Issues in Registration and De-Registration Mohammed Ashraf, ACCA

Organized By Indirect Tax Committee of ITBAK

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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

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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

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SALES TAX ACT, 1990

Benefits of RegistrationPersons Required to be RegisteredApplication for RegistrationJurisdiction of RegistrationExceptional CasesChange of ParticularsCompulsory RegistrationTransfer of RegistrationOffences and PenaltiesDe Registration

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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

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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]

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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

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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

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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

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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

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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

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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.

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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

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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

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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

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FEDERAL EXCISE ACT, 2005

Benefits of RegistrationPersons Required to be RegisteredApplication JurisdictionFailure to get RegistrationChange of ParticularsTransfer of RegistrationDe Registration

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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

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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

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Application for Registration

Application Form FE – 1

Person intends to commence Manufacturing of Excisable Goods

Person intends to provide Excisable Services

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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

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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

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Change in Particulars

Notification within 14 days of change

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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

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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

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ISSUES IN SALES TAX ACT, 1990

Registration Change in ParticularsTransfer of RegistrationDe Registration

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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.

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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?

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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 stageand special activities covered under special rules?

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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

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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

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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

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Federal Excise Act, 2005

Registration Change in ParticularsTransfer of RegistrationDe Registration

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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

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Change in Particulars Issue

No form prescribed

No time limit for issuance of revised registration certificate

Effective date of revised registration?

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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

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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

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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]

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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

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Thank You

Mohammed Ashraf, ACCA