Sales Tax Threshold

khizar · 06-26-2004, 06:09 AM

Hello
The recent budget increased the threshold for sales tax registration to Rs 5mn for manufactures. For business already registered, who have less than this sale, is it mandatory to deregister or voluntary?

Also, would it really be good for business under 5m not registering for GST???
I mean, if they dont register, then they cannot claim any input tax and will have to absorb these costs. Even if their purchases are around 2.5mn, the GST claimable would be 375,000. Not registering means loosing this..

Is there something I am missing. Why is this increase in threshold being termed as helpful for the small business?

Thanks
Khizar

massood akhter · 06-27-2004, 04:36 PM

Asslamo Alaikam,

Yes you are right that threshold for manufacturer and retailor for the purpose of sales tax registration has been increased to RS. 5.00 Million. The person who are already registered or enrolled are required to file application for de-registration, however they must file the sales tax return for the tax period-June-04 or quarter ending June-2004 which ever is applicable.

Yes, it will be beneficial for manufacturer and retailor whose turnover is less than 5.00 million to be de-register and not to pay any tax with the return.

In pakistan Sales Tax is being collected and charged on the machnism of VAT (Value added tax) after adjusting input and output tax. unregistered person can not claim input tax and it becomes cost factor for them, but registered person can claim input tax and simultaneously they charged output tax (otherwise like absorb input tax, it also becomes absorb output tax) and the difference so calculated becomes their liability to deposit with the return, ultimately it has negative impact on profit margin and also disadvantageous for consumers.

I hope you better understand, if not and then directly write to me at

[email protected]

<BLOCKQUOTE id=quote>quote<hr height=1 noshade id=quote>
Hello
The recent budget increased the threshold for sales tax registration to Rs 5mn for manufactures. For business already registered, who have less than this sale, is it mandatory to deregister or voluntary?

Also, would it really be good for business under 5m not registering for GST???
I mean, if they dont register, then they cannot claim any input tax and will have to absorb these costs. Even if their purchases are around 2.5mn, the GST claimable would be 375,000. Not registering means loosing this..

Is there something I am missing. Why is this increase in threshold being termed as helpful for the small business?

Thanks
Khizar

<hr height=1 noshade id=quote></BLOCKQUOTE id=quote>

massood ar.

khizar · 07-05-2004, 06:06 AM

Thanks Massood for your comments. But I didnt understand why deregistering is better. GST has a negative impact on cash as we need to pay GST. But this amount is recoverable.

As an example the revenue is 4,000,000 per year. And purchase is Rs 2,000,000 per year.
If the business is GST registered, it would charge 600,000 GST.
While its input GST would be 300,000. It would need to pay government the difference on a monthly basis and most likely before the customers pays.
So it could have a negative impact on cash.
And if the business deregisters (and assuming thier suppliers are over large and cannot deregister) its costs would increase by 300,000.

Please advise what the benefits of deregistration would be for the business?

Thanks

aamersikandar · 07-27-2004, 11:24 PM

Hi
As regards to the aforementioned question, I would say that hypothetically it is correct that their is benifit in registration as you can not pass on the GST without being registered yourself. However in Pakistan, the traders tend to charge the same price i.e. inclusive of GST thus passing the buck, withoout being registered themselve. Moreover you just do not declare that the increased price is GST inclusive. However if you sales are verifiable and to registered purchasers then it would be better to register yourself for GST.

Aamer Sikandar