Around 90 percent of the 'nil' filers of sales tax returns are exporters, importers or sole distributors who have either already paid final sales tax at import/ purchase stage or filed returns to claim refunds as admissible under the law. Sources told Business Recorder here on Tuesday that the exporters are legally allowed to claim adjustment or refund of sales tax paid on inputs used in manufacturing of export products.

For this purpose, the exporters file 'nil' return as their supplies are zero rated. In most of the cases, 'nil' filers are primarily exporters. Therefore, the exporters are not required to deposit tax while claiming refunds of raw materials consumed in finished items to be exported.

Sources said that most of sales tax refund claimants within the category of exporters belong to Faisalabad, Sialkot and Multan. The 25 percent of the Lahore-based registered sales taxpayers are exporters. All of them are filing 'nil' sales tax returns.

Likewise, commercial importers are paying advance sales tax at import stage under Special Procedure Rules 2007 along with value addition sales tax, hence by and large they were not necessarily required to make further payment at subsequent stage and thus they are also filing 'nil' sales tax returns. In case of sole distributor or supplier of items covered under Third Schedule of Sales Tax Act, the maximum amount of sales tax has already been charged by the principal manufacturer and distributor. The traders/suppliers of Third Schedule items are also need to only report purchase and sales in their sales tax return without requiring any net payment of sale tax.

According to sources, if a sales tax registered person is not depositing any tax along with the sales tax returns, it is not illegal. There are approximately 15,000 to 20,000 service providers, who were registered with the sales tax department but they have not obtained de-registration from the FBR. These service providers are filing 'Null' returns with the FBR that they do not have any taxable activity. They continue to file 'Null' sales tax returns with the FBR.

After 18th Amendment, service providers get themselves registered with the respective provincial boards and authorities like Sindh Revenue Board (SRB) and Punjab Revenue Authority (PRA). However, these service providers have not got de-registration from the FBR to claim input tax adjustment. In case they get themselves de-registered with the FBR, their customers would not be able to get tax adjustment of sales tax since the input tax credit adjustment is only admissible against registered person. The service providers filing 'Null' returns are, therefore, require to maintain their sales tax registration with the FBR as well as registration with the provincial revenue authorities.

Copyright Business Recorder, 2017