Issues in Registration and De-Registration

1. Issues in Registration and De-Registration Mohammed Ashraf, ACCA Organized By Indirect Tax Committee of ITBAK

2. CONTENT • Benefits of Registration • Registration and allied matters • Consequent penalties • De Registration [excluding suspension and blacklisting] • Issues in Registration and allied matters • Issues in De Registration • Conclusion

3. Purpose of Seminar – Ray of Hope Discourage litigation, Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser …… • in fees, • expenses and • waste of time Abraham Lincoln

4. SALES TAX ACT, 1990 • Benefits of Registration • Persons Required to be Registered • Application for Registration • Jurisdiction of Registration • Exceptional Cases • Change of Particulars • Compulsory Registration • Transfer of Registration • Offences and Penalties • De Registration

5. BENEFITS OF REGISTRATION • Claim of Input Tax Credits and adjustment against Output Tax Liability • Documentation – Effective Inventory Control and Physical Supervision • Accurate reporting of activities in the Economy • Authentic or Genuine Supplier or Customer to be networked • Transacting Business with Government, Semi Government and Defence Department

6. Registration – Sales Tax Act, 1990 Persons required to be Registered • Manufacturer – [Annual Turnover in last 12 months exceeds 5 Million] • Retailer – [Annual Turnover in last 12 months exceeds 5 Million] • Importer • Any other person required to collect the levy of Sales Tax • Commercial Exporter – [intends to obtain Refund against Zero Rated Supplies]

7. Registration – Sales Tax Act, 1990 Application for Registration • Prior to making any Taxable Supply • STR – I to Central Registration Office or Local Registration Office [Electronically, Registered Mail and Courier] • Application must specify the Jurisdiction

8. Registration – Sales Tax Act, 1990 Jurisdiction • Incorporated Business – Registered Office • Incorporated Business with Single Manufacturing Unit – Place of Manufacturing Unit or Place of Business Location • Unincorporated Business – Where Business actually carried on • Unincorporated Business with Single Manufacturing Unit – Any Place of Manufacturing Unit

9. Registration – Sales Tax Act, 1990 Exceptional Cases • Multiple Registration Certificate – Issued earlier [STR – 1] • Importer of Exempt Goods – No Registration • Supplier of Exempt Goods Only – No Registration • Industrial importer manufacturing exempt products – No Registration • Registration of Persons making supplies to FATA/PATA from FATA/PATA – No Registration

10. Registration – Sales Tax Act, 1990 Exceptional Cases • Import of Reagents – No Registration • Import of Newspapers – No Registration • Import of Raw Material for Fertilizer – No Registration

11. Registration – Sales Tax Act, 1990 Change in particulars • Application Form within 14 days of change – STR - 2 • Special procedure for change of Category to Manufacturer – Verification of Manufacturing Facility, Confirmation of status as industrial consumer [Electricity and Gas Distribution Companies] • Issuance of Revised Registration Certificate • Effective date of revised registration – Date of Application

12. Registration – Sales Tax Act, 1990 Compulsory Registration • LRO issues of notice Form STR – 6 on completion of enquiry • Opportunity of being heard • Obligation of a Compulsory Registered Person = Registered Person • Failure to Oblige means Notice under section 25 [Production of records or documents] to assess the amount of Sales Tax Payable under section 11 or any other action.

13. Registration – Sales Tax Act, 1990 Transfer of Registration • Application Form – STR – 2 • Subject of CRO’s Condition, Limitation or Restriction • New Jurisdiction shall exercise powers as it has always such jurisdiction • Old jurisdiction shall issue an intimation letter to new jurisdiction • Application must specify the Jurisdiction

14. Offences and Penalties – Sales Tax Act, 1990 • Failure to notify particulars of Registration – Rs5,000.00 • Failure to Apply for Registration before making Taxable Supplies – Rs10,000 or 5% of Tax Involved • Failure to Apply for Registration within 60 days of commencement of Taxable Supplies – Three years’ imprisonment or fine equal to amount of tax involved or both

15. De-Registration – Sales Tax Act, 1990 • Cessation of Business, Supplies becomes Exempt or Taxable Turnover during last 12 months falls below the Taxable Limit– STR - 3 and Return under section 28 • Application by Registered Person or Own motion of LRO • LRO recommendation to CRO for cancellation of registration on non-filing of 6 consecutive return along with penalties • LRO may conduct an audit or enquiry and direct the registered person to discharge any liability arose • LRO recommends to CRO – Within 3 months of application or the date all the dues are cleared

16. FEDERAL EXCISE ACT, 2005 • Benefits of Registration • Persons Required to be Registered • Application • Jurisdiction • Failure to get Registration • Change of Particulars • Transfer of Registration • De Registration

17. Benefits of Registration • Value Added Tax Mode – Input and Output Tax Adjustment • Eligibility for adjustment of Input Sales Tax / FED against Output Sales Tax / FED • No separate registration for sales tax registered persons

18. Persons Required to be Registered • Person engaged in production or manufacture liable to duty of excise regardless of annual turnover or volume of sales • Person engaged in rendering services liable to duty of excise regardless of annual turnover or volume of sales

19. Application for Registration • Application Form FE – 1 • Person intends to commence Manufacturing of Excisable Goods • Person intends to provide Excisable Services

20. Jurisdiction for Registration • Incorporated Business – Registered Office • Incorporated Business with Single Manufacturing Unit – Place of Manufacturing Unit or Place of Business Location • Unincorporated Business – Where Business actually carried on • Unincorporated Business with Single Manufacturing Unit – Any Place of Manufacturing Unit • Incorporated and Unincorporated Business for excisable services – Location of Head Office

21. Failure to get Registration • Collector issues notice on completion of enquiry • Opportunity of being heard – within 15 days of proposed registration • Further notice on receiving reply and non submission entail compulsory registration • Obligation of a Compulsory Registered Person = Registered Person • Failure to Oblige means Notice of Audit under section 46 to assess the recovery of amount of Excise Duty under section 14

22. Change in Particulars • Notification within 14 days of change

23. Transfer of Registration • Subject of Collector’s Condition, Limitation or Restriction • New Registration Certificate from New Jurisdiction with reference of previous certificate • Application may be made by registered person

24. De-Registration • Cessation of Manufacturing Excisable Goods or provide or Render Excisable Services – FE – III • Sales Tax Procedure shall mutatis mutandis apply on persons also registered under Sales Tax Act, 1990

25. ISSUES IN SALES TAX ACT, 1990 • Registration • Change in Particulars • Transfer of Registration • De Registration

26. Registration Issues • Why should I wait for Registration before any Taxable Supply? - Issue a Provisional Certificate, Complete the procedure - Business Activity should not be stopped • No time limit for completion of verification or inquiry for registration as opposed to 15 days for rejection? • FBR must realize that rejection of registration means no business! – Rejection should be replaced with resolution. • STR – I should not require a registered person to specify the jurisdiction instead the tax office should write the same in acknowledgment letter.

27. Registration Issues Conflict in registration procedure - Business Activities • Manufacture, • Importer, • Exporter, • Distributor, • Retailer, • Wholesaler, • Service Provider A person’s primary activity be more than one – Why restriction for doing business?

28. Registration Issues Special Rules • Electric Power, • Natural Gas, • Trading Corporation of Pakistan, • Rendering of services subject to provincial Sales Tax, • Television and Radio, • Ship Chandlers, • Stevedores, • Oil Marketing Companies [Sharing of Product], • Vehicle Dealers, • Ginned Cotton, • Commercial Importer, • Steel Melters, Re Rollers and Ship Breakers, • Manufacturers of Biscuits, Confectionary and Snacks Where is the nexus between business activity at registration stage and special activities covered under special rules?

29. Change in Particulars Issue • Absence of objective criterion for assessment on change of business category to Manufacturer in the light of definition of manufacturer • No time limit is specified for issuance of revised registration certificate on change of particulars of registration

30. Transfer of Registration Issues • No time limit is specified for completion of transfer of registration process • Non-disclosure of CRO’s condition, limitation or restriction would increase the Taxpayer and Collector interaction which is against the present image of FBR

31. De Registration Issues • No time limit is specified for conducting the audit of Final Return under section 28 in line with Rule 11, hence, the three months time limit is of no use. • Effective date of Registration as the case in change in particulars which is effective from date of application • Obvious instructions regarding right and obligation of Registered person from the date of de-registration are almost absent

32. Federal Excise Act, 2005 • Registration • Change in Particulars • Transfer of Registration • De Registration

33. Registration Issues • Registration threshold is not harmonized with Sales Tax Act, 1990 where both laws are applicable? • No time limit for issuance of Registration Certificate

34. Change in Particulars Issue • No form prescribed • No time limit for issuance of revised registration certificate • Effective date of revised registration?

35. Transfer of Registration Issues • No form prescribed • No time limit is specified for completion of transfer of registration process • Non-disclosure of Collector’s condition, limitation or restriction would increase the Taxpayer and Collector interaction which is against the present image of FBR

36. De Registration Issues • No Final Return with De Registration prescribed • No time limit is specified for De Registration • No procedure is specified for De Registration • Obvious instructions regarding right and obligation of Registered person from the date of de-registration are almost absent

37. COMMON LACUNA • A non corporate person having a single manufacturing unit, whose business premises and manufacturing unit are located in different areas, shall apply to the collector of the area in whose jurisdiction his manufacturing unit is located: Provided that a corporate person shall have the option to apply for transfer of registration to the collector having jurisdiction over the area where manufacturing unit is located. [Underlined Phrase of Rule 3(3) of Federal Excise Rules, 2005 and Rule 5(1)(c) of Sales Tax Rules, 2006]

38. CONCLUSION • Principle Based Approach instead Rule Based Approach • Provision meant to serve ease in doing business • Objective Facilitation not subjective imposition – In line with current approach of FBR • Institute of Internal Auditor’s Motto ought to be remembered by the registered persons on receiving a notice from Collector – In Allah [they used God] we trust others we Audit

39. Thank You Mohammed Ashraf, ACCA