Budget aims to promote industrialisation, FBR chief tells traders

--Shabbar Zaidi says department is mulling to charge tax on the basis of electricity bill on shops with an area of 240 to 1,000sq.ft.

--LCCI official says overall increase in taxes, particularly import duties, will enhance smuggling and increase the share of black economy

LAHORE: Federal Board of Revenue (FBR) Chairman Shabbar Zaidi, while addressing a meeting at the Lahore Chamber of Commerce and Industry (LCCI) on Saturday, said that the main theme of the Federal Budget 2019-20 is the development of industrial sector and creation of employment opportunities.

“Keeping in view the problems faced by the business community with regard to customs duty, valuation and clearance, the ratio of green channel would be increased to 60 per cent,” the FBR chairman said. “Currently, there are red, yellow and green channels for customs clearance. The ratio of green is 40 per cent which we plan to increase to 60 per cent within two months.”

He said that the process of sales tax

registration has been automated while certification for imports would also be
automated soon.

“Automation in FBR is the need of the hour and

the government wants less human inference in the taxation system and more utilization
of modern technology, as that would strengthen the department’s transparency and
accountability system,” Shabbar Zaidi said. “People who deal with income taxes
face difficulties in getting the section 148 certificate. We are moving towards
automating that within the next month or so.”

He said the system of taxation for retailers

has not been corrected as yet, while work is underway and suggestions of
charging a fixed tax on shops smaller than 240sq.ft. are under consideration. “In
addition, the department is mulling to charge tax on the basis of electricity
bill on shops with an area of 240 to 1000 sq. ft.”

The FBR chief said that bonds have already been

released to resolve the issue of refunds, adding that the business community
would be consulted on the zero-rating regime if the new system of refunds
doesn’t work.

Zaidi further informed that the trade tax on

sugar dealers has been decreased to 0.25 per cent.

Answering a question regarding the real estate

sector, he said that the government plans to promote the construction industry
as it, in turn, facilitates other industries like cement and steel. “We want to
discourage people from parking untaxed money in the real estate sector.”

LCCI Acting President Faheemur Rehman Saigal

said on the occasion that certain measures taken in the Federal Budget 2019-20
would prove to be counterproductive for the industrial sector, which
contributes around 70 per cent to tax revenues and the economy as a whole.

“The overall increase in taxes, particularly

the import duties, would enhance smuggling and also increase the share of black
economy,” he maintained. 

Saigal said although the decision of exemption

of custom duties on more than 1,600 industrial inputs would help in making the
local industry more competitive, the increase in additional custom duties (ACD)
on 3,000 items would impact vital industrial inputs and increase the cost of
doing business for the industry.

He said that the disallowance of input tax

relating to supplies made to an unregistered person without disclosing his CNIC
has its own complications.

“This can result in a potential misuse of CNICs

which has resulted in fraudulent transactions of billions of rupees as reported
in the media from time to time. LCCI demands that condition of disclosing CNIC
for sale to unregistered person should be delayed for one year,” he added.

He said the decision of withdrawal of zero-rating

facility should be put in abeyance till a proper system of refunds is made,
tested and implemented.

One mechanism proposed by exporters is that 70

per cent of the refunds should be paid to regular exporters upon issuance of
bill of lading and the remaining can be paid upon realisation of export
proceeds.

“The government can then do a post-audit. The

decision to pay refunds only on the basis of export proceeds is not viable as
the remittances often come after a considerable lag,” said the LCCI acting
president.

Minister of State for Revenue Hammad Azhar, Punjab

Industries Minister Mian Aslam Iqbal, former LCCI presidents Bashir A Baksh,
Mian Muhammad Ashraf, Iftikhar Ali Malik, Mian Anjum Nisar, Sheikh Muhammad
Asif, Muhammad Ali Mian, Sohail Lashari, former senior vice president Amjad Ali
Jawa, former vice president Kashif Anwar and executive committee members also
spoke on the occasion.