SITE industrialists reject proposed VAT bill

KARACHI - Industrialists in SITE area have expressed serious concern over the approach of the Federal Board of Revenue adopted for implementation of a broad-based integrated value-added tax (VAT) in all provinces under the Federal VAT Act 2010 and Provincial VAT Bills 2010 in place of prevalent GST law and have completely rejected the proposed Value Added Tax (VAT) law draft on the ground that it should be implemented across the board.
Member, Direct Tax Policy, FBR Asrar Raouf said that the new proposed VAT Law 2010 will come into force across the board and will also be applicable on the agriculture. After enforcement of new VAT law, the taxpayers will get relief from all complications present in the existing GST.
Member Direct Tax Policy Asrar Raouf said that the purpose of visit is to get feedback of business community on proposed VAT law and remove lacunas in the law. He said that the law would be implemented with the consensus of all the stakeholders and after approval of legislative assembly.
He further said VAT has two seats of laws one is federal and the other is provincial. Under federal set of law VAT covers goods and federal list of services which includes transport of persons and cargo by rail, air and sea. Under new law federal excise duty will be abolished on services and there will be a uniform rate of VAT at 15 percent.
He said that under proposed law exemption of turnover limit for registration under tax net has been enhanced from Rs 5 million to Rs 7.5 million. Law also allows zero rating to export only. Replying a question, he dispelled the impression that VAT has been imposed on funeral burial or similar services.
Former President of Karachi Chamber of Commerce and Industry (KCCI), Former Chairman, SITE Association of Industry and Advisor to Chief Minister for Investment, Zubair Motiwala said that no sector should be exempted and VAT should be implemented on agriculture sector, Afghan Transit Trade and other sectors as well.
Speaking after a presentation on proposed VAT law by Member Direct Tax Policy of Federal Board of Revenue (FBR) Asrar Raouf at SITE Association of Industry (SAI) on Friday, Zubair further pointed out that under proposed VAT law, all the five zero rates sector of industries have to deposit tax initially and then it will be refunded. This will open a gate of corruption, he added.
He said that industrialists are ready to close their units for two months if the proposed law is not amended and implemented across the board. Criticising imposition of VAT on industrial land and exempting agriculture land, he said that it will increase cost of industrial land many times and make it difficult for investors to purchase land and establish units. Investors will prefer to go for agriculture rather then establishing units, he added.
He also expressed apprehension that the provincial statutes administered by federal government usually suffer from staleness, as happed in the case of provincial sales tax ordinances promulgated in 2000.
He further added that after study of the proposed VAT law how the culture of under invoicing, fly invoices and other prevalent mal practices due to which the law abiding tax payers are suffering a lot and are even paying the taxes of those buyers/sellers who are not paying due taxes and making money due to bad law. The government has remained failure in bring them into tax net even today. The registered tax payers even today are the same i.e. 1.25 million.
You say that VAT law is applicable in 130 countries of the world and is running successfully and as why our government wants to implement the same here. I would ask you do you know what their literacy rate is, Zubair asked.
We reject the proposed law in total and it will not succeed if it is implemented in the present shape, said Chairman SITE Association, Salim Parekh. He said that the law should not touch five zero rates sector of industrial and these sectors must be allowed to enjoy exemption as it is today.
Referring to refunds, Raouf said that a new refund system has been created and from first April 2010 it will be implanted on trial bases at Large Tax Paying Units (LTU). He said the new law has been prepared to minimise tax exemption, which were prevailing in present sales tax regime.
Total shape of Sales Tax Act was changed time to time with amendments in the Act. Now the assembly will pass the law after thorough debate and any amendment will be made impossible without approval of the legislative house.
Siraj Kassam Teli, BMG Chief and Patron-in-Chief of SITE Association of Industry expressing his views on the Draft of Federal and Provincial VAT Bills 2010 said that the draft of VAT legislation has already been discussed in the national assembly and after sending it to Senate now the views of trade bodies are being taken which is not fair. The methodology to introduce an integrated VAT may have serious implications during implementation of a broad-based VAT from next fiscal year as the government has not taken into confidence the stakeholders. He suggested that each and every trade bodies including KCCI should be consulted and their views are obtained whether this new proposed draft of the (Province) Value Added Tax Bill, 2010 is in conformity with the law of the land or whether it would suit the stakeholders or not. He requested the authorities concerns that unless and until all the trade bodies and stakeholders agree on the enforcement of VAT Act 2010 from next financial year it should not be implemented.