Registered Manufacturers Disallowed Sales Tax InPut Tax Adjustment On Sale to Unregistered Buyers
About Second Amendment in section 73 of sales tax act 1990. (Registered Manufactures inadmissibility of sales tax input on sale to unregistered buyers above the limits given in amendment).
The threshold available in the amended ordinance, provides limitations up to which supplies can be made to unregistered persons. This threshold is applicable on a “single buyer”, and “excess” of 10 million a month and 100 million a year will be inadmissible input tax. Such inadmissibility will be calculated in proportion to unregistered supplies above thresholds.
This is just like and in addition to the inadmissibility of input tax on exempt supplies. Inadmissibility on the Basis of payment against supplies after 6 months.
Question mark on the amendment :
1- instead of providing threshold for inadmissibility, there should be reduction in % percentage applicable for unregistered input sales tax adjustment on all types of unregistered supplies.
2- just like “below taxable limits” purchases, income tax above 75,000 is deducted and normally people avoid such taxation by providing different identities of suppliers. Same Here in this amendment This practice will create tax evasion and door for corruption will open.
3- burden of unregistered buyers in sales tax can not be forced on suppliers, no motivation for getting them registration because they will avoid such registration by giving identities of different unregistered persons
4- threshold should be fixed as a whole on all buyers instead of on individual basis.
6- practically it will be very difficult for FBR to make control on admissibility under such tax provision.
1- amendment will help to identity the unregistered buyers, and latter on proceedings can be initiated to bring them in tax net.