RAHIM ELECTRIC STORE, FAISALABAD VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2003 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 187 (2002)

Sales tax‑‑‑

‑‑‑ Establishment of Office of Federal Tax Ombudsman (XXXV of 2000), S.14(1) & (2)‑‑‑Suggestion for reforms of sales tax‑‑‑Federal Tax Ombudsman in exercise of powers vested under S.14(1) & (2) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, required the State Bank of Pakistan to furnish the (i) List of exporters who were issued refunds during the last five years alongwith amount paid and the dates on which such payments were made out and (ii) particulars of valuation and remittances received through each exporter by the State Bank of Pakistan during the last five years‑‑‑Such information may be useful for and relevant to the subject‑matter of investigation.

Muhammad Ashraf Hashmi for the Complainant.

Nazim Saleem, Chief (Sales tax) C.B.R. with Pervez Esbhani, Secretary (Sales Tax) C.B.R. for Respondent.

ORDER

These are 91 complaints involving common questions of fact and law.

2. Mr. Ashraf Hashmi appeared on behalf of all the complainants and submitted that a Study Group may be established as a result of which the application of Sales Tax Law to be enforced in the country. This Study Group should recommend steps to provide equity, fairness by amending the Sales Tax Law and curbing maladministration. In this regard he proposed that:.‑‑‑

(i) Jurisdiction of Sales Tax Collectorate be confined to manufacturers liable to be registered with the Sales Tax Collectorate as "GST Registered Person", their agency holders, dealers and commission agents. In addition juris diction of Sales Tax Collectorate be extended to importers only.

(ii) The concept of input and output may be done away with by making tax paid by the manufacturers, their agency holders, dealers and commission agents and importers, as final discharge of tax liability.

(iii) Concept of

refund may be done away with and exporters may be allowed to make purchasers without making payment of Sales Tax, after obtaining exemption certificate from Collector Sales Tax after disclosing bank account numbers duly mentioned in the exemption certificate so as to verify that the said purchases so made have also been exported. Exporter will be liable to pay sales tax on local sales.

(iv) Sales Tax Collectorate will give full concentration at manufacturing stage, and import stage only and smuggling will be curbed, instead of creating harassment for traders and small shopkeepers.

(v) Traders may be allowed to make payment of Sales Tax on the basis of one window operation to Income Tax Authorities in the shape of minimum tax on their turnover and they may be excluded from the jurisdiction of Sales Tax Collectorate to save the economy and gain confidence of tax payers by doing away with the discrimination, saving a lot of expenses required for further expansion of Sales Tax Collectorates and improving the Revenue receipts.

3. Continuing further the learned counsel submitted that it is a well‑known fact that the issue of refund is a major problem relating to Sales Tax. Honest citizens are charged sales tax alongwith gas, electricity, telephone and other necessities of life and on the other hand sales tax refund is pocketed by the affluent businessmen. In this regard he referred to the New Refund Rules which were revised five times during the last ten years as under:‑‑‑

(i) Sales Tax Refund Rules, 1991.

(ii) Sales Tax Refund Rules, 1992.

(iii) Sales Tax Refund Rules, 1996.

(iv) Sales Tax Refund Rules, 1998.

(v) Sales Tax Refund Rules, 2000.

The Rules have been further amended when section 73 of the Sales Tax Act required that w.e.f. 1‑7‑2000 payments for purchasers of raw material from the supplier would be made by crossed cheque or bank draft in any transaction exceeding Rs. 50,000. Mr. Hashmi urged that the purpose of taxation should not be to harass or torture the tax paying community. Instead of amending the Refund Rules six times and yet not being able to curb corrupt practices why not make the Bank branch as the sales tax deducting authority on the lines provided in section 50 of the Income Tax Ordinance. In this regard, he suggested that small traders should be taken out of ambit of Sales Tax Department and a tax be levied on sales on the lines provided under section 80D at 5%.Department should focus its full attention only on manufacturers and importers. In the end Mr. Hashmi suggested that in order to detect fraudulent refund and devise ways and means to reform, the following information be collected from the State Bank of Pakistan:‑‑

(i) List of exporters who were issued refunds during the last five years alongwith amount paid and the dates on which such payment were made.

(ii) Particular of valuation and remittances received through each, exporter by the State Bank of Pakistan during the last five years.

4. In my view the above information may be useful for and relevant to the subject‑matter of investigation. Therefore, in exercise of powers vested in me under section 14(1) and (2) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000, the State Bank of Pakistan is required to furnish the above information within 60 days of this order.

A copy of this order be sent to Secretary C.B.R. for information.

C.M.A./M.A.K./465/FTOOrder accordingly.