br 2-11-13- 11 big companies allowed input tax adjustment
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11 big companies allowed input tax adjustment November 02, 2013 RECORDER REPORT
The Federal Board of Revenue has allowed 11 leading companies of Karachi to file their sales tax returns electronically/manually, after adjustment of provincial sales tax on services, following order of the Sindh High Court. Sources told Business Recorder on Thursday that the FBR has issued instructions to the Chief Commissioner Inland Revenue, Large Taxpayer Unit (LTU) Karachi to allow adjustment of provincial sales tax on services to these companies.
Sources said the SHC has passed an interim order and restrained the FBR from disallowing sales tax input tax on services. Resultantly, the FBR has also issued instructions to the Chief Executive Pakistan Revenue Automation Limited (Pral) not to take any action on deactivation/deletion from ''Active Taxpayers List'' cases of the 11 listed companies till further directions. Through Finance Act, 2013 the previous definition of input tax in section 2(14) of the Sales Tax Act, 1990 referred to "Provincial Sales Tax", which was further defined in section 2(22A). The previous definition refers to provincial sales tax ordinances which were promulgated in the year 2000, of which some have been rescinded. Cross adjustment of input tax between federal and provincial sales tax requires formal agreement between the federation and provinces. Therefore, the definition of Provincial Sales Tax was amended to enable the government to allow or disallow input tax adjustment against specified provincial sales tax laws through notification, sources said.
According to the FBR letter to the Chief Commissioner Inland Revenue Large Taxpayer Unit (LTU) Karachi, a leading multinational company has filed CP D-4062 of 2013 in Sindh High Court, Karachi challenging the vires of section 2(22A) of the Sales Tax Act, 1990 as amended vide Finance Act, 2013 and consequential disallowance of input adjustment of provincial sales tax paid on services. The Revenue Division/FBR, CIRs of LTU, Karachi and Pral have been made respondents.
It has been requested in the petition that till their disposal, the respondents, their officers, etc, may be directed to accept sales tax returns of the petitioners electronically and/or manually in which adjustment is claimed by the petition of Provincial Sales Tax on Services paid or payable under any provincial statute, as input tax viz-a-viz the Federal Sales Tax Act, 1990 while restraining the respondents, their officers, etc, from taking any adverse action in any manner whatsoever, the FBR said.
Since the interim relief has been granted by the court to the petitioners, it is requested to ensure that no action, whatsoever, is initiated against the petitioners, who have filed
sales tax returns manually or electronically, as the case may be, after adjustment of provincial sales tax on services, the FBR letter added. Tax experts were of the view that the reported amount of input tax pertaining to sales tax on services is automatically treated inadmissible, resultantly taxpayers were deprived of their legitimate amount of input tax credit despite making payment of sales tax on services since July 2013, they added.
Copyright Business Recorder, 2013