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The hard provisions of VAT Bill

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

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The hard provisions of VAT Bill

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  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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