Sources told Business Recorder here on Sunday that in order to encourage documentation, all sales tax registered persons registered as manufacturers, importers and exporters must provide the identification in the form of NTN or CNIC of buyers of their products under the SRO 821.
Sources further stated that the FBR and chambers/trade bodies were seriously working on a proposal to implement this documentation measure in a phase-wise manner. Under this phased programme, the registered persons would be required to provide the CNIC or NTN of a certain percentage of buyers, which will be increased every month. In this way, the registered person would have to submit CNIC or NTN of their un-registered buyers up to a certain percentage. The percentage could be increased on monthly basis till achievement of 100 percent by the end of currant fiscal. Hence, it would ensure that 100 percent implementation of the phased-programme within this financial year. The phase-wise implementation of the SRO-821 would also facilitate the registered manufacturers, importers and exporters to gradually ensure documentation of their buyers within the supply chain.
It is learnt that the registered persons, who would not meet the minimum percentage of sales made to the identified taxpayers would have to bear the declining of proportionate input or any other penalty notified by the government. In case the FBR notify the phased-programme of the SRO-821, the registered persons would be bound to submit specified minimum percentage of sales made to the identified taxpayers.
The sales tax and FED return for the tax period of January will be filed in February 2012, therefore a majority of the registered persons have already started collecting and recording the CNIC-NTN of the buyers in their books which would be used in filing of the returns. If no formal arrangement is notified by the Board, the e-filing system of the FBR will not accept the sales tax and FED returns without submission of complete particulars of their buyers.
In case any new arrangement has not been finalised, the electronic system of the FBR will not accept sales tax and federal excise returns from January 1, 2012 of all those registered manufacturers, importers and exporters, who would not disclose Computerised National Identity Card (CNICs) or National Tax Number (NTNs) of their unregistered buyers.
Sources said the system would automatically declare all such non-compliant registered persons as 'Non-Active', which would block their sales tax returns due to non-submission of the CNICs or NTNs of their un-registered buyers. The FBR will impose these restrictions over the non-compliant manufacturers, importers and exporters from January 1, 2012. Following introduction of the e-filing of returns for all sales tax registered persons, the FBR can easily declare non-compliant taxpayers as 'Non-Active' and subsequently sales tax returns could be blocked through the electronic system. The system can also declare the non-compliant manufacturers, importers and exporters as 'defaulted' as sales tax returns would not be accepted by the electronic system. From January 1, 2012, the facility given to the registered persons to show sales made to un-registered persons without submission of particulars has been ended under the SRO821(I)/2011.
According to sources, the FBR has repeatedly relaxed implementation of the SRO821(I)/2011 to fulfil the demands of the business and trade. The implementation of the said notification was suspended till December 31, 2011. As a result of relaxation given by the Board, a number of people have started providing details of their un-registered buyers in the sales tax returns. With the passage of time, the tax department has been able to obtain identification of the un-registered buyers.
From January 2012, importers, exporters and manufacturers have to maintain the particulars of the buyers in the form of NTNs/CNICs. Keeping in view the fact the FBR has already introduced e-filing of returns for all the sales tax registered persons and with the help of this electronic filing system, FBR can easily impose restrictions on the electronic submission of returns till they provide the complete details prescribed by the Board. As a result of failure to provide particulars of the un-registered buyers, they would not be able to file the returns and consequently they may become non-active taxpayers. The major impact of non-active taxpayers would be on their buyers who cannot take input credit of the purchases made from such non-active taxpayers. Therefore, it is in their own interest to maintain proper records of all the sales whether made to registered persons or un-registered persons for filing of their returns, sources said.
As a business practice, large majority of the sales made by manufacturers, importers, and exporters is through the dealers and distributors, who are otherwise required to be registered under the Sales Tax Act. The manufactures have to provide the details of these registered dealers etc to remain compliant under the FBR system. As some of the manufactures and importers have their retail outlets, therefore, they can continue to report their sales through the retail outlets as provided in the sales tax returns without providing the NTN/CNIC of the end consumers.
Sources said that it is very obvious from the above stated facts and position that the NTN/CNIC to be provided by the manufacturers, importers and exporters is only in respect of their sales made to the wholesalers, dealers and distributors and retailers. The non-compliant persons would be unable to file their sales tax returns, as the system would automatically block their returns. Thus, the registered buyers would not be ale to obtain input from these non-compliant taxpayers. Even registered buyers of manufactures, importers and exporters are compliant but they cannot be able to obtain input in case these manufacturers/importers etc were unable to provide particulars of their un-registered buyers. Thus, non-compliance of the SRO821(I)/2011 by the registered manufacturers/importers and exporters would also create problems for their compliant buyers in obtaining tax credit. They cannot claim input tax credit. Despite the fact that if the registered buyers of the manufacturers etc, are compliant but they would not be able to claim input tax adjustment due to inactive status of their registered manufacturers, importers and exporters. This would be applicable in cases where registered manufactures were unable to provide details of the CNIC/NTN of the un-registered buyers. In this way, the registered buyers would force their manufacturers, importers ands exporters to become active taxpayer to enable them for claiming input tax adjustment.