90pc industrial consumers of power don’t pay sales tax

ISLAMABAD: FBR Chairman Shabbar Zaidi disclosed that 90 percent industrial consumers of electricity do not pay sales tax and there is massive gap among owners of industrial consumers of electricity, gas and those manufacturers registered into Sales Tax system of the country.

He said that 50 percent companies registered with Security and Exchange Commission of Pakistan (SECP) also do not pay sales tax.

He said the fresh tax amnesty scheme 2019 provided opportunity to clear liabilities of sales tax by paying 2 percent tax. They are intended to introduce legislation to stop misuse of our existing system in the upcoming budget in case of those who will not prefer to come into tax system after July 1, 2019. “There are total 341,174 consumers of electricity and 7000 of gas companies while number of registered sales tax filers stood at 38,937. All those who are unregistered now possessed opportunity to avail amnesty scheme by clearing their past liabilities by paying 2 percent tax,” Chairman FBR Shabbar Zaidi said while addressing news conference here at Board’s headquarters on Wednesday.

He said that the people should be brought in tax net without harassing them. Shabbar Zaidi said he wrote letter to Chairman SECP for cleansing of data base as 100,000 companies were registered with SECP but only 50,000 were return filers with the FBR system. “Either the SECP should erase those companies from their system or we bring them into tax system,” he added. He also said that he had talked about industrial connection of electricity as this interaction with the media would continue for coming days and he would throw light on commercial connection of power consumers that had touched 3.1 million.

The journalists repeatedly asked about the stick in the hands of tax machinery if someone would not prefer to come into tax system. One top official of FBR told journalists that after expiry of asset declaration scheme from July 1, the FBR was mulling different options for freezing business accounts who would not prefer to become filers through availing this scheme. “There are around 50 million bank accounts holders in the country and the FBR is considering different options for freezing those business accounts which will not be part of Active Taxpayers List (ATL),” the FBR’s Member Inland Revenue Service (IRS) Dr Hamid Ateeq Sarwar said while talking to journalists here on Wednesday. He said for every businesses having electricity bill of Rs0.8 million or Rs10 million sale on annual basis, it becomes mandatory for such business to become registered into tax system.

Earlier, Shabbar Zaidi Chairman FBR said that he trusted that things could be done and success could be achieved. He said that the new Assets Declaration Scheme 2019 was different from past schemes because the new scheme introduced a new provision to clear sales tax liabilities on payment of 2 percent tax. “If they will not come into the tax net, the FBR will do legislation in budget (2019-20) to document them from July 1, 2019”, he made it clear.

“I request the industrial consumers of electricity to legalize their sales tax affairs under the Assets Declaration Ordinance 2019,” he said and added in the same breath that they would ensure “voluntary compliance” by improving the current environment. A proposal is under consideration to revise the definition/threshold of the cottage industry in budget to check the misuse of sales tax registration of manufacturers, FBR Chairman said. The FBR’s Member IR Operation Seema Shakil said that there was threshold of Rs0.7 million for cottage industry. A senior official said that the Sales Tax Rules would be amended in budget (2019-20) to change the procedure for registration of manufacturers, facility of temporary registration and definition of cottage industry. The chairman FBR said the business associations are demanding increase the sales tax registration threshold of registration. Business community has also approached the FBR for revision in the definition of cottage industry.

To another question, Shabbar Zaidi replied that the FBR was not considering any scheme for regularization of non-duty paid smuggled vehicles. About powers on freezing bank accounts of taxpayers, he said the tax officials still empowered to attach bank accounts of the taxpayers as per law however; the procedure was streamlined with the objective to intimate prior information of 24 hours before attachment of bank accounts.