The Senate Standing Committee on Finance and Revenue met under the chairmanship of Senator Farooq H Naek here at the Parliament House and started proceedings to finalise recommendations for the budget 2019-20. The recommendations after getting endorsement of the Upper House of Parliament will be forwarded to National Assembly for consideration and approval to make these changes part of the budget.
Strongly opposing the FBR's proposal to avoid misuse of cottage industry for registering into sales tax regime, the Senate panel recommended for raising turnover limit up to Rs 10 million against Rs 2 million proposed in the Finance Bill 2019-20.
Finance committee has assigned Senator Mohsin Aziz to propose recommendation to bring changes in the proposed law. The committee members opposed FBR's proposal to collect 17 percent sales tax from manufacturers at written retail price of certain specific sectors including electronics, household appliances, paints, tyres and tubes and motorcycles etc.
Chairman of the Senate panel Farooq H Naek said that the prices of these items would go up by 10 percent for customers. With abolishment of zero-rating regime for five export-oriented sectors including textile, the committee members feared that the prices of clothes and garments would also go up in the domestic market.
On sugar price, the FBR said that the FBR has increased sales tax rate from 8 to 17 percent so it would have impact of Rs 3 per kg after approval of budget from July1 but the committee members argued that the prices of sweetener had already gone up in the market.
The committee members opposed the FBR's move to abolish zero-rating regime but decided to defer its recommendations as they would make up their minds after listening to the viewpoint of concerned stakeholders.
The senators supported the FBR's move to bring millions of retailers into tax net under which the FBR imposed 17 percent sales tax on tier-1 retailers having shop size of 1,000 square feet in shopping malls or plazas. All these retailers of tier-1 would be linked electronically with the FBR.
The FBR proposed exemption of audit for three years if someone is selected for audit, arguing that the multilateral creditors made it clearly that with provision of such laws there was no need to continue parleys on the name of removing distortions into tax system.
Chairman FBR Shabbar Zaidi and Member Inland Revenue Policy Hamid Ateeq Sarwar told the committee that there were 341,000 industrial electricity connections out of which 41,000 were registered with sales tax regime. They said that the cottage industry status was being misused to evade taxes so the FBR proposed changes to avoid its misuse in the Finance Bill 2019-20. The turnover limit was brought down from Rs 10 million to Rs 2 million but the committee members did not extend support to the FBR's move.
For bringing retailers into tax net, PTI Senator Mohsin Aziz said that it would be biggest move if the FBR succeeds to bring them into the tax net. He recalled that Musharraf regime had failed on this front. He said that he is not hopeful that the FBR would be able to get success for bringing retail sector into tax net.
The chairman FBR said that they made moves to achieve the objective in gradual manner. The FBR proposed three different regimes for retailers as in tier-1 the FBR proposed to impose 17 percent sales tax.
FBR's Member Inland Revenue Dr Hamid Ateeq Sarwar said that the FBR would provide 5 percent back scheme to customers. Secondly, he said that the FBR would hire workforce to check receipts from customers in posh areas to avoid evading of taxes by retailers. Tax officials stated that the FBR would bring second tier of retailers through electricity bills and small retailers would have fixed tax regime.