ST exemption on supply: FBR takes notice of representation by leading tea maker January 04, 2015 RECORDER REPORT The Federal Board of Revenue (FBR) has taken notice on a representation by a leading tea manufacturer seeking sales tax exemption on supply of tea under Sales Tax Act 1990 on February 28, but the standard rate of sales tax came into force from March 1, 2013 through rescinding SRO.608(I)/2012. Sources told Business Recorder here on Saturday that the FBR has called a report from Large Taxpayer Unit (LTU) Karachi on the representation of M/s Tapal Tea (Pvt) Ltd made to the FBR Member Inland Revenue. According to the company, it is a leading blender of tea in Pakistan. It sells the commodity to its distributors, from where shopkeepers/retailers buy the item. Tea is subject to sales tax at the retail price under Third Schedule to the Sales Tax Act 1990. Retail Price is fixed and announced by the company, which cannot be altered by distributors or shopkeepers. The contribution of sales tax, income tax and custom duty is one of the highest to government exchequer and therefore, the company comes within the jurisdiction of large taxpayer unit, Karachi. It is among the top 100 taxpayer companies of Pakistan. It said tea was chargeable to sale tax at 5 percent vide SRO 608(I)/2012 dated June 1, 2012 which was rescinded vide SRO No 153(i)/2013 dated February 28, 2013, hence black tea became liable to be charged to sales tax at standard rate of sales tax. Though the notification being SRO No 153(I)/2013 was issued on December 28, 2013, it came to the knowledge of the company through newspapers on March 1, 2013 that SRO No 608(I)/2012 has been rescinded by SRO No 153(I)/2013. Hence, the sales tax was charged on the sale made on February 28, 2013 at 5 percent as against the standard rate. Thus, the amount of sales tax charged on February 28, 2013 was less by Rs 27,520,174 which should have actually been charged. The company failed to recover the sales tax at standard rate on February 28, 2013 and started paying sales tax at the standard rate from March 1, 2013 when it came to the knowledge and information that tea was chargeable to sales tax at the standard rate. Thus, the non-levy of sales tax on February 28, 2013 on the supply of tea by the company, was as a result of inadvertence as it came to the knowledge of the company on March 1, 2013 that the supply of tea was chargeable to sales tax at standard rate and therefore, started charging the sales tax at the standard rate on and after March 1, 2013. It said that non-levy of sales tax on February 28, 2013 on the supply of tea by the company was not subsequently recoverable from the distributors since recovery of non-levy of sales tax required alteration and printing of the revised retail price on each pack/carton present at the warehouse of distributors and shopkeepers which was not logistically possible. It is a fundamental principle of justice and fair play that the department should have intimated the change in the rate of sales tax being a core concept of notice as a requirement of fairness to the taxpayers so that a tax payers should not violate the provisions of law resulting in short levy of sales tax. No intimation or notice of the rescinding of SRO No 608 (I)/2012 was given by the department to the company on February 28, 2013. Even otherwise, though the SRO No 153 (I)/2013 dated 28.02.2013 was published in extraordinary gazette on the same date, it could not have been circulated amongst the general public during the working hours on February 28, 2013 as a result of printing at Islamabad and publishing by the deputy controller, stationary and forms at Karachi. Under the above circumstances, the indulgence of the FBR is highly solicited and hence the representation for exemption of sales tax under section 65(c) of the Sales Tax Act 1990 not levied at the standard rate on February 28, 2013 by the said company. In case if the FBR is not satisfied, it will be highly appreciated that a proper and adequate opportunity of hearing may kindly be granted to satisfy the genuineness and bona fide that the sales tax was inadvertently not charged at the standard rate on February 28, 2013 and payment of the sales tax at the standard rate was made on and after March 1, 2013, the company added.
Posted on: Mon, 05 Jan 2015 06:39:00 +0000
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