Sales Tax Registration May Be Decentralised

Saturday, August 16, 2008 at 1:19 pm

ISLAMABAD :The Federal Board of Revenue (FBR) may delegate powers to the collectors of sales tax to issue sales tax registration numbers (STRNs) from the regional registration offices, abolishing the existing mechanism of Centralised Registration Office (CRO).

Sources told Business Recorder on Friday that the FBR has directed Member, Sales Tax, to explore possibility of delegating powers to the field formations for issuance of sales tax registration numbers to the new taxpayers. In this connection, the Sales Tax Wing would examine the matter for submission of a report to the FBR Chairman Ahmed Waqar.

In case tax authorities agreed with the proposal, the new taxpayers might get rid off this cumbersome process of registration in future. Interestingly, time consuming sales tax registration process is a clear violation of Tax Administration Reform Project, but nobody is here to take the responsibility for delaying tactics adopted by the CRO.

Details showed that new applicants are facing serious problems in obtaining sales tax registration number from CRO, FBR House, Islamabad. The applications of new registrations were rejected on minor objections raised by CRO.

The legal aspect of each application for new registration is thoroughly examined, which only results in delayed registration. In many cases, the CRO rejected the applications on small legal grounds. For example, there is no legal bar on a firm to become partner of another firm. Secondly, a limited company can also become a partner of another firm. However, sales tax registration applications have been rejected on the grounds that the partners of one firm could not become partner with a new firm.

Such kinds of objections create serious problems for taxpayers, who intend to operate under the documented regime. This could be further clarified from an example that the registration applications of those Associations of Persons (AOPs) have not been accepted where partners of one AOP wanted to get registered with the new firm.

Experts said that it is an uphill task to obtain sales tax registration number as a “manufacturer” due to time consuming verification process of the CRO. The registration office has directed the new applicants to show the manufacturing premises as well as the complete process of manufacturing. Resultantly, the sales tax registration for manufacturers category is difficult as the manufacturing process itself.

Similarly, physical verifications of the godowns have been done by the new applicants, who wanted sales tax registration within the category of wholesalers and distributors. If these distributors/wholesalers do not have their own godowns, they have to hire on rent for obtaining sales tax registration. However, it is comparatively easy to obtain sales tax registration within the category of importers.

Experts said that the CRO also does not allow two registrations under one premises. If a person has declared an address of a plaza and another person is also using the same premises, there are strong chances for rejection of registration application. The physical verification process has been followed in cases where new applicant is working in a plaza where already one registered person is working. However, the new applicant has nothing to do with the other businesses operating within the same plaza.

The delay in issuance of new registration numbers to the businessmen merely bars them from issuing sales tax invoices. They cannot claim input tax adjustment due to non-availability of provisions for issuance of invoices. Petty objections usually result in 3-4 weeks delays in obtaining sales tax registration numbers. It is hoped that the regional registration offices would not indulge in undue objections or verifications for issuance of registrations, experts added.

It is important to mention that registration procedure is provided in Chapter I of the Sales Tax Rules, 2006, issued vide SRO 555(I)/2006. For this purpose, the prospective taxpayers have been given the option to apply for registration directly to the Central Registration Office (CRO) at FBR. This will ensure expeditious registration process by eliminating the step of filing application in the Local Registration Office (LRO) or the Collectorate.

The previous requirements of furnishing supporting documents have been done away with. The Central Registration having online access to database of NTN as well as to that of NADRA and shall verify the particulars declared in the application with database. On verification, it shall generate and issue registration certificate to the applicant. The system has been designed in such a way that it can correct any minor mistakes automatically without bothering the taxpayers, the FBR added.

Sales Tax Registration May Be Decentralised

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