C. No. 3(9)STL&P/2001                                                                                                         Date: 30^th June, 2001

Subject: REMOVAL OF LONG OUTSTANDING DIFFICULTIES OF TAXPAYERS.

Responding to numerous representations from trade and industry, the difficulties and hardships experienced by different segments of taxpayers’ community were examined by the Board. Such difficulties and complications generally stemmed from the fragmented and sectoral approach towards implementation of VAT system in the earlier years as reflected in the adoption of fixed and simplified sales tax regimes for various categories of taxpayers from time to time. Since most of the affected taxpayers have now converted to VAT, there is a need to resolve their genuine problems pertaining to the earlier years. For this purpose, four relief notifications have been issued in the Budget 2001-2002 as described below:-

2. S.R.O. 392(I)/2001, dated 18.06.2001: - A large number of taxpayers worked under the fixed tax schemes during the financial years 1995-96, 1996-97 and 1997-98, and were subsequently covered under the Simplified Sales Tax Rules, 1999 during the year 1998-99. After expiry of the last of the fixed or simplified tax schemes on 30.6.1999, many of such taxpayers continued to discharge their tax liabilities in the same manner and at the same rates as in the past but did not switch-over to VAT system. The expectation of the taxpayers who continued to behave in this manner was that the government would eventually revive the fixed tax schemes in due course, as it had done in previous years. The announcement of the government’s resolve for documentation of the national economy in December 1999 created an awareness among taxpayers that the fixed tax schemes were a thing of the past. Thereafter, such taxpayers gradually started converting to genuine VAT system. Under S.R.O. 392(I)/2001, dated 18.06.2001, those amongst such taxpayers who converted to VAT system by 30.06.2000 will get relief in respect of their past inadequate compliance provided they fulfill the conditions specified therein.

3. S.R.O. 393(I)/2001, dated 18.06.2001:- This notification addresses the difficulties of those persons who were working under any notified fixed sales tax regime upto 1.7.1998 when the relevant legal provision was rescinded. As already mentioned, most of the persons governed under the fixed tax regimes upto 30.6.1998 continued to discharge their tax liabilities in accordance with the lapsed fixed tax notifications, and in due course, the Simplified Sales Tax Rules, 1999 were notified vide S.R.O. 458(I)99, dated 6.4.1999 which operated upto 30.06.1999. However, one category of taxpayers previously covered under the fixed tax schemes was excluded from the Simplified Sales Tax Rules, 1999 i.e. those with annual turnover in excess of Rs. 1 million. This retrospective exclusion created difficulties for those persons who had been complying under the old regime even after 1.7.1998. Now, the persons so excluded have been given coverage under the Simplified Sales Tax Rules, 1999 during the period of its validity. It is clarified that any person to whom the advantage of Simplified Sales Tax Rules, 1999 has thus been extended under this notification are also entitled, if otherwise qualified, to the relief available under S.R.O. 392(I)/2001, dated 18.06.2001, notwithstanding the provisions of item No. (iv) of rule 3 of the Simplified Sales Tax Rules, 1999.

4. S.R.O. 394(I)/2001, dated 18.06.2001:- This notification covers those weaving units who were complying with an "informal" fixed tax scheme during 1996-97 and/or 1997-98 even though no formal notification had been issued to cover such activity after 9.6.1994. As per verbal agreements between the government and the Pakistan Silk & Rayon Mills Association, such weaving units paid sales tax @ Rs. 300 per loom on automatic looms for 1996-97 and 1997-98 on a promise of subsequent compliance under VAT mode. This notification, therefore, addresses the difficulties of such taxpayers in the weaving sector for the period upto 30.6.1998.

5. S.R.O. 395(I)/2001, dated 18.06.2001:- The overwhelming bulk of weaving and sizing sector remained completely outside the tax net till recently. The recent compliance to GST requirements by such units was on the basis of verbal assurances from the government to forgo their liabilities for the past. This notification has been issued to take care of difficulties of such weaving and sizing units etc.

6. Guidelines:- In other to ensure that these notifications are not misinterpreted or the relief admissible thereunder is not misused by any person, the Collectorates are directed to follow the following instructions:-

    ii)    None of these notifications is meant for such taxpayers who, merely to avoid or evade their emerging tax obligations, surrendered their sales tax registrations or became consistent non-filers or they started afresh under some other registration number or simply skipped out of the system. Benefit of these notifications is also not admissible to those taxpayers who were guilty of tax fraud (not merely departmental allegation of tax fraud but legally substantiated or sustainable tax fraud);

    iv)     Each of the notifications contains certain conditions which need to be fulfilled by a person before availing the benefit thereof. The Collectors of Sales Tax are required to issue formal orders for grant of relief under these notifications. The Collectors may however, nominate any Additional Collector under their jurisdiction to work on their behalf in this regard;

    v)    The Collectorates are required to maintain a register containing the following information:-

 

PART – I (PARTICULARS AT COLUMNS 3-10 TO BE FURNISHED BY APPLICANT)

S. No.	Date of receipt of application	Name of the applicant	Registration No. and date	Previous registration/ enrollment No(s). & date(s), if any	S.R.O. No(s). & date(s) under which relief is being sought
(1)	(2)	(3)	(4)	(5)	(6)

 

Period for which relief is being sought (i.e. up to the date of conversion to VAT mode)	S.R.O. No(s). & date(s) under which the applicant was working before conversion to VAT mode	Amount of arrears for the period prior to conversion to VAT mode	Whether the applicant is regularly filing sales tax returns and paying sales tax after conversion to VAT mode
(7)	(8)	(9)	(10)

 

PART–II (TO BE COMPLETED BY THE COLLECTORATE FROM DEPARTMENTAL RECORDS)

 

Particulars of audit/contravention report or adjudication/ appellate/court orders, etc. under which arrears in column (9) accrued	Amount of arrears for the period prior to conversion to VAT mode	Arrears till date of filing of application for the period after the date of conversion to VAT made	Whether any case of tax fraud has been established or is pending against the applicant	No. & date of the order passed by Collector/ Additional Collector disposing off the application	Amount paid and date of deposit of arrears
(11)	(12)	(13)	(14)	(15)	(16)

    vi)    In order to standardize this work in all Collectorates, the particulars in columns Nos. (3) to (10) shall be obtained from the applicant along with a declaration in writing to the effect that these particulars are complete and correct;

    viii)    The Collectorates shall verify such declared particulars from their own records, and will also fill in the particulars in the remaining columns (i.e. 11 to 16). Any other information considered really essential for disposal of the case may also be obtained from the applicant;

    ix)    After disposing off the applications received under the said notifications, it may be ensured that all the relevant records of the Collectorate (e.g. records of arrears, adjudications, court/tribunal cases, etc.) are updated to reflect the decisions taken on such applications;

    x)    Each application should be disposed off as promptly as possible by the Collector or by the designated Additional Collector under an appealable order;

    xi)    It may be ensured that to the extent of the period for which relief is admissible in these notifications, the staff of the Collectorate does not raise audit objections or make contraventions on account of the omissions condoned or condonable under these notifications;

    xii)    Cases which are otherwise deserving, but which warrant some technical waiver/condonation, should be referred to CBR; and

    xiii)    The Collectorates should keep SRO-wise account of the amounts recovered and the amounts forgone in each case, preferably in the computer, as all work/disposal under these notifications will be monitored by the Board on monthly basis.

( Iftikhar Qutab )

Chief (Sales Tax-II)