Fashion designers reluctant to pay service taxes

Owners of a number of sealed outlets have contacted PRA for registration and payment of taxes

Akbar Bajwa September 07, 2015

LAHORE: The raids by Punjab Revenue Authority (PRA) against designer outlets in Lahore, followed by their outlets being sealed, have caught the fashion fraternity with their hand in the cookie jar.

Owners of a number of sealed outlets have now contacted the authority for registration, business evaluation and payment of taxes to reopen their businesses, while terming the move by PRA as highhandedness and controversial, with some of them even considering moving the Lahore High Court to intervene.

According to details, owners of the designer outlets including Zara Shahjahan, Rubayat, Gulaci, Sania Maskatiya, Ammar Bill, and Nida Azwar visited the Punjab Revenue Authority and paid a collective amount worth Rs8 million taxes as security.

Meanwhile, designers Asifa and Nabeel, Aphrodite and Mehdi registered themselves with the authority with Mehreem Gul, Jeuni Couture, Ali Zeeshan and Fahad Hussain having applied for registration.

The expected tax recovery from sealed outlets of non-compliant fashion designers (FDs) is believed to be around Rs80 million.

Shahjahan, when contacted, said that her outlet was not providing any services rather it was selling a product that was designed, manufactured and packaged by them.

She refused to comment any further adding that the Pakistan Fashion Design Council (PFDC), a body representing fashion designers, would issue an official statement.

However, she did confirmed that the PFDC was in talks with PRA on behalf of all fashion designers.

Later, in a statement, PFDC said that they had had discussions with the PRA to resolve the matter when their stores in Lahore were sealed, adding that the manner in which the PRA conducted themselves was unethical.

However, a PRA spokesperson denied that the body was in talks with PFDC, adding that it will proceed with collecting service tax from all designers.

Moreover, the Punjab sales tax on services Act,2012 section 2(38) says “service or services means anything which is not a good or providing of which is not a supply of goods and shall include but not limited to the services listed in first schedule.”

The PRA official said that a service shall remain and continue to be treated as service regardless whether or not rendering thereof involves any use, supply or consumption of any goods either as an essential or as an incidental aspect of such rendering.

Designers move LHC

On the other hand, a writ petition has been filed by fashion designers, Muse and Ayesha Imran, against the actions of PRA in the LHC.

Justice Mamoonul Rasheed Sheikh of the LHC, after a preliminary hearing of arguments, remanded the cases to PRA to accord personal hearing to the petitioners and decide their cases, keeping in view the law, after disposing of the petition.

Tax evasion?

Moreover, authority officials told The Express Tribune that record accessed under enforcement rules of leading fashion designers showed that the designers, apart from not paying the tax on services to the government were charging the general sales tax to the customers but were holding it back and not passing it off to the government.

PRA spokesperson told The Express Tribune that Maria B, a leading designer, got herself registered with Punjab Revenue Authority on Jan 27, 2014 in the service category and had filed 17 returns since then. But had paid no service tax as a designer by showing zero sales.

The authority had confiscated records of sales at these fashion outlets which will be assessed while their tax process will be started once they have been registered.

Additional Commissioner Ayesha Ranjha, said that a survey to ascertain exact number of fashion designers in the city was in progress.

Asked about the crackdowns, she said that information notices and reminders had been duly sent to the outlets prior to action.

Assistant Commissioner PRA Sumaira Ambreen echoed that due notices were served, in addition to allowing for personal hearings.

“Finally Sealing Notice is sent under rule 6(3) of Punjab sales tax on services (Enforcement) rules 2014 and other penal actions under 5 Punjab sales tax on services Act,2012.”

Ambreen said that complete information about the designers, their products, charges, equity and capital investments were collected prior to sealing them.

Now, a final opportunity to get registered with PRA had been offered to all designers who corresponded or expressed their interest to the authority over the last year.

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