ARTICLE (May 30 2010): The government's decision to introduce value-added tax (VAT) in the country from July 1, 2010 has sent a wave of fear across the business community, which has aroused much opposition and resentment. It is feared that it will adversely affect the economy of the country. Inflation will double and each segment of society will be brutally taxed.
The FBR said that the introduction of VAT is just a change of name accompanied by a broader scope. The VAT is, in fact, general sales tax (GST) minus aberrations from the concept of value addition. The GST incorporated these aberrations in the form of numerous exemptions and zero-ratings. The VAT is left with only a few non-avoidable exemptions and zero-ratings. Not only have the aberrations been removed from the GST to change it into VAT, the mechanism of subordinate legislation through SROs, which brought about many of these deviations, has also been eliminated. Under the VAT, any exemptions or zero-ratings can be granted only by the statute.
Source: http://www.brecorder.com/index.php?id=1062753&currPageNo=1&query=&search=&term=&supDate=
The Federal VAT Act levies VAT on the import and domestic supply of all goods except a few exemptions and zero-ratings. The Federal VAT Act also levies VAT on transportation of goods and passengers through railway, sea or air. The Provincial VAT Acts levy VAT on services. All service, excluding those exempted and specified in first schedule to the Provincial VAT Acts are chargeable to Value Added Tax.
For the purposes of valuation, VAT divides goods/services into two categories: It includes imports and domestic supplies. For imports, valuation rules are the same under GST and VAT except that under VAT, cost of services treated under provincial VAT law as part of the imported goods will be added to the value determined under GST.
Pakistan is 137th country where the VAT would be applied. The Senate Standing Committee on Finance has however recommended deferment of the VAT for one year, reducing its rate from 15% to 12.5% and lessening the powers of its arrears recovery from the relatives of defaulters. As against the proposed uniform rate of VAT at the rate of 15% in Pakistan, the applicable VAT rates in some other countries are as under:
=============================== Country VAT rate Tax-GDP ratio =============================== JAPAN 5% (27.9) MALAYSIA 5% (15.5) SWITZERLAND 6.5% (30.1) CANADA 7% (33.4) AUSTRALIA 10% (30.5) ===============================
There is no VAT in the US. However, in the US federating units, there is unadjustable GST. In California (largest state), grocery stores, un-prepared food items are not taxed. All other food items, eg fruits and vegetables are exempt from sales tax. The US states rely upon GST as internal revenue, ie with the federal government. For this reason, the states are continuing with non-adjustable GST instead of adopting the VAT. Despite such heavy reliance on GST, the list of exemptions is not different from European Union, UK and Australia.
Almost all food items, medicines, supplies to the federal government, educational institutions are exempt from the GST. The list of exemptions in the US may be very relevant to our government as we have very' strong strategic partnership with the US. The Indian exemptions list is also very exhaustive. It has even exempted the supply of electrical energy and textile as well as sugar sector. None of their agri products are subjected to VAT.
Singapore took two years to complete the consultation process and India postponed the introduction of the VAT system for one year just to complete the consultation process as every country has its own economic structure and tax culture. Australia took more than 6 years to convince the parliament for the enforcement of the GST. It also did a lot of capacity building of the potential taxpayers.
In Pakistan, the FBR has not published any material on the viability of the proposed bill, except placing FAQs on the website and conducting a few seminars subsequent to moving of the bill in the parliament. Since this bill shall have far reaching repercussions, the print and electronic media also needs to sensitise on this core economic issue.
The World Bank says Pakistan has a revenue system that is low yielding by international and regional standards. The tax-to-GDP ratio has been declining over the time despite several years of robust economic growth. At around 10 percent, the country's tax-to-GDP ratio is among the lowest in the world. The impact of Pakistan's weak revenue performance is significant. The resources to finance necessary investments in education, healthcare and infrastructure remain limited, increasing Pakistan's dependence on external aid.
However, the matter of levy of the VAT is an issue of utmost importance and involves question of constitutionality. This appears to be the main stance of the government to introduce the VAT that tax-to-GDP ratio in Pakistan is very low, ie about 10.6%. It is also being said that the VAT rate is directly proportional to tax-to-GDP ratio.
WHAT IS THE DIFFERENCE BETWEEN VAT AND SALES TAX?The VAT is levied on goods and services while sales tax is imposed generally on goods. Contrary to sales tax, the VAT has no cascading effect. The VAT is a multistage tax, levied only on the value added at each stage in the chain of supply of goods and services with the provision of a set-off for the tax paid at earlier stages in the chain. Thus, the VAT eventually becomes a single point tax.
KEY OBJECTIVES: Advisor to the Prime Minister on Finance Hafeez Sheikh has assured the International Monetary Fund (IMF) that an integrated broad-based value-added tax (VAT) would be announced in the forthcoming budget 2010-11, as agreed. This agreement is in black and white and is included in the fourth Letter of Intent (LoI) signed by former finance minister Shaukat Tarin, dated 11 December 2009, and submitted to the Fund's Board as a perquisite for the release of a subsequent tranche. The objective of the VAT, according to the LoI, is "to meet the government's medium-term needs".
THE EXPECTATION: "additional revenue generated could reach 3 percent of gross domestic product per annum over the medium term." The LoI commits to "full implementation of the VAT by July 02, 2010 (as) a key objective and a structural benchmark.
The money so collected from the VAT will be spent to meet budgetary deficit as such these funds will not be available to finance capacity building of energy resources, health, education and construction of dams to meet water requirements.
GLOBAL VIEW OF VAT: Around 70 percent of the world's population in 130 countries now lives with a value-added tax (VAT), which is essentially an alternative method of collecting what most people would readily understand as a sales tax. By adopting VAT by six more countries, Pakistan shall become the 137th country to fall in line with the VAT mode of taxation.
The acceptance of a value-added type of tax as a revenue instrument is largely based on the fact that it will raise more revenue than the sales/turnover tax, which would be replaced. It is justified on the theoretical grounds that (a) it is a neutral tax, (b) it removes cascading (a tax on tax), and (c) enables a zero-rating of exports.
The VAT is a multi-point sales tax, which allows a set-off for tax paid on purchases, since only the value-added at each stage of manufacturing or sale is taxed at a percentage of the value added at cacti stage of production or sale.
The VAT is collected in instalments on each transaction in the production-distribution process. There is no cascading because of the system of deduction or credit for taxes paid. The tax is levied on consumption and, therefore, the final and total burden of the tax is fully and exclusively borne by domestic consumers.
No VAT is charged on exported goods and services. It is generally argued that the VAT provides a better audit trail than a single point/stage sales tax. However, such an argument assumes that someone is going to, or has the capability to, follow the trail. With millions of credits being taken it is rather difficult to follow them.
Pakistan experience shows that the costs of compliance are also high because of the somewhat cozy relationship between some taxpayers and revenue staff, the frequent audits (commonly more than one per year) of those registered for the GST purposes and the endemic, and never likely to be resolved, problem of exporters being unable to get their refunds of the GST paid on inputs on a timely basis.
Finally, and not less importantly, the VAT, especially now has been planned to extend to the retail level, it would require a fairly high level of literacy and understanding among the taxpayers. The successful implementation of such a tax needs a long period of up-front taxpayer education and eventual societal acceptance.
It is, perhaps, for a combination of these reasons that the US, the biggest and most powerful economy of the world has nor instituted a VAT type tax and relies on a sales/turnover tax levied by each state with, its own rates of sales tax for or different goods and services.
POVERTY IN PAKISTAN The inadequacy of income to meet basic needs, low quality of life, denial of opportunities and choices basic to human development are different facets of poverty. The main objectives of government policies are to raise the standard of living and improve the socio-economic conditions of the people and thus reduce the incidence of poverty in the country. Contrary to these objectives, the VAT will be counterproductive; it will become another source of pushing the people below the poverty line.
INFLATION PRESSURES ON CONSUMERS: Pakistan is one of only a handful of countries that is still experiencing double-digit inflation. The surge in food and commodity prices pushed the Consumer Price Index (CPI) in Pakistan to a record level of 25.3 percent in August 2008, remaining above the 20 percent level up in the subsequent period.
The non-food component also remained in double-digit figures throughout the course of the fiscal year owing to the transport group, fuel and lighting group and the house rent index remaining at elevated levels.
======================================================= TABLE ======================================================= Main Components of CPI Inflation ======================================================= Item (July-April) ======================================================= 2006-07 2007-08 2007-08 2008-09 ======================================================= CPI (General 7.8 12.0 10.2 22.4 Food Group 10.4 17.5 15.0 26.6 Non-Food Group 6.0 7.9 6.8 19.0 Core Inflation 5.9 8.3 7.5 17.8 =======================================================
Source: Economic Survey of Pakistan 2008-09
Once the VAT becomes operational, (in the present shape), almost every commodity other than peas, wheat and wheat floor shall be changeable to the VAT. What would happen to a common person in a country where 40% of its population lives below the poverty line?
In order to reduce the incident of poverty, the government may turn its attention to certain basics:
i) Slash its expenditure,
ii) Raise taxes on the rich and the influential,
iii) Break collusion by those engaged in producing commodities like sugar and
iv) Last but not least enhance development expenditure to deal with the twin evils that beset our country: lack of energy and lack of education. This would fuel the wheels of productivity.
SCOPE OF VAT The VAT is levied both on goods and services while sales tax is imposed generally on goods only. Contrary to the sales tax, the VAT has no cascading effect. The VAT is a multistage tax, levied only on the value-added at each stage, in the chain of supply of goods and services with the provision of a set-off for the tax paid at earlier stages in the chain.
The VAT will cover supply (including import) of both goods and services at uniform rate of 15 percent unless exempted under the VAT law. The businesses whose annual turnover is less than Rs 7.5 million will be out of the VAT net.
The rationale behind both of these levies is same: both are consumption taxes. Both the GST or the VAT, however, serve a supplementary purpose: both lead to documentation of economy and a shift from import duties to domestic taxes which is a big challenge at least in the developing countries.
The GST and the VAT, both travel with price. In a domestic transaction, seller of goods/services receives the price and the buyer pays it. The GST or the VAT is paid with price by buyer to the seller. The seller collects the tax and deposits it in the government treasury. The government officials in the tax department just watch that the buyer pays the right amount of tax and seller faithfully deposits the amount so received in the government exchequer.
In case of imports, importer incurs the liability of both seller and buyer. He pays the tax and also deposits it in the treasury. Both the GST and the VAT, however, make a provision to shift the liability to pay the tax.
Under both the GST and the VAT, the Federal government may by a notification in the official gazette, specify the goods in respect of which the liability to pay tax would be of the buyer of goods/services. What difference would such a notification make? To the extent of goods so specified, the buyer instead of seller will have to face the consequences of non-payment of tax.
TAX RATE IN GST Tax rate in the GST rate system is more complicated. There is a standard rate of 16% in the GST. Besides, there are 11 more GST rates above and below the standard rate, which are payable on certain specified supplies. For example, ship-breakers pay GST at the rate of Rs 4848 per metric tonne.
The GST rate on supply of sugar is 8% and the rate on supply of natural gas to the CNG station is 25%. Commercial importers pay GST at the rate of 18% on commercial imports.
Tax rate in VAT: The VAT has a single standard rate of 15% on any supply/import.
LOW RATE OF TAX ON FOOD AND ESSENTIAL ITEMS The FBR has been examining a proposal to levy lower rate of the VAT on food items and essential commodities where exemptions would be withdrawn under the 6th Schedule from 2010-11. In this way, the inflationary impact could have been avoided by imposing reduced rate of the VAT on basic consumer items and food commodities.
There was a news that the FBR may propose 5-6% VAT on supply of consumer items sold in Pakistan on which presently sales tax is charged on the basis of printed sale price, eg fruit juices, vegetable juices, ice cream, aerated water or beverages, syrups and squashes, cigarettes, toilet soap, detergents, shampoos, tooth paste, shaving cream, perfumery and cosmetics, tea, powder drinks, milky drinks, toilet paper and tissue paper, spices, sold in retail packing, bearing brand names and trade marks and shoe polish and shaving cream.
In the UK, food of all kinds used for human consumption, including products eaten as part of a meal or as snacks and products like flour are exempt. The food items for human consumption are not only exempt but entitled to input tax credit. Likewise, all unprocessed foodstuffs, such as raw meat and fish, vegetable and fruits, cereals, nuts and pulses etc are zero-rated, so almost all the agricultural products are exempt from the VAT and entitled to tax credit paid on any goods and services used in their production.
The exemptions available to farm products the world over are just to attract investment in this core activity of life. The GST in Australia is proving a very smooth growth engine for the economy. Basic food, education courses, medical, health and care services, medicines, exports, childcare, religious services, charitable activities etc are exempt.
Australia has not only exempted agri products, food items and socio-economic services, but allows refund or input credit adjustment to the suppliers. This, in return, keeps them cost free of any taxes hidden or otherwise. In one decade, since the GST was introduced in Australia, it has become a success story.
GOVERNMENT DEPARTMENTS TO ACT AS WITHHOLDING AGENTS: A provision has been introduced in the VAT law to declare government departments/autonomous bodies as withholding agents for deduction of VAT as far as transaction of supplies made to these departments is concerned.
Even if the "Sales Tax Special Procedure (Withholding) Rules, 2007" is being abolished under the VAT rules and regulations, a provision of 'withholding of VAT' has been introduced in the Federal Value Added Tax (VAT) Act 2010. Under section of the Federal VAT Act, "the Federal government may specify any person or class of persons as withholding agent for the purpose of deduction and deposit of tax on the purchase of goods."
Presently, the government departments are working as withholding agents under the "Sales Tax Special Procedure '(Withholding) Rules, 2007". The board had declared government departments/autonomous bodies as withholding agents for deducting 3 percent of the total 15 percent payable sales tax involved in transaction of supplies made to these departments.
The FBR has also made it mandatory for the units registered with the Large Taxpayer Units (LTUs) to deduct and withhold one percent of value of taxable supplies as sales tax from those suppliers, who do not fall within the jurisdiction of LTUs.
The government departments are required to make purchases from the registered suppliers. At the time of issuing bills, departments pay sales tax to these suppliers, but the amount was not deposited in the national kitty. To check this violation, it was decided to deduct 15 percent sales tax on supplies by withholding agents. But, 15 percent deduction had created problems in claiming input tax adjustment. Later another procedure was notified for deduction of three percent tax on supplies made to the government departments.
VAT EXTENDED TO AJK, GB, TRIBAL AREAS The VAT regime would be extended to Fata, Pata, Azad Jammu and Kashmir and Gilgit Baltistan from July 01, 2010 provided that the National Assembly and provincial assemblies pass the Federal and Provincial VAT Bills.
Presently, Sales Tax Act is not applicable in Fata and Pata and extension of the VAT in tribal areas would bring manufacturing units and retail sectors located in Fata/Pata into the VAT regime. Any unit engaged in manufacturing activity or wholesaler, dealer or supplier having annual turnover of Rs 7.5 million in Fata/Pata would operate under the VAT regime.
Similarly, the FBR has to issue rules to deal with the supplies made to the Azad Kashmir for VAT enforcement. Presently, excise duty in the VAT mode is applicable on ghee and cooking oil units located in Fata/Pata. Referring to AJK laws, sources said the AJK government has adopted the entire Sales Tax Act and implemented the same in their territory.
The AJK sales tax laws, which are a copy of the Sales Tax Act, 1990, is applicable in their respective territories. The AJK is an independent territory under the AJK Interim Constitution Act, 1974 and the AJK Board of Revenue under the AJK Sales Tax (Adoption) Act, 1993, is empowered to levy sales tax on taxable supplies in the AJK territory.
In the same manner the Azad Jammu and Kashmir can also adopt the Federal VAT Act or any other arrangement could be implemented as prescribed by the Federal government. Following clearance of Federal and Provincial VAT Bills by the National Assembly and provincial assemblies, the VAT would also be enforced at the business units located in the area of Gilgit Baltistan.
The FBR has recently issued a simplified procedure for issuance of sales tax registration certificates to the importers, manufacturers and other business units of Gilgit Baltistan. The FBR has allowed authorised representatives of the applicants of Gilgit-Baltistan area to obtain new sales tax registration certificates on their behalf.
The mandatory personal appearance of the applicants for receiving certificates has been abolished by the board. Once the Federal and Provincial VAT Bills are through by the National Assembly and provincial assemblies, the VAT could be extended to the Fata through a Presidential Order and Pata through a Governor Order.
RESERVATIONS ON VAT LAWS IN PAKISTAN The draft Bills 2010, relating to Federal and provincial VAT, reflect a gross violation of the Constitution of Pakistan, and these are totally contrary to the recommendations of the 7th NFC award relating to sales act on services.
It is worth mentioning that Finance Department, the government of Sindh has already placed its serious reservations to the FBR by submitting that the draft bills on the VAT, both Federal and provincial, being contrary to constitution "are not acceptable to Sindh."
According to the Sindh government, these bills empower the FBR to collect the VAT on behalf of the Federation and the provinces without providing any scope for provincial rights on collection of sales tax on services. There are innumerable clauses which, in a way, encroach upon the provincial jurisdiction so much so that the role of the provincial government has almost been minimised to the promulgation of the act only, as is the case in the existing Provincial Sales Tax Ordinances, 2000.
The draft VAT Bills further involve a very complex system of input and output adjustments in such a way that it becomes impossible to ascertain what are "goods" and what are "services". (Example Section-17 - Federal Bill, Section-6 - Provincial Bill/Ancillary or incidental supplies). Simplicity in tax structure is one of the basic principles under the cannons of taxation, as a complex tax structure will always lead to evasion of tax. 'tax on goods' and 'tax on services' are two separate domains; thus they should be treated separately.
A uniform collection mechanism is needed for all provinces for implementation of an integrated VAT in all provinces. The Finance Ministry is trying to convince the Sindh government to allow the federation to collect the VAT on services till such time the provincial government is able to develop infrastructure and enough capacity to effectively collect the levy on services.
VAT formula: The amount of the GST or VAT payable is calculated according to the following formula:
AMOUNT OF TAX PAYABLE = TAX RATE X VALUE OF SUPPLY The two ingredients of equation on the right side of equality sign are a bit different in the GST and the VAT. Value of supply in GST: Supplies for GST purposes are divisible into the following two categories in terms of valuation rules:
(1) Actual value supplies and (2) Market value supplies.
In case of Actual Value Supplies, the value is the actual amount of money excluding GST, which changes hands between seller and buyer. In the case of Market Value Supplies, the value is the amount excluding GST which would change hands between seller and buyer in a transaction in the open market. Actual Value Supplies have one standard value with some deviations around the standard. The standard value is consideration in money for the supply plus all federal duties/taxes plus all provincial duties/taxes minus GST. Deviations around this standard apply in the following situations.
(a) When the seller makes supplies on a discounted price, the discount is deducted from the standard subject to the condition that the discount is in conformity with the normal business practices.
(b) When goods are imported, the actual value is the Customs value plus Customs Duties plus Federal Excise Duties.
(c) When the value declared in an invoice is doubtful, the actual value is the value as determined by a Valuation Committee.
Market Value Supplies are valued at a consideration in money, which the goods would generally fetch in the open market. Sales Tax Act provides the following situations in which market value applies.
(a) When the consideration for a supply is in kind or is partly in kind and partly in money, the value of supply shall be the open market price of supply excluding the amount of Sales Tax chargeable thereon.
(b) When the seller and buyer are associated persons and the supply is made for no consideration or for a consideration, which is lower than the open market price, the value of supply shall be the open market price excluding Sales Tax chargeable thereon.
(c) When the supply includes a markup and its price is higher than open market price, the value of supply shall be the open market price excluding Sales Tax chargeable thereon.
VALUE OF SUPPLY IN VAT: For purposes of valuation, the VAT divides goods/services into two categories: 1. imports and 2. domestic supplies.
For imports, valuation rules are the same under the GST the and VAT except that under the VAT, cost of services treated under provincial VAT law as part of the imported goods will be added to the value determined under the GST. For domestic supplies, there are Actual Value Supplies and Market Value Supplies. Actual value of a supply is the consideration for the supply excluding an amount equal to the consideration multiplied by the tax fraction (tax fraction means the amount worked out according to the formula R/100+R where R is the value added tax rate).
THE VAT APPLIES MARKET VALUE IN THE FOLLOWING SITUATION:
(1) Supply between associated persons for no consideration or for a consideration lower than the open market price. (2) The associated buyer would not be entitled to a full input tax credit on his purchase. In such a situation, value of supply shall be the open market price reduced by an amount equal to the tax fraction of that price.
The GST on imports is paid along with the customs duties at the same time and in the same manner as the chargeable customs duties. The same rule applies under the VAT. For domestic supplies, a record of monthly purchases and sales is maintained under the GST and the amount of Sales Tax chargeable on the value of purchases and sales is calculated.
The amount calculated as chargeable on purchases is paid to the preceding seller in supply chain. The amount calculated as chargeable on sales is collected from the buyer next in supply chain. The amount of sales tax paid to the preceding seller is deducted from Sales Tax collected from the succeeding buyer and the differential amount is paid in a designated branch of National Bank every month along with return.
Under the VAT, sales tax return will be filed every month with Federal Board of Revenue in manual or, where so required, in an electronic format. The concept of tax adjustment has been given a broader scope under the VAT. Apart from deduction of Input Tax from Output Tax as in the GST, the VAT has introduced the concept of a series of increasing and decreasing adjustments to the amount of tax payable. An increasing adjustment increases the net amount payable. A decreasing adjustment decreases the net amount payable. The concept of increasing and decreasing adjustments has brought the provisions of VAT in line with the business practices.
WHO COLLECTS GST OR VAT: The GST is collected by the Federal Board of Revenue under the Sales Tax Act. The VAT will be collected by the Federal Board of Revenue under Federal VAT Act and Provincial VAT Acts.
GOODS/SERVICES SUBJECTED TO GST OR VAT: The Federal VAT Act levies VAT on the import and domestic supply of all goods except a few exemptions and zero ratings. The Federal VAT Act also levies the VAT on transportation of goods and passengers through railway, sea or air. Provincial VAT Acts levy the VAT on services. All services excluding those exempted and specified in first schedule to the Provincial VAT Acts are chargeable to value-added tax.
The services exempted from the VAT include services provided by religious institutions, educational institutions, charitable institutions, certain specified financial services and the funeral/burial services. Certain supplies relating to immovable property have also been exempted from the VAT.
These include supply of vacant land, supply of land to be used for agricultural purposes, supply of hotel accommodation for continuous period of more than 45 days and the lease/hiring of residential immovable properties.
From the above-mentioned basic facts about the GST and the VAT, it becomes apparent by now that VAT is nothing new. It is already in force in the country in the form of the GST. Introduction of the VAT is just a change of name accompanied by a broader scope. The VAT is, in fact, the GST minus aberrations from the concept of value addition. The GST incorporated these aberrations in the form of numerous exemptions and zero-ratings.
The VAT is left with only a few non-avoidable exemptions and zero ratings. Not only have the aberrations been removed from the GST to change it into VAT, the mechanism of subordinate legislation through SROs which brought about many of these deviations has also been eliminated. Under the VAT, any exemptions or zero ratings can be granted only by the statute.
DIFFERENCE BETWEEN GOODS AND SERVICES: Goods are tangible supplies (materials, commodities and articles) and services are intangible supplies. The VAT will regulate mixed supplies on the basis of their contractual character. Under the VAT, services means anything that is not goods, immovable property or money. However, auctionable claims, money, stocks and securities are not included in goods.
ZERO-RATED IN EXPORTS IN VAT REGIME: All exports of goods and services shall be zero-rated under VAT. The input tax involved therein shall be refunded expeditiously.
EXEMPTIONS UNDER VAT: The up-front VAT exemptions are available under the First Schedule each of the Federal and provincial VAT Bills. Exemptions will generally cover basic food items, charities, public sector education and health and international commitments.
The Federal Board of Revenue (FBR) has observed that exemption of the value-added tax (VAT) would be available on certain supplies relating to immovable property, including supply of vacant land, supply of land to be used for agricultural purposes, supply of hotel accommodation for continuous period of more than 45 days, and lease/hiring of residential immovable properties.
According to the FBR, the VAT has introduced the concept of a series of increasing and decreasing adjustments to the amount of tax payable from July 1, 2010. An increasing adjustment increases the net amount payable. A decreasing adjustment decreases the net amount payable. The concept of increasing and decreasing adjustments has brought the provisions of VAT in line with the business practices.
EXEMPT GOODS ARE DIFFERENT FROM ZERO-RATED GOODS: Exempt supplies are input-taxed and zero-rated supplies enjoy effective exemption because the input tax involved therein is creditable/refundable.
VAT IS PRONE TO TAX FRAUDS: Every tax is prone to fraud. The VAT, however, has edge over other consumption taxes as that the VAT fraud cannot escape detection sooner or later. Proper monitoring always reduces opportunities for tax fraud. The world experience shows that the VAT induces a strong tax culture.
MEANINGS OF THE FORENSIC AUDIT IN VAT: Forensic audit involves a specialised examination of (mostly documentary) evidence to determine the accuracy or truthfulness of any assertion for judicial or quasi-judicial determination of any fact. The VAT Rules will explain the concept of forensic audit under the VAT regime.
DISCRETIONARY POWERS OF VAT OFFICIALS: Under Section 61 read with section 90 of the Federal VAT Bill 2010, recovery process commences only after the undischarged tax liability has been adjudged or determined through adjudication observing all the principles of natural justice. Detailed recovery rules shall be included in the VAT rules. There is no concept of physical raids under the proposed VAT system. Section 75 of the Federal VAT Bill 2010 speaks of the lawful access of the authorised VAT functionaries to records and premises only for tax matters.
(The writer is the practising cost and management accountant)
Source:
Subscribe to:
Post Comments (Atom)
Thanks for sharing this information with us, VAT Return in the UK.
ReplyDelete