ISLAMABAD (December 23 2002) : After thorough scrutiny of 'Registration and De-registration Rules, 2002', leading chartered accountant firms and sales tax consultants expressed doubts in the applicability of certain clauses pertaining to new businessmen desirous of registration with the sales tax department.
They opined that these rules would be instrumental in hindering sales tax net expansion drive.
Under the proposed rules, the Central Board of Revenue (CBR) has made it compulsory for new applicants to submit bank certificate of sound financial position for sales tax registration.
The applicants are bound to either submit income tax assessment order for the previous year or a certificate of sound financial position issued by the bankers of the applicant or by President of Chamber/respective trade association.
It is astonishing to note that the CBR is expecting from a fresh businessman to submit certificate from the bank that he has sound financial position.
“Why a bank would simply issue such type of certificate to that person?” one sales tax consultant said.
Furthermore, how a person can submit previous income tax assessment order? President of Chamber/respective trade association would think thousand times before issuing such certificates.
Tax experts suggest that this compulsion should be withdrawn before notification of the rules to avoid further complications.
The new law also carries that the new businessman must submit Certificate of membership of chamber of commerce and industry, or of the concerned trade/industrial association or group as applicable.
Experts say that this condition would make it mandatory for the person to become member of the association first and then pay fee to chamber of commerce to get the certificate.
The question arises that why CBR needs certificate from chamber of commerce and industry as the condition would simply complicate things for the new trader.
In Short title, application and commencement, the rules would apply to persons who opt for separate registration of branches, divisions or manufacturing units.
However, it has not been specified that if a person has a different liaison office, he is required to get that office registered or not.
The new rules shall apply to all persons to be de-registered under section 21 of the Act. Strongly contesting section 21, the consultants say that the time period for de-registration as mentioned in section 21 is not honoured by the collectorates of sales tax.
Thousands of de-registration cases are lying pending with the collectorates and authorities have taken no action so far.
Experts pointed out that the statement fails to elaborate the complete procedure.
The time period/procedure for de-registration should also be mentioned properly.
The rule says, “Where the application for registration is complete in all respects, the applicant shall be registered after such verification, inquiry or investigation as is deemed necessary and a certificate of registration containing his registration number shall be issued to him as set out in Annex “B””.
Referring to this rule, the experts said that the department has not given any details about verification, inquiry or investigation.
It is not mentioned which authority would conduct such verification, at what time and what would be the scope of such investigation.
The rule 7 mentions that attested photocopies of the documents shall be attached with the application for registration. But the authority responsible for attesting is not specified. For example, if an auditor attests a copy and collector does not accept it, then it would only create problems and the taxpayers have to visit the concerned department time and again.
It says, “Attested photocopies of the following documents shall be attached with the application for registration and the applicant or his authorised representative shall produce the originals as and when required by the Assistant Collector incharge”.
The original copies should be produced at the time of registration as the words “as and when required by the Assistant Collector incharge” empower the authorities to issue a notice calling this person whenever required causing harassment among the taxpayers.
Documents to be attached include, “Electricity, Gas and Telephone bills showing payment for any previous month.”
This requirement seems unnecessary as it gives the impression that the bills should have to be deposited by the taxpayer.
The department has nothing to do with the deposit of bills as the meters could be in the name of any person.
The CBR has given wrong impression through the above-mentioned phrase.
Electricity, Gas and Telephone bills are needed to verify address of the taxpayers.
Similarly, De-registration; says that a registered person is liable to be de-registered if his taxable turnover during the last twelve months is below two and a half million rupees and, five million rupees.
It should be amended as, “a registered person is liable to be de-registered if his taxable turnover during the last twelve months is below two and a half million rupees {in case of manufacturer} and, five million rupees; {in case of retailers}.
The de-registration procedure points out that on receipt of application an officer not below the rank of an Auditor or Deputy Superintendent shall be assigned to either conduct audit of the relevant records of the applicant or to do such enquiry as is necessary to ascertain whether the applicant qualifies for de-registration provided that such audit or enquiry shall, unless otherwise extended by the Collector, be completed within the stipulated period of six weeks.
Now, the question arises if the process of de-registration is not completed or an assessee could not receive the certificate of de-registration then he is deemed to be de-registered.
It is not clarified whether a person is required to file a monthly tax return after applying for de-registration or after six weeks? These issues need clarification in the new rules.
Tax practitioners suggest that the person applying for de-registration should deposit a challan fee of Rs 10 in National Bank to discourage the taxpayers from submitting applications from the back date.
The basic logic behind this idea is to ensure that a person who has not deposited tax could not take the plea of de-registration and back dated applicants are discouraged.
For registration, the CBR has also restricted a person to submit, “Documents of ownership or lease of the business or manufacturing premises and in case of leased premises, N.O.C from the owner”.
This would also create difficulties for the persons intended to be registered as if an assessee is not able to get NOC from the owner, for whatever reason, then it would be almost impossible for the taxpayer to get registration.
The only purpose is to verify the address from the documents.
These types of restrictions only de-motivate a taxpayer.
However, it would be more appropriate if above-mentioned requirement is revised in the following manner: “In case of leased premises, lease agreement; in case of rental property, rental agreement and in case of ownership, deed of the property is required”.
Documents to be attached also required, “National Identity Card of the authorised representative”.
Tax practitioners are of the view that Power of Attorney is enough for this purpose and the provision of ID card would only increase the workload on the authorised representatives.
If a consultant has to file ten registration applications the procedure will consume his whole working day.
