1. Issues in Registration and De-Registration Mohammed Ashraf, ACCA Organized By Indirect Tax Committee of ITBAK

2. 2 CONTENT Benefits of Registration Registration and allied matters Consequent penalties De Registration [excluding suspension and blacklisting] Issues in Registration and allied matters Issues in De Registration Conclusion

3. 3 Purpose of Seminar – Ray of Hope Discourage litigation, Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser …… in fees, expenses and waste of time Abraham Lincoln

4. 4 SALES TAX ACT, 1990 Benefits of Registration Persons Required to be Registered Application for Registration Jurisdiction of Registration Exceptional Cases Change of Particulars Compulsory Registration Transfer of Registration Offences and Penalties De Registration

5. 5 BENEFITS OF REGISTRATION Claim of Input Tax Credits and adjustment against Output Tax Liability Documentation – Effective Inventory Control and Physical Supervision Accurate reporting of activities in the Economy Authentic or Genuine Supplier or Customer to be networked Transacting Business with Government, Semi Government and Defence Department

6. 6 Registration – Sales Tax Act, 1990 Persons required to be Registered Manufacturer – [Annual Turnover in last 12 months exceeds 5 Million] Retailer – [Annual Turnover in last 12 months exceeds 5 Million] Importer Any other person required to collect the levy of Sales Tax Commercial Exporter – [intends to obtain Refund against Zero Rated Supplies]

7. 7 Registration – Sales Tax Act, 1990 Application for Registration Prior to making any Taxable Supply STR – I to Central Registration Office or Local Registration Office [Electronically, Registered Mail and Courier] Application must specify the Jurisdiction

8. 8 Registration – Sales Tax Act, 1990 Jurisdiction Incorporated Business – Registered Office Incorporated Business with Single Manufacturing Unit – Place of Manufacturing Unit or Place of Business Location Unincorporated Business – Where Business actually carried on Unincorporated Business with Single Manufacturing Unit – Any Place of Manufacturing Unit

9. 9 Registration – Sales Tax Act, 1990 Exceptional Cases Multiple Registration Certificate – Issued earlier [STR – 1] Importer of Exempt Goods – No Registration Supplier of Exempt Goods Only – No Registration Industrial importer manufacturing exempt products – No Registration Registration of Persons making supplies to FATA/PATA from FATA/PATA – No Registration

10. 10 Registration – Sales Tax Act, 1990 Exceptional Cases Import of Reagents – No Registration Import of Newspapers – No Registration Import of Raw Material for Fertilizer – No Registration

11. 11 Registration – Sales Tax Act, 1990 Change in particulars Application Form within 14 days of change – STR - 2 Special procedure for change of Category to Manufacturer – Verification of Manufacturing Facility, Confirmation of status as industrial consumer [Electricity and Gas Distribution Companies] Issuance of Revised Registration Certificate Effective date of revised registration – Date of Application

12. 12 Registration – Sales Tax Act, 1990 Compulsory Registration LRO issues of notice Form STR – 6 on completion of enquiry Opportunity of being heard Obligation of a Compulsory Registered Person = Registered Person Failure to Oblige means Notice under section 25 [Production of records or documents] to assess the amount of Sales Tax Payable under section 11 or any other action.

13. 13 Registration – Sales Tax Act, 1990 Transfer of Registration Application Form – STR – 2 Subject of CRO’s Condition, Limitation or Restriction New Jurisdiction shall exercise powers as it has always such jurisdiction Old jurisdiction shall issue an intimation letter to new jurisdiction Application must specify the Jurisdiction

14. 14 Offences and Penalties – Sales Tax Act, 1990 Failure to notify particulars of Registration – Rs5,000.00 Failure to Apply for Registration before making Taxable Supplies – Rs10,000 or 5% of Tax Involved Failure to Apply for Registration within 60 days of commencement of Taxable Supplies – Three years’ imprisonment or fine equal to amount of tax involved or both

15. 15 De-Registration – Sales Tax Act, 1990 Cessation of Business, Supplies becomes Exempt or Taxable Turnover during last 12 months falls below the Taxable Limit– STR - 3 and Return under section 28 Application by Registered Person or Own motion of LRO LRO recommendation to CRO for cancellation of registration on non-filing of 6 consecutive return along with penalties LRO may conduct an audit or enquiry and direct the registered person to discharge any liability arose LRO recommends to CRO – Within 3 months of application or the date all the dues are cleared

16. 16 FEDERAL EXCISE ACT, 2005 Benefits of Registration Persons Required to be Registered Application Jurisdiction Failure to get Registration Change of Particulars Transfer of Registration De Registration

17. 17 Benefits of Registration Value Added Tax Mode – Input and Output Tax Adjustment Eligibility for adjustment of Input Sales Tax / FED against Output Sales Tax / FED No separate registration for sales tax registered persons

18. 18 Persons Required to be Registered Person engaged in production or manufacture liable to duty of excise regardless of annual turnover or volume of sales Person engaged in rendering services liable to duty of excise regardless of annual turnover or volume of sales

19. 19 Application for Registration Application Form FE – 1 Person intends to commence Manufacturing of Excisable Goods Person intends to provide Excisable Services

20. 20 Jurisdiction for Registration Incorporated Business – Registered Office Incorporated Business with Single Manufacturing Unit – Place of Manufacturing Unit or Place of Business Location Unincorporated Business – Where Business actually carried on Unincorporated Business with Single Manufacturing Unit – Any Place of Manufacturing Unit Incorporated and Unincorporated Business for excisable services – Location of Head Office

21. 21 Failure to get Registration Collector issues notice on completion of enquiry Opportunity of being heard – within 15 days of proposed registration Further notice on receiving reply and non submission entail compulsory registration Obligation of a Compulsory Registered Person = Registered Person Failure to Oblige means Notice of Audit under section 46 to assess the recovery of amount of Excise Duty under section 14

22. 22 Change in Particulars Notification within 14 days of change

23. 23 Transfer of Registration Subject of Collector’s Condition, Limitation or Restriction New Registration Certificate from New Jurisdiction with reference of previous certificate Application may be made by registered person

24. 24 De-Registration Cessation of Manufacturing Excisable Goods or provide or Render Excisable Services – FE – III Sales Tax Procedure shall mutatis mutandis apply on persons also registered under Sales Tax Act, 1990

25. 25 ISSUES IN SALES TAX ACT, 1990 Registration Change in Particulars Transfer of Registration De Registration

26. 26 Registration Issues Why should I wait for Registration before any Taxable Supply? - Issue a Provisional Certificate, Complete the procedure - Business Activity should not be stopped No time limit for completion of verification or inquiry for registration as opposed to 15 days for rejection? FBR must realize that rejection of registration means no business! – Rejection should be replaced with resolution. STR – I should not require a registered person to specify the jurisdiction instead the tax office should write the same in acknowledgment letter.

27. 27 Registration Issues Conflict in registration procedure - Business Activities Manufacture, Importer, Exporter, Distributor, Retailer, Wholesaler, Service Provider A person’s primary activity be more than one – Why restriction for doing business?

28. 28 Registration Issues Special Rules Electric Power, Natural Gas, Trading Corporation of Pakistan, Rendering of services subject to provincial Sales Tax, Television and Radio, Ship Chandlers, Stevedores, Oil Marketing Companies [Sharing of Product], Vehicle Dealers, Ginned Cotton, Commercial Importer, Steel Melters, Re Rollers and Ship Breakers, Manufacturers of Biscuits, Confectionary and Snacks Where is the nexus between business activity at registration stage and special activities covered under special rules?

29. 29 Change in Particulars Issue Absence of objective criterion for assessment on change of business category to Manufacturer in the light of definition of manufacturer No time limit is specified for issuance of revised registration certificate on change of particulars of registration

30. 30 Transfer of Registration Issues No time limit is specified for completion of transfer of registration process Non-disclosure of CRO’s condition, limitation or restriction would increase the Taxpayer and Collector interaction which is against the present image of FBR

31. 31 De Registration Issues No time limit is specified for conducting the audit of Final Return under section 28 in line with Rule 11, hence, the three months time limit is of no use. Effective date of Registration as the case in change in particulars which is effective from date of application Obvious instructions regarding right and obligation of Registered person from the date of de-registration are almost absent

32. 32 Federal Excise Act, 2005 Registration Change in Particulars Transfer of Registration De Registration

33. 33 Registration Issues Registration threshold is not harmonized with Sales Tax Act, 1990 where both laws are applicable? No time limit for issuance of Registration Certificate

34. 34 Change in Particulars Issue No form prescribed No time limit for issuance of revised registration certificate Effective date of revised registration?

35. 35 Transfer of Registration Issues No form prescribed No time limit is specified for completion of transfer of registration process Non-disclosure of Collector’s condition, limitation or restriction would increase the Taxpayer and Collector interaction which is against the present image of FBR

36. 36 De Registration Issues No Final Return with De Registration prescribed No time limit is specified for De Registration No procedure is specified for De Registration Obvious instructions regarding right and obligation of Registered person from the date of de-registration are almost absent

37. 37 COMMON LACUNA A non corporate person having a single manufacturing unit, whose business premises and manufacturing unit are located in different areas, shall apply to the collector of the area in whose jurisdiction his manufacturing unit is located: Provided that a corporate person shall have the option to apply for transfer of registration to the collector having jurisdiction over the area where manufacturing unit is located. [Underlined Phrase of Rule 3(3) of Federal Excise Rules, 2005 and Rule 5(1)(c) of Sales Tax Rules, 2006]

38. 38 CONCLUSION Principle Based Approach instead Rule Based Approach Provision meant to serve ease in doing business Objective Facilitation not subjective imposition – In line with current approach of FBR Institute of Internal Auditor’s Motto ought to be remembered by the registered persons on receiving a notice from Collector – In Allah [they used God] we trust others we Audit

39. 39 Thank You Mohammed Ashraf, ACCA