15.9 C
Islamabad
Friday, November 22, 2024

President upholds FTO’s decision on refund of excessive tax to buyers of Suzuki vehicles

Must read

Sultanate of Oman marks fifty-fourth glorious National Day with milestone accomplishments

Spokesman Report On the eighteenth of November of each year, the Sultanate of Oman celebrates its National Day, which is the fifty-fourth glorious National Day...

Reforms and innovations create a solid foundation for sustainable development of agriculture in New Uzbekistan

Spokesman Report Tashkent: It is difficult to imagine economic development in any country without a strong focus on agriculture. The well-being of citizens in every...

Daily The Spokesman November 22 2024 PDF

Daily The Spokesman November 22 2024 PDF

Naveed Ahmad Khan

 ISLAMABAD: Twenty-four complaints were filed against FBR Islamabad and Pak Suzuki Motor Company Limited, in terms of Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance) for charging Sales Tax @ 17% on purchase of Suzuki Cultus vehicle 998 CC in August, 2021 as against 12.5%, which was the actual rate at that time. In this way the taxpayers were constrained to pay in excess of what was actually due. FTO had recommended that collection of the sales tax in excess of being legislated in the Finance Act 2021 and delay in setting the tax refund tentamounts to maladministration. President of Pakistan upheld the decision and rejected FBR’s pleas against recommendation for refund.

Precisely, the Complainants booked Suzuki Cultus cars 998 CC, prior June 2021 at 100% advance payment of Rs.2.145 million, with tentative date of delivery after July 2021. Meanwhile, the rate of Sales Tax on such cars was revised downwards, from erstwhile 17% to 12.5% and the FED chargeable @ 2.5% was waived off altogether through the Finance Act, 2021 with effect from 01.07.2021. Further, the term “time of supply” defined in Section 2(44) of the Sales Tax Act, 1990 was also amended from “time of sale” to the “time of delivery”.

The vehicles were delivered to the Complainants, alongwith invoice of Rs.2.069 million the new rate applicable after July, 2021, and not the one, at the time of booking of the car in June 2021. However M/s Pak Suzuki Company Limited charged Sales Tax on old rates rather than invoice date “the time of sale” and refused to refund the difference, hence depriving Middle Income Complainants of due effect of the reduced tax burden.

The Complainant contacted FBR as well, on its helpline through email dated 17.08.2021, requesting for refund of the differential amount of sales tax. In response thereof, the FBR communicated through email dated 20.08.2021 that sales tax had been reduced to 12.5% on cars up to 1000cc. However, the FBR restricted its response to this e-mail and did not resolve the issue by arranging for refund of the differential amount of sales tax. Complaint to the FTO and FBR’s print of view when the Complainants made complaint to the FTO seeking that the department may be directed to refund the over charged sales tax and FED. FBR admitted, “there was lack of clarity with regard to the definition of “time of supply” at the time of booking of the vehicle in June 2021 and that at the time of its delivery in August 2021. As per the definition in June 2021, the relevant time for determining the rate of taxation was the time when payment was received by the supplier, wherein Sales Tax was @ 17% and FED @ 2.5%. However, both the definition and the applicable rates of taxes had been changed in the budget 2022-2023 and now “supply of goods, other than under hire purchase agreement, means the time at which the goods are delivered or made available to the recipient of the supply”. This despite the fact that amendment in the act was intended to favour the tax payers benefit was denied to the complaints.

After hearing the point of view of the complainant and FBR FTO thrashed out the subject as under:

“In the Finance Act, 2021, after amendments in Sales Tax Act, 1990, Section 2(44)(a) was enforced w.e.f. 01.07.2021 and it is clear that:

The time of receipt of payment by supplier becomes irrelevant, if the supply is made on or after 01.07.2021. In accordance with Section 5 of the said Act.

Thus “If there is a change in the rate of tax, a taxable supply made by a registered person shall be charged to tax at such rate as is in force at the time of supply” which in the subject case was July to August 2021. He also held that “Collection of Sales Tax in excess of being legislated in Finance Act, 2021 and delay in settling the refund, tantamounts to maladministration, in terms of Section 2(3)(i)(a) of the FTO Ordinance and made recommendation to FBR to refund the amount of Sales Tax collected in excess of 12.5% from the Complainants as per law”.

 Instead of resolving the issue and allowing refund to middle income buyers FBR took refuge under non clarity of law and filed representations to the President of Pakistan. While concluding the subject proceedings, the President of Pakistan confirmed the grant of refund by the Federal Tax Ombudsman as under: “The approach adopted by the FTO  in deciding the complaints that collection of sales tax in excess of due tax is contrary to the law and direction of refund the amount of sales tax collected in excess of 12.5 % from the complainants is  absolutely lawful and in accordance with law. He further held that representations by FBR were bereft of any merits or justifications and are liable to be rejected.

Federal Tax Ombudsman has issued instructions to all advisors to decide all similar cases according to decision by the President of Pakistan and hopes that FBR would ensure prompt compliance of the Presidents directives, as the decision is of far reaching impact by providing relief to not only the complaints but many others who may not have so far opted such relief.

- Advertisement -President upholds FTO’s decision on refund of excessive tax to buyers of Suzuki vehicles

More articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisement -President upholds FTO’s decision on refund of excessive tax to buyers of Suzuki vehicles

Latest article

Sultanate of Oman marks fifty-fourth glorious National Day with milestone accomplishments

Spokesman Report On the eighteenth of November of each year, the Sultanate of Oman celebrates its National Day, which is the fifty-fourth glorious National Day...

Reforms and innovations create a solid foundation for sustainable development of agriculture in New Uzbekistan

Spokesman Report Tashkent: It is difficult to imagine economic development in any country without a strong focus on agriculture. The well-being of citizens in every...

Daily The Spokesman November 22 2024 PDF

Daily The Spokesman November 22 2024 PDF

Chairman PRCS Highlights Locally Led Climate Adaptation at COP29 Event

Spokesman Report Baku: Chairman Pakistan Red Crescent Society (PRCS), Sardar Shahid Ahmed Laghari, addressed a distinguished forum at a special event hosted in the Pakistan...