Value added tax coming together


Irshad Ansari April 30, 2010

ISLAMABAD: The Value Added Tax (Vat) Bill is expected to be approved on May 6 by the National Assembly’s Standing Committee on Finance.

The Senate Standing Committee on Finance has completed its first reading of the bill intended for implementation in 2010. The committee completed a clause by clause reading of the Value Added Tax (Vat) act on Friday. The government wants this Vat tax regime to replace the General Sales Tax system from the next fiscal, starting from July 1.

The committee will listen to the suggestions of the Tax Bar Association on May 6 after which the bill will be approved, said the committee’s chairperson, Fauzia Wahab. Some amendments have been made in the Vat bill and the rest of the document is the same said the chief Vat official, Iftikhar Qutub. According to the new amendment recommends that the Vat be imposed on the commercial activities of NGOs, he said.

The International Monetary Fund (IMF) has asked the country to switch the taxation system after Pakistan sought an economic bailout package of over $11 billion from them last year. The Federal Bureau of Revenue chairman Sohail Ahmed, voiced his disagreement against the bill , saying that the Vat Bill has been designed as suggested by international experts.

He it would create misperceptions in people’s minds because the IMF and the World Bank had dictated terms regarding it. Ahmed said that the impact of the move on the overall tax collection would be huge and that it could undermine the whole idea of switching from one system to the other. “It is virtually impossible to determine the annual turnover of a retailer operating in posh markets,” said Ahmed, talking about bringing retailers into the tax net.

It is almost impossible to force any businessman to accept an actual turnover of Rs7.5 million or above. It has been assumed under the self-assessment system that businessmen with annual turnovers of more than Rs7.5 million will voluntarily declare their income and allow themselves to be taxed under the Vat. “We do not have any magic wand to suddenly register a large number of persons into the Vat regime keeping our present tax culture in mind,” Ahmed added. The Vat will only be applicable on private educational institutions with an annual turnover of more than Rs7.5 million.

Interestingly, none of the committee members raised voice on the imposition of Vat on private educational institutions. A 15 per cent value added tax will be charged on imported machinery. The products to be exempted from Vat are pulses, wheat, flour, branded mineral water, salt, books and newspapers. Moreover, copies of Quran Pak, ambulances, fire fighting trucks, artificial body parts, contraception products, expensive metals and government schools and hospitals will be exempted from Vat.

COMMENTS (3)

muhammed ashraf gandhi | 11 years ago | Reply what else we can expect from fouzia sahiba.does she know that the repund culture inherent in the system hhas already generated REFUND TYCOONS because of the earlier sales tax system.it was confessed by the state bank and cbr that the amuont refunded is more than the collected. the system would certainly erode the economy further. refund culture in a country like ours is killing where amnesty schems are introduced of and on.for GOD sake donot sink the whole economy for the luxuries of the rulers
Meekal Ahmed | 11 years ago | Reply And what, sir would you suggest we hope for?
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