INDIRECT TAXES SALES TAX & FEDERAL EXCISE Presented by: Mehmood A. Razzak Partner , Amber Estate, Main Shahrah-e-Faisal, Karachi Phone: 021 – Fax: 021 – Contact Address: The Income Tax Bar Association, Karachi June 16, 2009

2 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.

3  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

4 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.

5 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.

6 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..

7 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.

8 POWER OF ADJUDICATION  Powers of adjudication with respect to threshold of amount involved have been revised as follows:

9 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.

10 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.

11 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.  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.

12 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 16% of the charge.  Re 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.  16% levied on services provided by Stock Brokers.  Services rendered by port and terminal operators in relation to imports shall also be subject to 16%.

13 T h a n k Y o u