Clarification Letter
C.No.3(12)ST-L&P/04 dated 04-07-2005
SUB: SPECIAL PROCEDURE FOR PAYMENT OF SALES TAX BY COMMERCIAL IMPORTERS ON VALUE ADDITION.
I am directed to refer to Project Director CARE’s letter C. No. MCC/MISC/21/2004 dated 01.07.2005 on the subject cited above.
2. The basis of an adequate reform programme depends to foresight of the managers to develop a flexible programme which is capable of handling not only day to day business but to cater for rare occurring phenomenons. Special Procedure for Payment of Sales Tax by Commercial Importers on Value Addition was a budgetary measure for the year 2004-05, which was circulated to all the field formations as a part of budget document 2004-05. Since instructions issued by the Board, irrespective of the Wing that has issued it, are binding on the field formations, the said procedure was rightly adopted by all the Collectorates of Customs and has been in field for over an year now.
3. As regards the observation regarding determination of actual value addition of the commercial importer, it is clarified that, as is generally known, the system of sales tax is based on self assessment and self declaration. The Customs Collectorate is required to realize sales tax @ 10% from the commercial importers at the time of import, as sales tax on minimum value addition. In case the importer makes a value addition in excess of 10%, he is required to self assess and deposit sales tax on such excess amount alongwith the prescribed statement, by filling it in the respective Collectorate of Sales Tax, on completion of the financial year. Similarly the commercial importers with a declared history of having a value addition above 10% are required to self assess and deposit sales tax in excess of already paid amount accordingly. As such, apparently, there arises no need for a nationwide sales tax return database to be integrated with PACCS, although N.T.N as a single identifier has already been adopted by the Sales Tax administration.
4. It may also be pointed out that in all other Customs Collectorates, sales tax on value addition basis is being collected on a separate challan to ensure that this collection is correctly accounted for and reported under the domestic collection of sales tax. The Model Collectorate may waive the requirement of a separte challan, if so required by the programme/software, but if must be ensured that the collection of sales tax on minimum value addition is accounted for and collected under the domestic collection of sales tax.
5. It may once again be pointed out that the basis of successful reform depends on a clear understanding and adequate provision for implementation at the appropriate stage of the rules framed under all tiers of indirect as well as direct taxes governed by the Central Board of Revenue. The special procedure under reference is not a new phenomenon for the customs authorities. Since the rules relating to the said procedure were smoothly implemented by the Customs it is believed that the CARE programme has ample provisions to accommodate the said procedure, since nationwide linkage of sales tax return database with PACCS for the prupose alone is not required. However, Mr S.M.Tariq Huda, Secretary Sales Tax has been deputed to coordinate with the CARE team for any further clarification, as and when required.
[CBR letter signed by (Aamer Amin Bhatti) Secretary (ST-FE-L&P) addressed to The Project Director, Customs Administrative Reforms (CARE) Model Customs Collectorate Custom House Karachi.]
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