Sources said that in the suspended condition (xiv), rate of further tax was one percent for goods covered under SRO No 1125(I)/2011 and two percent on finished goods. In earlier round of litigation, attempt of FBR field formations to recover further tax from persons covered under SRO No 1125(I)/2011 pertaining to concessional sales tax regime of zero rating of local supplies of five export sectors of Pakistan was declared without lawful authority.
After the judgement of Lahore High Court, amendments were made through Finance Act 2017 in section 3(1A), section 3(2)(b) and section 4 of the Sales Tax Act 1990 and through SRO No 584(I)/2017 in SRO No 1125(1)/2011 to nullify the ratio of aforesaid judgement of the Lahore High Court in writ petition No 35733 of 2016.
In the current second round of litigation, it was pleaded before the court that tax through notification could not be levied when the said court had already held further tax contrary to the regime of zero rated supplies under SRO No 1125(I)/2011. When contacted, Tax Consultant of All Pakistan Textile Mills Association (APTMA) Shahid Jami he pointed out that on one hand Prime Minister Shahid Khaqan Abbasi is giving relief package to the export sectors for boosting exports by alleviating their cash flow problems due to blocked refunds and high cost of doing business, while on the other, tax machinery has only revenue considerations before it.
He explained that under SRO No 1125(I)/2011, textile sectors is paying six percent sales tax on retail sale to public of finished goods and if any sale of unfinished goods is made to the unregistered persons in the supply chain even then the government gets six percent tax of finished goods; hence any further tax in the supply chain is a legal infirmity. Jami added since provision has been suspended therefore its benefit is available to all persons within the jurisdiction of Lahore High Court.
Copyright Business Recorder, 2017