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VAT Bill Analysis: Implications, Challenges, and Stakeholder Perspectives

This article discusses the provisions of the new VAT Bill proposed by M. Iqbal Patel, which seeks to replace sales tax and impose a 15% tax across the supply chain, with exemptions limited to essential food items and medicines. Stakeholders, including retailers and industrialists, express concerns over VAT implementation complexities and its potential impact on consumers, particularly the poor. The article reviews the 2010 Action Plan for VAT implementation, the need for transparent practices, and makes recommendations to ensure effective roll-out while balancing fiscal responsibility.

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VAT Bill Analysis: Implications, Challenges, and Stakeholder Perspectives

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Presentation Transcript

  1. The hard provisions of VAT Bill By M. Iqbal Patel

  2. VAT in place of Sales Tax • 15% from the entire supply chain • Remove all exemptions except a few food items & medicine • Government undecided whether VAT should be charged on the on the actual transaction price or the retail price

  3. View of Stakeholders Retailers • Need to be familiar with VAT system & banking procedures • Maintain proper records/books & issue cash memo to every customer • Cost of documentation may not be feasible for the to comply. • Requirement of CNIC/NTN from every buyer, mention in VAT invoice

  4. Industrialist • Doubtful VAT would produce the desired result & rejected it • Ensure speedy tax refunds • VAT should be implemented across the board including agriculture

  5. Components of VAT Implementation Action Plan 2010 agreed with IMF/WB • Drafting of VAT rule • Designing of VAT Whole range of applications, declarations and statement • Reviewing procedures/processes for VAT enforcement • Development of IT system for tax regime • Preparation of broachers, booklets and manuals • Identification of solutions of organization/staff issues • Lunching of public campaign, staff training and taxpayer education

  6. Features of VAT Act 2010 • Power of granting exemptions to any sector/item to be given to parliament from FBR • FBR plans to bring big traders of agriculture under VAT at marketing level • FBR chairman states to the senate body that agriculture to be VAT exempted in view of constitutional immunity • Normal/special audit would give unlimited power to tax officials for carrying out investigation against a registered unit • No suit shall be brought to court to modify/ set aside any tax/penalty levied. This is against the constitution

  7. Argument Against VAT • FBR claims slight inflationary impact • PKR 500b to be generated through VAT, cannot be done so with out taxing poor consumers • Further burden the poor with high prices, aggravating the economic crisis • Remove irregularity from FBR of PKR 102b annually as detected in the AGPR Audit report 07/08 • Public enterprises misuse their funds, government should take corrective measure to protect taxpayers money

  8. Recommendation/Conclusion • Government in haste to implement VAT to meet IMF conditionality for the release of 4th tranche of $1.2b • Senate Standing committee recommended VAT rate from 15% to 12.5% • Singapore took 2 years to implement VAT & India has phased out till April 2011 for consultation process

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