Senate panel opposes retail sales tax


A Senate panel on Tuesday unanimously rejected budget proposals to arrest taxpayers suspected of concealing income without a warrant and to charge a 17% sales tax at the retail stage which, if accepted, would can raise sugar prices by Rs 7 per kilogram.

The Finance Standing Committee also rejected a proposal to impose a general sales tax of 17% on online platforms.

The government wants to charge a 17% sales tax on online platforms, which will hurt 92% of unregistered people who use platforms like Daraz and Foodpanda to sell their products. Taxation would eliminate these people from the market at a time when the government wants people to prefer online shopping.

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In its first session to consider the 2021 Appropriation Bill – the Senate Standing Committee on Finance called Clause 203-A “mini-NAB” and “draconian.” The recommendations of the Senate are non-binding in the event of a finance bill.

“A tax official not having the rank of Deputy Commissioner…who, on the basis of physical evidence, has reason to believe that a person has committed an offense of concealment of income or any offense warranting prosecution under of the order, can have such a person arrested”, according to article 203-A. The committee unanimously rejects Section 203-A, ruled Senator Talha Mehmood, chairman of the committee.

Pakistan Muslim League-Nawaz (PML-N) Senator Sadia Abbasi has spoken out against publicity in the media about sending taxpayers behind bars.

Senator Sherry Rehman of the Pakistan People’s Party (PPP) argued that on the one hand we are told that the powers of the FBR are being reduced and on the other hand it is being turned into a mini-NAB through this provision. The provision is a mini stealth martial law, she added.

Section 203-A is draconian and the FBR should instead use technological means to broaden the base, said Senator Faisal Subzwari of MQM-Pakistan. The reaction to Section 203-A is very natural, but to address concerns we have reduced the discretionary powers of the tax authorities, FBR Chairman Asim Ahmed said while defending the clause.

The RBF mindset is the biggest impediment to broadening the tax base, as it believes more in harassing people than facilitating them, Senator Kamil Ali Agha said.

The FBR also introduced a proposal for “mystery shopping” by informants to check whether retailers were reporting their sales via outlets. But Agha said the concept of indicator or monitoring was contrary to the finance minister’s rhetoric that spoke of facilitation and self-assessment.

Committee members also registered a token walkout due to the absence of Finance Minister Shaukat Tarin and Finance Secretary Yousaf Khan. Committee members also urged the FBR to accept its majority recommendations, saying that without giving the Senate due weight, there was no point in reviewing the appropriation bill.

“Today is the first meeting of this committee and the Minister of Finance and the Secretary are not present. This must be taken into account,” Senator Rehman said.

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The standing committee also rejected the tax proposal to impose a 17% sales tax on the online market. The online marketplace included an electronic interface such as a marketplace, e-commerce platform, portal, or similar means that facilitates the sale of goods, including sales to third parties.

The committee also unanimously rejected the proposal to tax sugar at the retail stage instead of charging a 17% sales tax at the ex-factory price. Changing the stage of tax collection would raise the price of sugar by 7 rupees per kilogram, said Senator Saleem Mandviwalla of the PPP. Retailers and dealers do not fall into the tax net, which has created enforcement problems for the FBR and we have no choice but to charge the tax at the retail stage, a said Tariq Chaudhry, tax policy member of the FBR.

Published in L’Express Tribune, June 16h2021.

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