ADDED TO THE
PROPOSED TEXT:
-- The Central Board of Revenue (CBR) had offered
for the comments through newspapers in the month
of February 2004.
"In case, the payment of the sales tax amount was
not made within 180 days of the issuance of the
sales tax invoice, the buyer should pay one
percent per month of the sales tax amount of the
unpaid invoice with the each tax return, until he
deposited the input tax of the unpaid invoice
claimed by him, or make payment of the sales tax
amount, so deposited after the payment of sales
tax amount to the seller in the manner prescribed
in Sub-section (1).
-- On frequent audits, it suggested that without
adjudication, no unilateral demand should be
deducted from the pending refund claims and the
frequency of the audits be curtailed to the
minimum.
This suggestion has been made because of frequent
audits of the manufacturers-cum-exporters, too
much time of the mills as well as of the
collectorates was being wasted, which was proving
to be of no use to either of the parties.
The department was to provide copies of the audit
reports to the manufacturers-cum-exporters.
-- The department every year conducted annual
audit of the sales tax. The queries, found during
the course of audit, were conveyed to the sales
refund department by the audit department.
The refund department, without giving any
opportunity of being heard, immediately deducted
the demand involved in the said queries. The
demand raised during audit was always unilateral
and requires adjudication.
-- On the issue of blacklisted/suspected units,
the Aptma proposed that a specific timeframe of
not more than one month, in any case, may be laid
down, in which the collector was required to
complete his inquiry, and in case of clean audit
report, the registered/enrolled person's name
might also be removed from the list of
suspected/suspended units, forthwith.
-- Regarding the draft of the proposed sales tax
refund rules 2004, which was circulated by the CBR
in February, which had been reviewed, it offered
the following areas for improvement:
a) The excessive documentation required should be
minimised.
b) Payment records, including banking instruments,
should not be required for audit purposes in
relation with the refund claims.
This requirement would result in unavoidable
delays in sanctioning of the refunds to the
exporters.
c) No timeframe for sanctioning of the refunds was
given in the rules for either of the green, yellow
and red channel claimant.
Highlighting the customs and income tax related
issues, the Aptma specifically pointed out to the
audits.
-- There were three auditors for checking the
income tax assessment order. Besides two, within
the tax department, there was one auditor from the
revenue department, Islamabad.
-- No parameters were fixed for these auditors.
-- The revenue department auditors checked the
assessment orders after two to four years on the
completion of the assessments. -Due to
non-availability of the scope of the audit, these
auditors tended to start re-assessment of the
completed assessment.
-- The audit objections were thrusted upon the
income tax officers. Frivolous demands were
created to the determent of the assessee.
THE APTMA, THEREFORE, PROPOSED THAT:
-- Audits should be taken up within six months of
the completion of assessment, and the parameters
of the audits by internal auditor and revenue
department auditor be fixed and made known to the
department and the assessees.
Courtesy Business Recorder
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