taxation management report

8/2/2019 Taxation Management Report

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Banking Law and Practice Table of Contents

Allama Iqbal Open University Islamabad i

Contents

Chapter 1 INTRODUCTION .......................................................................................................... 31.1 overview ................................................................................................................................ 3

1.2 Pakistans Taxation System .................................................................................................. 41.3 Sales Tax ............................................................................................................................... 41.4 Liability to Sales Tax ........................................................................................................... 61.5 REGISTRATION ................................................................................................................. 61.6 RETURNS ............................................................................................................................ 71.7 MAINTENANCE OF RECORDS ....................................................................................... 71.8 REFUNDS OF SALES TAX ............................................................................................... 71.9 ADDITIONAL TAX ............................................................................................................ 71.10 ARREARS ......................................................................................................................... 81.11 Sales Tax refund procedure and rules ................................................................................. 8

1.11.1 Short title, application and commencement. ............................................................... 81.11.2 Definitions.................................................................................................................... 81.11.3 Establishment of refund division. ................................................................................ 91.11.4 Filing of refund claim .................................................................................................. 91.11.5 Scrutiny of refund claim ............................................................................................ 101.11.6 Sanction and payment of refund claim ...................................................................... 101.11.7 Extent of payment of refund claim ............................................................................ 111.11.8 Action on inadmissible refunds ................................................................................. 131.11.9 9. Supportive documents ............................................................................................ 131.11.10 Refund damn of an investor ..................................................................................... 151.11.11 Refund under section 66 .......................................................................................... 15


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Banking Law and Practice Table of Contents

Allama Iqbal Open University Islamabad ii

1.11.12 Profiling of exporter for the purpose of refund ........................................................ 151.11.13 Miscellaneous .......................................................................................................... 181.11.14 Saving ...................................................................................................................... 18

Chapter 2 SALES TAX REFUND PROCEDURE FOR MOTOR VEHICLE DEAL ................. 192.1 General Sales Tax Refund Procedure in state of Michigan ................................................ 192.2 Sales Tax Refund Procedure for Manufacturer Buy-Back Agreements Under the "Lemon

Law" .......................................................................................................................................... 20Chapter 3 DATA COLLECTION ................................................................................................. 22

3.1 Data collection method ....................................................................................................... 22Chapter 4 SWOT ANALYSIS ...................................................................................................... 23

4.1 Recommendations ............................................................................................................... 23Chapter 5 CONCLUSION ............................................................................................................ 26Chapter 6 References .................................................................................................................... 28


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Allama Iqbal Open University Islamabad 3

Chapter 1 INTRODUCTION

1.1overview

The constitution empowers the Federal Government to collect taxes on income other than

agricultural income, taxes on capital value, customs, excise duties and sales taxes. The Central

Board of Revenue (CBR) and its subordinate departments administer the tax system. Each of the

three principal taxes has a different history and different set of issues. For a large number of

income tax payers the core of the business process is pre-audit and assessment by a tax official.

This process gives considerable discretion to tax officials, with potential for abuse. Moreover,

this process is also not tenable as the number of taxpayers increase. The report is focused on a

total overhaul of the process and organization of income tax. Sales tax is recent and its processand organization is adjusted to the needs of an expanding tax base. These are based on self-

assessment and selective audit. Similarly, in customs the accent is on accelerating and

broadening the changes begun in recent years. Before long, central excise will be subsumed in

sales tax.

During the nineties, despite many changes in the tax regime and introduction of withholding and

presumptive taxes, Federal Government tax to GDP ratio has varied narrowly around eleven

percent. The tax base has grown but still remains narrow and skewed. The number of income tax

filers is around one million. At less than one per cent of the population, it is a lower proportion

than in many developing countries.

Pakistans fiscal crisis is deep and cannot be easily resolved. Taxes are insufficient for debt

service and defense. If the tax to GDP ratio does not increase significantly, Pakistan cannot be

governed effectively, essential public services cannot be delivered and high inflation is

inevitable.

The Reforms to improve our taxation system need to be focused on human resources, business

process and organization, corruption and information management. An effective revenue

organization must be comprised of trained and dedicated persons with integrity, transparent

processes, a comprehensive information system, and taxpayer education. The paper recommends


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self-assessment, selective audit, and expansion and upgrading of information management,

emphasizes reduction of discretion and direct contact between tax collector and taxpayer.

1.2Pakistans taxation system

Federal taxes in Pakistan like most of the taxation systems in the world are classified into two

broad categories, viz., direct and indirect taxes. A broad description regarding the nature of

administration of these taxes is explained below:

Direct Taxes

Personal Tax

Tax on Companies

Inter-Corporate Dividend Tax Treatment of Dividend Income

Unilateral Relief

Agreement for avoidance of double taxation

Customs

Central Excise

Sales Tax

Here in this report sales tax has been explained in details.

1.3sales tax

Sales Taxwas a provincial subject at the time of partition. It was being administered in theprovinces of Punjab & Sindh as provincial levy.Sales taxwas declared a federal subject in 1948through the enactment of GeneralSales TaxAct, 1948 and in 1952, this levy was transferredpermanently to the Central Government.Sales taxwas levied at the standard rate of 6 pies perrupee at every stage whenever a sale was effected. The tradingcommunity protested against thissystem, and this resulted in the enactment ofSales TaxAct 1951.

A system of licensed manufacturers & wholesalers was instituted whereby they were allowed to

purchase goods free ofsales taxfrom each other and pay tax on sales to unlicensed traders.


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Imports were chargeable toSales Taxbut the licensed manufacturers & wholesalers wereallowed to import goods without the payment of Sales Tax. Later onSales Taxbecamechargeable on locally produced & imported goods at the time of their sales & import,

respectively. Thesales tax, was collected under the Finance Ordinance, 1956, on goods whichwere chargeable to Central Excise Duty, as if it were a duty of Central Excise. In April 1981, by

virtue of an amendment in theSales Taxact, 1951, the collection ofSales Taxon non-excisablegoods was also entrusted to the Central Excise Department.

In the late eighties the government decided to replaceSales Taxwith the Value Added Tax inthe country as a part of its structural adjustment program which was undertaken to correct

anomalies & distortions both in our tax & non-tax regimes. Accordingly new enactment

titledSales TaxAct 1990 replacedSales TaxAct 1951 with effect from 1-11-1990.Sales Tax is levied at various stages of economic activity at the rate of 15 per cent on:

All goods imported into Pakistan, payable by the importers

All supplies made in Pakistan by a registered person in the course of furtherance of any

business carried on by him

There is an in-built system of input tax adjustment and a registered person can make adjustment

of tax paid at earlier stages against

The tax payable by him on his supplies. Thus the tax paid at any stage does not exceed 15% of

the total sales price of the supplies

The sale tax is evolving into Pakistans key revenue earner is beyond any doubt. What is even

more impressive is the growth of sales tax revenue during the latter half of the nineties. During

this period, real sales tax growth was 2.9% per annum faster than the growth of direct taxes, a

true testimony to its buoyancy. Although the performance of the sales tax has been impressive, it

still remains short of the potential achieved by high performing developing countries, where its


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contribution to the GDP ranges between 4% and 9%4. The Proposed Reforms shall be driven by

four broad objectives:

To increase the long-term revenue generation capacity of the administration

To lower compliance costs of taxpayers through process reform

To reduce the misuse of discretion by reducing the points of contact between the

taxpayers and the tax officials.

To create an impartial and judicious adjudication system, which gives relief when faced

with excesses

1.4 liability to sales tax

Following sectors are required to get registration for sales tax and charge sales tax on theirsupplies/ services:

Manufacturing

Import

Services

Distribution

Wholesale

Retail stage.

Previously it was being charged at the manufacturing & import stage, and its scope has been

extended now to remaining sectors.

Sales Tax is chargeable on all locally produced and imported goods except computer software,

poultry feeds, medicines and unprocessed agricultural produce of Pakistan and other goods

specified in Sixth Schedule to The Sales Tax Act, 1990.

1.5 reGistration

Every person in sectors mentioned above, who makes a taxable supply in Pakistan is required to

be registered under the Sales Tax Act, 1990. However, manufacturers having taxable turnover

below five million rupees and also utility bill below Rs. Seven lac during the last twelve months

are exempted from registration and payment of sales tax. Similar exemption is also available to


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retailers having total turnover below Rs. five million in the last twelve months.The rate for sales

tax is 16% of value of supplies. However, there are some items which are chargeable to sales tax

at 18.5% or 21% of value of supplies (see SRO 644(I)/2007 as amended by SRO 537(I)/2008

dated 11th June 2008)The Registration Form(s) are submitted to the Central Registration Office,

FBR, or Sales Tax Collectorates/ RTOs for the allotment of a Registration Number by the

persons liable to be registered under the Sales Tax Act. The taxpayer is then issued a Certificate

of Registration.

1.6 retUrns

As per law each registered person must file a return by the specified date, regarding the sales

made. All registered persons are required to file returns electronically.There are some sectors

which are required to file returns on quarterly (tri-monthly) basis while some may have to file

monthly.

1.7 maintenanCe oF reCorDs

All registered persons are required to maintain records at their business premises of the goods

purchased and supplied made by them. All the records are required to be kept for a specified

period.

1.8 reFUnDs oF sales tax

In cases where the Input Tax exceeds the Output Tax due from the registered person in respect

of a tax period because of exports or other zero-rated supplies, the excess amount of input can be

refunded after the procedure specified by the federal board of revenue is followed.

1.9 aDDitional tax

If a sales tax registered person does not pay the tax within the specified time or claims a taxcredit or refund which is not admissible to him, or incorrectly applies the rate of zero percent to

the supplies made by him, he has to pay the additional tax at rate of One and half percent of tax

due or the part thereof per moth.However, in case of tax fraud, the rate of may be increased

more.


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1.10 arrears

The work regarding Arrears gets initiated in the following cases:

Late or no submission of the Returns

Amount paid is less than the tax amount payable

A demand raised after an audit/ scrutiny is upheld after adjudication

1.11sales taxreFUnD ProCeDUre anD rUles

1.11.1 short title,aPPliCation anD CommenCement.

(1) These rules may be called Sales lax Refund Rules, 2000.

(2) These shall apply to

i. Registered manufacturer-cum-exporters and commercial exporters who desire to zero rate

all, or part, of their supplies under section 4 of the Sales Tax Act, 1990.

ii. Registered persons who claim refund of such excess amount of input tax as is not fully

adjusted against the tax payable during a period of one year following the tax period in

which the credit first arose'.

iii. Investors claiming refund under the .second proviso to subsection (1) of section 10 of the

Sales Tax Act, 1990.

iv. Registered persons claiming refund of tax under section 66 of the Sales Tax Act, 1990

(3) These shall come into force at once.

1.11.2DeFinitions

(1) In these Rules, unless the subject or context otherwise requires,

i. Act means the Sales Tax Act, 1990.

ii. Claimant means a registered person being a manufacturer-cumexporter or a

commercial exporter, who files a sales tax return claiming refund under these rules and

includes an investor or any other registered person entitled to claim refund under the Act.


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iii. Commercial Exporter means a person who having no manufacturing facility of his own,

opts for voluntary registration under section 18 of the Act for exclusively making

zero-rated supplies of same state goods and claims refund of input tax thereon.

iv. Officer-in-charge means deputy collector of sales tax or any officer of sales tax of

senior rank who holds full or partial charge of the Refund Division.

v. Investor means a person entitled to claim refund of sales lax on plant and machinery

under second proviso to sub-section (1) of section 10 of the Act.

vi. same-state-goods means goods produced by a registered manufacturer-cum-exporter

for export or purchased by a commercial exporter against tax invoice for export as such

and includes the goods which have been got manufactured or processed from one or more

than one registered vendor against tax invoice against processing charges or as the case

may be, manufacturing or conversion charges.

vii. Supportive documents means documents prescribed in rule 9347 whether on electronic

media or otherwise.

viii. Processing Officer means auditor or deputy superintendent deputed by the officer-in-

charge to process and scrutinize a refund claim.

(2) All other expressions used but not defined in these rules shall have the same meanings as are

assigned to them in the Act.

1.11.3establishment oF reFUnD Division.

(1) There shall be established a Refund Division in each Collectorate of Sales Tax to receive,

process and settle the refund claims filed under the Act.

(2) A deputy collector or such senior officer as may be nominated by the Collector of Sales Tax,

shall be head of the Refund Division :Provided that Collector of Sales Tax may distribute work

of the Refund Division amongst more than one deputy collectors in. such manner as hemay deem

fit.

1.11.4FilinG oF reFUnD Claim

(1) Monthly sales tax return filed by a claimant shall be treated as refund claim once all the

supportive documents have been received and shall be processed accordingly.


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(2) The claimant shall forward to the officer-in-charge a legible photocopy of the bank-receipted

return, referred to in sub-rule (1), duly accompanied by the requisite supportive documents for

processing and settling the refund claim.

Provided that in case of a refund claim where such supportive documents have not been so

received, the officer-in-charge may require the claimant through telephone, facsimile or in

writing to furnish the same within such time as may be specified by him.

1.11.5sCrUtiny oF reFUnD Claim

(1) On receipt of a refund claim the processing officer shall carry out necessary examination and

scrutiny in order to ascertain the bona fides or otherwise of the refund claim under the law. He

shall check the accuracy of declarations and calculations, etc., on the sales tax return involving

the amount of refund claimed and satisfy himself that the amount so claimed as refund is

properly supported by the documents as prescribed under these rules to prove the genuineness

and admissibility of the refundable amount.

(2) After having satisfied himself about the genuineness and admissibility of the refund claim,

the processing officer shall submit a written comprehensive refund examination report within

seven days of receipt of the supportive documents to the concerned senior auditor or

superintendent who shall give his conclusive recommendations thereon and pass it on to the

officer-in-charge within three days of receipt of the case from the processing officer. The officer-

in-charge shall satisfy himself about the genuineness and admissibility of the claim on the basis

of the said report, recommendations and supportive documents.

(3) The officer-incharge may, under circumstances of exceptional nature and for reasons to be

recorded in writing, make or cause to be made further scrutiny or verification including

examination of relevant business records and stock taking for determining the genuineness and

admissibility of a refund claim.

1.11.6sanCtion anD Payment oF reFUnD Claim

(1) If on the basis of supportive documents, refund examination report, recommendations,


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scrutiny or verification report as the case may be, the officer-incharge is fully satisfied about the

genuineness and admissibility of the claim, he shall, subject to the provisions of rule 7 sanction

the claim and send the original copy of the sanction order to the treasury officer for issuance of

cheque to the claimant:

Provided that if the claimant is liable to pay any duty or tax, additional duty or additional tax or

penalty under any law administered by the Board, payment of the refundable amount shall be

made only after adjustment of unpaid outstanding amount of duty or tax or as the case may be,

additional duty or additional tax and penalty.

(2) The treasury officer, before issuing cheque 10 the claimant, shall personally ensure that

cheque of only such amount is issued to the claimant as is specified and sanctioned in the

sanction order:

Provided that refund cheque shall be issued to the claimant only through courier service, or

through urgent mail service, with due acknowledgement:

Provided further that the treasury officer shall maintain all the records and registers, etc

prescribed under the treasury or financial laws for the purpose of keeping account of payment of

Federal revenue refunds.

(3) The duplicate copy of the sanction order shall be retained the Refund Division in relevant

file.

1.11.7extent oF Payment oF reFUnD Claim

(1) Refund to a commercial exporter shall be sanctioned and paid only to the extent of input tax

involved in the goods actually exported and within one month of the submission of supportive

documents.

(2) In case of manufacturer-cum-exporter, refund on zero-rated supplies shall be sanctioned and

paid within one month of furnishing of the supportive documents, and refund, if any, on

domestic supplies or, as the case may be, input stocks in balance shall be sanctioned and paid in

the following manner namely :


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(i) Fifty percent of such claim shall be sanctioned and paid within one month of filing of

supportive documents.

(ii) The remaining fifty per cent shall be sanctioned and paid after:

(a) verification of deposit of tax paid on goods in respect of which refund of input tax has been

claimed : and

(b) if not already done in terms of sub-rule (3) of rule 5, scrutiny of relevant records or accounts

and verification of stocks of the claimant: Provided that in case action under this clause is not

completed within sixty days of the receipt of supportive documents, the remaining fifty per cent

refund shall be paid if otherwise admissible on the basis of supportive documents and action

under the said clause shall be completed thereafter :Provided further that manufacturer-cum-

exporters who zero-rate their supplies and also make domestic supplies duly reflected in their

monthly return, may, ipso facto, deduct the amount of tax, payable on their domestic supplies

from the amount of refund due on their zero-rated supplies and claim refund only for the balance

amount, if any.

(3) In order to calculate the refund components of zero-rating and local supplies, the following

formula shall be applied in case of manufacturer- cum-exporters, namely :

(i) Zero-rated component .. .. .. .. E x R D+E

(il) Local sup plies component .. .. .. DxR/D+E

E denotes value of exports ; D denotes value of domestic supplies ; and R denotes the amount of

refund claimed ;

Illustration

Suppose E=Rs. 600

D=Rs.400

R-Rs.100

then zero rated component is=ExR =600 x 100=Rs. 60


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D+E 400+600' and local supplies component is D xR/ DTE = 400 x 100/600+400 =Rs. 40

(4) The time limit given in this rule shall not apply to cases subjected to further scrutiny or

verification under sub-rule (3) of rule 5: Provided that the officer-in-charge shall inform the

claimant about the subjection of his refund claim to scrutiny or verification as the case may be.

(5) The refund claims of registered manufacturers, importers, wholesalers or retailers shall be

sanctioned and paid in the manner prescribed in clause (i) and clause (ii) of sub-rule (2) read

with the first proviso to sub-section (1) of section 10 of the Act.

1.11.8aCtion on inaDmissible reFUnDs

(1) In case any refund claim or part thereof is found not genuine and not admissible under the

law, a notice shall be served on the claimant requiring him to show cause in writing, within

fourteen days, as to why the claim or as the case may be, part thereof should not be rejected and

as to why the claimant should not be proceeded against under the relevant pro-visions of law :

Provided that in cases where the amount of refund liable to rejection does not exceed five million

rupee, the officer-in-charge shall bring to the knowledge of additional Collector having

jurisdiction in writing on the relevant file the reasons for issuing the notice: Provided further that

the cases involving amounts of refund liable to rejection exceeding five million rupees shall be

brought to the knowledge of the Collector before issuance of notice.

(2) After affording a reasonable opportunity of hearing to the claimant, the officer-in-charge

shall issue the show cause notice to such claimant and pass an adjudication order specifying

reasons therein: Provided that in case the claimant does not respond to the show cause notice or

does not appear himself, or through his authorized representative, to defend his position on three

dates of hearing, the officer-in-charge may decide the case ex parte on the basis of fads and

evidence available onrecord.

1.11.99. sUPPortive DoCUments

(1) A manufacturer-cum-exporter or a commercial exporter shall submit the following

documents in support of his refund claims, namely :


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Input tax invoices and/or as the case may be, bills ofentry

Zero-rated invoices in case of export

Output tax invoices in case of domestic supplies

Tax invoices of- intermediary processes as and if applicable

Bill of exports (quadruplicate copy) indicating Mate Receipt number and date or as the

case may be. Airway bill number or railway receipt number and date or postal receipt

number and dated

Bill of lading, and airway bill or as the case may be, railway receipt and postal receipt

indicating transportation of goods out of Pakistan

The statement showing the position of stocks of major inputs and outputs carried over

from the previous tax period, additions in such stocks, stocks consumed or supplied

during such period and stocks in balance, if any.

(2) An investor shall furnish the following documents, namely :--

Bills of entry 01 lax invoices indicating import or purchase of plant and machinery, its

components and spare-parts

Plot allotment order or ownership documents of the premises where such plant and

machinery has been installed; and

Rent deeds in case the plant and machinery has been installed in the rented premises.

(3) In case of refund claimed under section 66, the following documents shall be submitted,

namely :

Bill of entry or input tax invoices and tax invoices of intermediary processes (if

applicable) as the case may be

Output tax invoices in case goods have been supplied domestically

Zero-rated invoices in case goods have been exported

Export documents mentioned in sub-rule (1)

Statement of stocks if needed in support of the claim

(4) The claimant shall submit the original supportive documents in original along with one set of

photo copies and the original supportive documents shall be returned to the claimant after

tallying with the photo copies by the officer-in-charge or any officer authorized by the Collector


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in this behalf, who will endorse his proper verification on each photo copy: Provided that the

original quadruplicate copy of the bill of export shall be returned to the claimant after recording

the following endorsement under the full signatures and official stamp of the said officer,

namely:- Zero-rating has been claimed on this bill of export.

(5) The officer-in-charge may, for reasons to be recorded in writing and after taking permission

from the Collector, call for any other document or information not specified in sub-rules (1), (2),

(3) and (4) in support of the claim or for the purpose of satisfying himself about the gaminess

and admissibility of the claim.

1.11.10reFUnD Damn oF an investor

(1) An investor, in addition to the documents specified in sub-rule (2) of rule 9, shall submit an

undertaking on a non-judicial stamped paper that he shall commence production and supply of

taxable goods within a period of two years of the receipt of refund.

(2) If the investor fails to commence production and supply of taxable goods within the period

specified in sub-rule (1) or within such further period as may be allowed by the Collector, the

amount of sales tax refunded to him shall be recovered from him alongwith additional tax and

penalty as provided in the Act.

1.11.11reFUnD UnDer seCtion 66

A registered person who claims refund under section 66, in addition to the documents specified

in sub-rule (3) of rule 9, shall file an application of refund indicating

His name, his address and registration number

Date of application

Amount of sales tax refund claimed

Reasons for seeking refund

1.11.12ProFilinG oF exPorter For the PUrPose oF reFUnD

(1) Each Collectorate shall develop profile of exporters categorizing them into Gold , Silver

or Others' on the basis of the criteria specified in this rule.


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Explanation. For the purpose of this rule, exporter means manufacturer-cum-exporter and

commercial exporter.

(2) The exporters fulfilling the following conditions shall be rated as category Gold , namely

For limited companies :

a. Certified Books of Account for the last eighteen months

b. Either certified accounts show amount of exports, domestic sales or a separate statement

by the concerned Chartered Accountant firm regarding amounts of export or domestic

sales

c. Bank or bank's certificate for the last three years' export performance

d. Six months accounts having been audited by Sales Tax department during last twelve

months indicating at least ninety per cent claim acceptance level in terms of value

e. Payment by crossed cheque encashable in any of the bank branches issuing the certificate

in clause (c)

Other than limited companies

a. Export registration of throe years or more

b. Bank certificate-confirming availability of loan credit limit equal to four times the value

of an individual claim to be sanctioned

c. Bank certificate for last three years' export performance;

d. Six months accounts having been audited by Sales Tax department during the last twelve

months indicating at least ninetyper cent claim acceptance level in termsof value

e. Refund cheque shall be issued as encashable through bank branch issuing the certificate

in clause (c)

(3) The exporters fulfilling the following conditions shall be classified as category Silver ,

namely :

a) New enterprises and new exporters having export registration of less than three years but

with at least one year's valid registration

b) Bank certificate for export performance since the date of export registration

c) Verification by the Collectorate (through fax. E-mail, post, courier or in person) of bank

certificate mentioned in clause (b) within the period of fifteen days


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d) Six months accounts having been audited by Sales Tax department during the last twelve

months indicating at least ninety per cent claim acceptance levied by value

e) Bank certificate for loan limit indicating credit limit being not less than four times the

amount of claim, which shall be verified, by the Collectorate, from the respective bank

branch within the said period of fifteen cays.

(4) The following class of exporters shall be treated as category Other. namely :

a) Persons not falling under categories Gold and Silver

b) Persons disqualified in category Gold or category Silver shall be down-graded to

category tfc Other directly if their claim acceptance levels under audit are less than

ninety per cent or forged or untrue documents an: submitted :

c) Once an exporter is down-graded, he shall not be up-graded for at least eighteen months

and will only be considered by the Collector for upgrading if he is satisfied that during

the eighteen months down grading period. The exporter has met the requirements of

respective category for continuous period of eighteen months

d) Persons involved m a prosecution case of tax fraud under the Act or any other tax shall be

rated in category Other even if they fulfil rating criteria for Gold Silver

(5) The exporters falling under the category Gold shall be allowed refund within seventy-two

working hours from the date of receipt of supportive documents it the refund is genuine and

admissible on the basis of such documents.

(6) Exporters falling under the category hi Silver shall be allowed refund within fifteen days of

receipt of supportive documents if the refund is genuine and admissible on the basis of such

documents.

(7) The refund claims of exporters falling under category Other shall be sanctioned after

through scrutiny and verification and refund shall be allowed within the time-limit specified insub-section (2) of section 10 ofthe Act.

(8) If person in a lower category 'improves whether on the basis of audit or or the basis of other

prescribed criteria his category arting shall be upgraded accordingly, on the basis of a review by

the Collector on six monthly basis on the recommendation& of a Review Committee comprising


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representatives of the Export Promotion Bureau Collectorate of Sales Tax, Chamber of

Commerce and Industry and exporter's respectiveassociation, if any, of which the exporter is a

member.

1.11.13misCellaneoUs

(1) All such refund claims that have not been subjected to presanction scrutiny or verifications in

terms of sub-rule (3) of rule 5 shall invariably be audited subsequent to payment by the Audit

Division.

(2) In cases where it has been found during post-payment audit that refund has been paid in

excess of the claimant's entitlement excess paid amount shall be recovered alongwith additional

tax and penalty as provided under the Act.

(3) The refund claims of a registered person found indulged in tax fraud shall not be finalized

before thorough pre-audit.

(4) The refund claims shall be process d and finalized on first comefirst served ' basis

1.11.14savinG

The genuine and admissible refund claims sanctioned and paid in pursuance of Board's

instructions contained is its letter C. No. 3 (39) STP/96, dated 21-10-1998 shall be deemed to

have been validly sanctioned and under these rules.


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A dealer who claims a sales tax refund under this procedure must retain all documentation

regarding the credit for audit purposes, including proof that a full exchange, refund, or credit was

given to the purchaser.

2.2sales tax reFUnD ProCeDUre For manUFaCtUrer

bUy-baCk aGreements UnDer the "lemon

law"

Manufacturers who file Michigan sales, use and withholding tax returns should refund to the

consumer, and follow the general refund procedures described in this bulletin. Public Act 127

of 1994 requires that the manufacturer retain the following documentation for "lemon law"

refunds including an allowable deduction for use:

1. An affidavit in the form of the sample appearing at the end of this bulletin; and

2. A copy of the consumer's written notification of the defect or condition to the

manufacturer as required by the lemon law, MCL 257.251; MSA 9.1951.

For transactions involving an out-of-state manufacturer who does not file Michigan sales, use,

and withholding tax returns either the consumer or the manufacturer may request a refund of

Michigan tax paid on the returned vehicle. To request a refund, the manufacturer or consumer

must submit all of the following documents:

(1)Copy of title application (forms RD-108 or TR-11C) of original purchaser showing

validations as proof of Michigan tax paid.

(2)Copy of the manufacturer's buy-back agreement or arbitration decision stating the buy-

back dollar figure given to the original purchaser.

(3)Consumer's social security number, if the refund will be issued directly to the consumer.

Note: A dealer is not a principal in "lemon law" buybacks. Therefore, dealers should not refund

to consumers nor claim credits for "lemon law" buybacks on their sales, use, and withholding tax

returns.


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The manfacturer must retain an affidavit similar to the one on the following page to document

each "lemon law" refund.

AFFIDAVIT TO BE COMPLETED WHEN CREDIT IS GRANTED OR REFUNDED FOR A

RETURNED MOTOR VEHICLE UNDER ACT 87 OF THE PUBLIC ACTS OF 1986

The undersigned hereby certifies that they have accepted return of the following new motor vehicle,

_______________________, ________________________ from ________________________

Year, Make & Model V.I.N. Number Consumer's Name

and has replaced the motor vehicle or issued a refund on Date ______________ to the above

named consumer in accordance with the provisions of Public Act 87 of 1986.

Full Original Purchase Price _______________

Less: Allowance for Consumer's Use _______________

Less: Appraised Damage Not Attributable to

Normal Use or to the Defect or Condition _______________

===============

____________________________________

Manufacturer

____________________________________ _______________

Authorized Representative, Title Date


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Chapter 3 DATA COLLECTION

3.1Data ColleCtion methoD

Most of the information is collected from secondary sources. Information required in writing this

report is already available on internet and I have extracted it from different websites. I have also

collected data from sources such as articles, journals, magazines, books and periodicals to obtain

historical and other types of information. Some information is also collected from the primary

source. I have taken lot of information about the company from its website.


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Chapter 4 SWOT ANALYSIS

4.1reCommenDations

Create taxpayer assistance units as a point of contact between the department and the

taxpayers. Its functions should include: receipt of registration, de-registration and refund

applications, issuance of registration certificates, notices and orders of the Sales Tax Act

and any other acknowledgement for the tax payers, administer the voluntary disclosure

process, provide tax payer education and training, and register tax payer complaints.

Create an exception based process of refunds using information on an exporters

compliance history to ensure the access of compliant exporter to a fast track contingent

on future compliance performance backed by a strong audit. As a medium term measure,

introduce input tax verification scheme.

Develop support systems for audit, standardise audit work, develop well-defined work

programmes and check lists for different types of audits. A risk-assessment instrument

may be developed to systemise the steps to be taken during an audit in each risk area.

For large corporate taxpayers, develop system audits of their record keeping and

accounting systems to evaluate its comprehensiveness, control procedures and transactionflow systems.

Revenue targets should be based on gross receipts.

Upgrade the auditors by recruitment in Executive Group 1 and enact reward rules for

auditors.

Train auditors, both in-house and outsourcing with professional firms on regular bases.

Discontinue the multiplicity of audit. A taxpayer should not be audited more than once a

year.

Retain outsourcing of audit keeping in view the revamping and transition cost of adopting

a modernised audit system. Establish rigorous pre-qualification criteria as a key

improvement in the system.


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As a part of the adjudication process reform, induce greater independence in adjudication,

develop a sustained specialisation in the adjudication function, and improve the human capital

and physical infrastructure for adjudication.

To reduce pressure on adjudication, short filing, late filing, and non filing should send directly to

recovery.

Introduce the concept of advance rulings by the CBR.

Institute voluntary disclosure to encourage voluntary settlements by the taxpayer.

Reform the recovery process to streamline the multifarious enforcement functions, efficient

mechanism of charging of additional taxes, and provide a 30 days grace period prior to which

recovery will not be initiated.

Avoid introducing tax amnesty schemes.

Re-design the return form to capture vital information on arrears and adjudication.

Create a networked database on adjudication, arrears and recoveries to provide essential

information for control purposes.

Develop a procedure for return rectification in the event unwarranted errors are committed.

Develop a semi-automated pilot programme for filing of returns and tax payments initially for

large tax payers, which may be extended to other tax payers at a later stage.

Implement NTN as a common tax number on a priority basis to harmonise documentary

requirements and lower the manpower usage in registration across taxes.

Reduce the existing exemption thresholds for registration.

To facilitate the taxpayer stay of recovery should be allowed on submission of bank guarantee.

Make a provision in the law, which allows for a transfer of jurisdiction in the event a taxpayer

shifts location.

Make the compulsory registration process more systematic. Create a centralised national

database, which captures information from sales tax, income tax and customs, utility bills, PTCL,

SECP, industrial associations, and state enterprises. The selection of cases to be registered should

be automated to reduce discretion. A separate register should be maintained for the same.

Undertake measures to lower the extent of non-filing. Remove the contaminated portion of theregister, and maintain a separate register for effective monitoring.

Remove the physical infrastructure constraints with great urgency. These include building space,

basic amenities and record rooms.

Improve the task of taxpayer education by publishing booklets and brochures explaining VAT

principles, procedures and practices, and methods of record keeping. The information sharing


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Taxation Management


with taxpayers regarding the audit work programme would help. Arrange regular seminars with

traders and industry associations. Keep CBR web site up to date with user friendly material.

Reinforce business advisory committees at the Collectorates level.


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Taxation Management


Chapter 5 CONCLUSION

A sales tax return is a form used by businesses to report sales tax collected and paid to the sales

tax authority. The total amount owed to the government agency is calculated and submitted with

the sales tax return. The calculations used differ according to the rules of the taxation agency.

A sales tax is a flat percentage charged at the point of purchase. The rate charged is determined

by the government responsible for that area. There are a wide range of government levels that

can implement sales taxes, including city, state, or federal agencies.

When a sales tax is implemented, the government agency responsible for the administration of

the state tax creates the rules about what types of items are taxable. Point of sale systems are

programmed to automatically calculate the tax on the appropriate items. The total value of thesales tax collected is entered on the sales tax return form.

The vast majority of agencies that collect sales tax have rules for businesses. There are two

options: credit for sales tax paid on the purchase of items or a sales tax exemption. The sales tax

credit allows businesses to deduct the sales tax that they pay on supplies.

On the sales tax return, there are three values: debit, credit and difference. The amount of the

debit is the amount of sales tax the company paid for that period. The credit amount is the value

of sales tax obtained from customers.

The difference between the amount collected and the amount paid is the value that is remitted to

the government agency. A sales tax exemption is a certificate issued to businesses that allows

them to avoid paying the sales tax at the point of sale. This certificate must be presented at every

purchase.

A sales tax return is only required from registered businesses in certain industries. The exact

rules vary by location, but typically apply to firms that sell directly to an end consumer.Distributors are typically exempt, as they do not product anything new.

In order to submit a sales tax return, the government agency will provide the business with a

sales tax or business number and forms with the business number preprinted. On the sales tax
http://www.wisegeek.com/what-is-a-tax-return.htmhttp://www.wisegeek.com/what-is-a-point-of-purchase.htmhttp://www.wisegeek.com/what-is-the-point-of-sale.htmhttp://www.wisegeek.com/what-is-a-tax-exemption.htmhttp://www.wisegeek.com/what-is-a-tax-exemption.htmhttp://www.wisegeek.com/what-is-the-point-of-sale.htmhttp://www.wisegeek.com/what-is-a-point-of-purchase.htmhttp://www.wisegeek.com/what-is-a-tax-return.htm


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Taxation Management


return remittance form, the reporting period is provided. Calculate the total amount of sales tax

collected during this period, using the information from the point of sale system.

Confirm the value of eligible sales tax paid during the period from the business accounting

system. Enter this value on the sales tax return form. If the amount received is greater than the

amount paid, issue a check for the different.


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Chapter 6 References

Pakistans Taxation System: A Critical Appraisal Journal of Managerial Sciences;

Volume II, Number 1

GOVERNMENT OF PAKISTAN, CENTRAL BOARD OF REVENUENOTIFICATION;

PART 11Statutory Notifications (S. R. 0.) SALES TAX; Islamabad, the 20th

June , 2000

Sales Tax Special Procedures Rules, 2007; Mr. Hamid Hussain Joint Director, Sales Tax

& Federal Excise Wing Federal Board of Revenue

http://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/how_to_apply_for_a_refund_of_sal

es_and_use_tax.htm

http://www.wisegeek.com/what-is-a-sales-tax-return.htm

http://www.ct.gov/drs/cwp/view.asp?a=1511&q=267332

http://www.pakcustoms.org/sales_tax_guide/index.htm
http://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/how_to_apply_for_a_refund_of_sales_and_use_tax.htmhttp://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/how_to_apply_for_a_refund_of_sales_and_use_tax.htmhttp://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/how_to_apply_for_a_refund_of_sales_and_use_tax.htmhttp://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/how_to_apply_for_a_refund_of_sales_and_use_tax.htmhttp://www.wisegeek.com/what-is-a-sales-tax-return.htmhttp://www.ct.gov/drs/cwp/view.asp?a=1511&q=267332http://www.pakcustoms.org/sales_tax_guide/index.htmhttp://www.pakcustoms.org/sales_tax_guide/index.htmhttp://www.ct.gov/drs/cwp/view.asp?a=1511&q=267332http://www.wisegeek.com/what-is-a-sales-tax-return.htmhttp://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/how_to_apply_for_a_refund_of_sales_and_use_tax.htmhttp://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/how_to_apply_for_a_refund_of_sales_and_use_tax.htm

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