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7/29/2019 VAT Lahore
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MYTHMYTH
OROR
Presented By:
Abdul Razzaq FCMA
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(BenjaminFranklin)
n
swor
no ng
can
e
sa o ecer a n,excep
ea an axes.
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History
VATVSGST
Effectsof
VAT
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DirectTaxvs.IndirectTax
Advalorem,
Value
added
and
Specific
Tax
nput axvs. utput ax
Fake,Flying
and
VAT
Invoice
Exempt,ZeroRatedandTaxable
Goods/Services
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taxpayerto
someone
else.(income
tax)
thebuyerandhencethebuyer
ultimatel
a sthe
tax.
VAT
CollectionoftaxinPakistan33%:77%
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Valueadded:ataxwithrespecttovalue.
Specific:
A
tax
with
respect
to
quantity.(
.
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purchases.
received/receivablewithsales.
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invoice.
goods/services.
:
GSTnumbersofboththesupplierandthe
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Exempt,ZeroRatedandTaxableGoods/
Serv ces
Exem t:Whereinanin uttaxisa artofcost
Zerorated:
Wherein
an
output
tax
is
being
chargedattherateofZeropercentand
taxpayerisentitledtoclaimrefundofinputtax
Taxable:Wherein
an
output
tax
is
being
chargedattheprescribedrate(say15%)and
taxpayerisentitledtoadjustinputtaxagainst
out uttax
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Exempt,ZeroRatedandTaxableGoods/
erv ces
ZeroRated: Inputisrefundable
Taxable: Inputispayable/adjustable
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Accountin
entriesin
case
exem t
and
taxable
oods
PaymentofElectricityBillincaseofexemptgoods
ElectricityExpense 115,000
Taxdeductionatsource 10,000
Bank 125,000
Payment
of
Electricity
Bill
in
case
of
taxable
goods
ElectricityExpense 100,000
InputTax 15,000
Taxdeduction
at
source 10,000
Bank 125,000
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GDP
world
increased350%duringthisperiod
2%richowns80%ofcountryswealth
corrupt ono on upees nnum s
onlyin
FBR
(Shoukat
Tareen)
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Export
Oil,Gas,Communication
1600Companiesarepaying85%ofTotalTax.
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Property,Stocks,
services
etc.
Corruption/Tax
evasion
Energycrises
Lossin overnmentownedentities
AfghanTransit
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Earned rofitfrom200001to200708.
Grossloss
Rs.
19.5
billion
during
2008
09.
200809comparetopreviousyear.
. comparetoaprofitof3.6billioninprevious
year.
Abail
out
package
of
Rs.
10
billion
was
given
to
PSM.
SamesituationisinPIA,WAPDA,Railwayetc.
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Example: Rs.
InvoicePrice 25
ssesse a ue
CustomsDuty(10%) 5
a es ax
IncomeTax(4%) 2
urt er
ax
(Govt.
Revenue)
TotalCost 116
A g anio ert esamepro uctat 110
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VATissimilartoaSalesTax.Itisataxonthe
market
value
added
to
a
product
or
material
at
eachstageofitsmanufactureordistribution,
.
Laure)
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ValueAddedTax(VAT)isaconsumptiontaxofupto25%thatisleviedonbothgoodsandservices inmostcountriesaroun t ewor .T ssystem spresent nEurope,Japan,
andAustralia
and
anumber
of
others
countries.
They
also
allowarefundofVATtononresidentandResident.
VAThasitsorigininEuropeanCountries(EC).Itwas
pioneeredin
France,
which
introduced
avalue
added
type
o consump on axongoo s n a was ev e a eproductionstage.
Intheworld,morethan160countrieshavesuccessfull
implementedVAT
system
of
taxation.
Out
of
31
member
countriesofOrganizationforEconomicCooperationandDevelopment(OECD),Mostofthe countrieshaveaccepted
as e rma nconsump on ax.
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enmar n an ermany
France 19.60% Ireland 21% Italy 20%
Netherlands 19% Portugal 20% Spain 16%
Sweden 25% UnitedKingdom 17.50% Poland 22%
Argentina 21% Canada 5% Croatia 22%
Iceland 24.50% India 12.50% Mexico 15%
Russia 18% China 17% Uruguay 22%
w zer an . orway ou r ca
Indonesia 10% Kenya 18% Korea 10%
Nigeria 5% Nepal 10% SriLanka 12.50%
Bangladesh 15% Egypt 15% Source:EconomyWatch
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Similarities:
Bothare
indirect
taxes.
.
Differences (incaseofPakistan)
Services
Zerorating
ExemptList
DiscretionaryPowers
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46(5)TheBoardmay,bynotice,canceltheregistrationofapersoniftheBoardissatisfiedthat
(a)thepersondoesnothaveafixedplaceatwhich
thepersonseconomicactivityiscarriedon;
(b)the
person
has
not
kept
proper
records of
its
business;
(c)thepersonhasnotfiledregularandreliable
returns or
(d)thepersonhasnotcompliedwithitsobligationsunderothertaxation
laws,includingthecustomslaws,andtherearereasonablegroundsto
e eve
t at
t e
person
w
not eep
proper
recor s
or
e
regu ar
an
reliablereturns.
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DifferencebetweenVAT&GST
ncase
o
Pa stan
betweennewly
introduced
VAT
and
existingGST,incaseofPakistan:
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GST:Multiple
tax
rate
such
as
16%,
18%,
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VAT:In14entries Exem t oodsareclearl
defined.
(
first
Schedule) GST:82(71+11)goodsambiguouslydefinedas
per TableI&IIofsixthscheduleofSalesTax
Act1990andwithalmost30SROs.
Fooditems,medical,educationalservices&materialis
exemptinEUcountries.InUKandAustralia,theseare
zerorated.
Indianexemption
list
is
very
comprehensive
even
coveringtextileandelectricity.
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D m tic Z r Ratin 23 and 2nd
Schedule
VAT:Exportandonlyfewothersuchas
Warranty
claims,
maintenance,
sale
of
economic
activity,
Basic
medicineetc.
: num ero sec orsarezerora e suc as:
Textile SewingMachines
Leather Surgicalgoods
Cookedandun DairyIndustry
cookedmeat
based
products
Carpet StationeryIndustry
SportsItems Bicycles
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books,newspapers
and
magazines
youngchildren'sclothingandfootwear
specialexempt
items
for
example
equipmentfordisabledpeople
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Driedbeans. Milk
powder.
Dairypowderblend. Rice.
Vegetables. Fruit.
Vegetableoil. Milk.
u ure
m . rown
w ea en
mea .Eggs.
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Medicaland
Assistive
Devices
BasicGroceries
Agricultureand
Fishing
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VAT:Noconce t
GST:Manufacturer
will
pay
tax
according
toretailpriceon17items.
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VAT:Noexem tionorzeroratin canbemade
byanygovernmentdepartmentorauthority ,
exceptasexpresslyprovidedinthisAct.
GST:BoardhaspowertoissueSROunder
numberofsectionsevenregardingzerorating,
.
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VAT:Zerorated
GST:No
concept
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InVAT:
Latefiling
with
the
approval
of
the
board.
approvalofBoard.
Noapprovalfromcommissionerincaseoflate
fillin
Within120daysincaseofrevisionandafter
theapprovalofCommissioner
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Inputtaxadjustmentincaseof
manufacturer
VAT:100%
GST:90%
of
output
tax
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VAT:SHGaresub ecttotax In uttax
adjustmentisallowedbytaxfraction
GST:Notaxonsaleandpurchaseofsecond
handgoods
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PurchasefromunregisteredpersonofRs.100.
Tax
fraction
=
VAT
Rate/100+VAT
Rate
(15/115)= * = .
SaletoregisteredpersonRs.115.(ValueEx.
.
.
.
VATPayable=OutputTax Inputtax
=15
13.04
=1.96
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InputTaxadjustmentincaseofpurchaseof
xe
sset
GST:Equal
proportion
in
twelve
months
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paidwhich
relate
to
bad
debts
in
the
periodinwhichhe/sheactuallywriteoff
thesebaddebts.
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and
payments
shallbetreatedaseparatesupply.
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Mistake
1%/M
rau
InGST
Mistake KIBOR+3%
Fraud 2%/M
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AllGoodsareTaxable exce tfollowin :
Wheat Wheatflour
Unprocessed
peas
Waterwithoutbrandname
Saltwithoutbrandname
Books,Newspaper,
Periodicals
body
Contraceptives Preciousmetal
otherthanafirst
supply
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categories
ProvincialServices
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railway,
sea,
or
air
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Allservicesaresub ectto rovincialSalesTax
exceptthefollowing
Funeral,burialorsimilarservices
Servicesbyreligiousinstitutions
organization
CertainFinancialservices.
CertaineducationservicesprovidedbyaninstitutiondulyregisteredbytheMinisterof
education
Certainsupplies
of
immoveable
property.
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subject
to
tax. , , ,
Caterers
2.Advertisement
on
TV
and
Radio
3.CustomsAgents,ShipChandlersand
Stevedores
4.Courier
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from
manufacturer
or
importer
to
retailer.
:
importer
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Taxinvoices
Salesreceipts
Periodofretentionforrecord.
1.Sixyearsfromtheendofthetaxperiod.
2.Untilthefinaldecisionismadeincaseofany
au t,recovery,prosecut onan procee ng.
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Taxinvoicewillincludethefollowings:
SerialNo.
Name,AddressandNTNofSupplier.
Nameaddress,NTNorCNICofBuyer.
DescriptionandQuantity.
ValueEx.
Tax,
Tax
Rate,
Tax
and
Value
Inc. Tax.
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Ifsalesareu to25 000andthebu eris
unregisteredpersonthensupplierwillissue
Salesreceipt
which
will
include
the
followings:
Date
Name
and
Registration
numbers
of
Supplier Descriptionofgoodsorservices
Totalamount
Anindicationthattaxisincludedinamount
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Salesrecei tcanbeissuedtothatunre istered
personwhichisnotrequiredtoberegistered.(
ashift
of
responsibility)
Serialnumberismissing
Name
and
address
of
buyer
is
missing Quantityismissing
ManufacturercanalsoissueSalesRecei t.
Noperdaysalesreceiptslimitforsamebuyer.
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TurnoverforRegistration:
VAT: 7.5Million/Annum
Decisionregardingregistrationorrefusalwillbeissuedw n aysan anappea can ema eaga nsdecision(41)
Section
79,
dealing
with
appeals
does
not
provide
the
r g to appea .
GST:ForManufacturernotbeingacottageindustryandretailerwhoseturnoverexceeds5Million/Annum
ALLwholesaler,
trader,
distributor
,importer and
dealerwithoutanylimitationofturnover
4.Requirementofregistration.Thefollowingpersonsengagedinmakingoftaxable
supplies in Pakistan (including zerorated supplies) in the course or furtherance of any
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suppliesinPakistan(includingzero ratedsupplies)inthecourseorfurtheranceofany
taxableactivitycarriedonbythem,ifnotalreadyregistered,arerequiredtobe
,
y:
(a)amanufacturernotbeingacottageindustry
(b)aretailerwhosevalueofsupplies,inanyperiodduring
thelast
twelve
months
exceeds
five
million
rupees;
c an mpor er;
(d)awholesaler(includingdealer)anddistributor;
(e)apersonrequired,underanyotherFederallawor
Provinciallaw,toberegisteredforthepurposeofanydutyor
collectedunder
the
Act;
20[and]
(f)acommercialexporter,whointendstoobtainsalestaxrefundagainst his
zeroratedsupplies.
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VAT Pa a l 21
= +
adjustments)
(Input
Tax
+
Decreasing
adjustments)
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Carr F rwar an R f n 7
= +
Decreasing
adjustments)
are
greater
than(OutputTax+Increasing
adjustments)
Carr
forwardcan
be
made
u
to
six
month
month,it
will
be
claimed
refund.
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(i)
50%or
more
persons
turnover
is
or
will
(ii)50%ormoreinputrelatetozerorated
.
theninputtaxwillberefunded.(38)
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RefundincaseofAdv.TaxorWithholdin Tax 24
+
others
(Government
department
or
LTU)
isgreaterthanoutputtax+increasing
adjustments thentheamountshallbe
refundedwithoutcarryforward.
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Incase
of
delay
additional
refund
@
WhereanofficerofIRSsuspectsor
genuine,trueorcorrect,hemayreject
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Postsu l ad ustment 29
Baddebts
adjustment (30)
Cancellationofregistration(32)
Changeinrate(34)
Withholdingtax(36)
Defaultsurcharge,
fine,
penalty,
fee
etc.
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Withholdingtax
(36)
Postsupplyadjustment(29)
Bad
debts
adjustment(30) Registration(33)
arry orwar
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GST:2%
VAT(15%) GST(16%)
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u
=
Inputtax = 15 16
Add.Tax = 3.75 2
TotalInput =18.75 18
.
OutputTax = 18.75 18
Ifthesalepriceislowerthan125,theimporterwillclaimrefund.
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GST:3.2%
VAT
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PurchasePrice =
100
In uttax = 15
a epr ce = .
Outputtax = 20
Withholdingtax = 5
IfPriceislowerthan133.33,thesupplierwillclaimrefund.
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exceedsfiftythousandrupeesthe
paymentshallbemadebyverifiable
bankinginstrumentfromthebank
accountofthebuyertothebank
accoun
o
ese er.
Ifthebuyerdonotmakepaymentwithin
six
month,
the
buyer
will
make
an
increasingadjustment.
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importsarepartlyforcreditablepurpose.
partlyapplies.
.
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VATpaid
on
purchase
of
goods
VATpaidonimportofgoods
VAT
paid
on
purchase
of
services VATpaidonimportofservices
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VATreceived
on
sales
of
goods
VATreceivedonsalesofservices
VAT
paid
on
purchases
of
services
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inputtax,supplierwillconsideritout
puttax.
Sixsucceedingtaxperiodsafter
considerin
itout ut
tax
b
the
su lier.
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ForensicAudit
would
give
unlimited
togotoanyextentforcarryingout
investi ationa ainst
are istered
unit.
beyondtax
record
required
to
be
maintained.
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increase
Domesticzerorated oodsinGST
GoodsandserviceswhichwillbesubjecttotaxinVAT
Value
addition
in
supply
chain
Thepricesofthefollowinggoodswill
decrease
Goodsand
services
which
are
subject
to
tax
@
16%,
18%,
21%,
25%inGST
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Increasein
Undocumented
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Increasein
Govt.
revenue
Broadbase
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Noone
knows
the
pros
and
cons
Lakeofsupportoftrade
associations/chambers
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StandByArrangements(SBA)of$7.6billiontobepaidin23months
Enhancementin
July
2009
to
$11.3
billion
Conditions:
1. VATfromJuly2010
2. MonitoringofrevenuecollectionbyIMF
MonitoringTeamconsistof :
1. 6DirectorsofIMF
2. 2DirectorsofWB
(JewishProverb)
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axes
grow
w t out
rain.
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Thank
You