17pc GST on sales via online marketplace
ISLAMABAD: Sales of goods in an online marketplace were subject to a 17% sales tax by incorporating the same under the Sales Tax Act of 1990.
Thanks to the finance bill (2021), the scope of the sales tax is extended to online sales via a third-party platform.
Sharing sales tax revenue metrics, sales tax expert Arshad Shehzad informed that there is currently no specific provision on the collection of sales tax on sales made in the online marketplace. using a third-party platform by a level 1 retailer. In recent years, the online sales tax platform has been significantly increased.
The sales tax law; however, does not provide a specific law or modus operandi for the declaration and collection of sales tax through this channel.
In this budget, the amendment was made under section 3 of the Act to extend the scope of sales tax on the supply of goods through the online marketplace.
Likewise, the definition of Level 1 retailer is also broadened to include a retailer operating an online marketplace providing goods through the e-commerce platform, whether the goods are owned or not, Shehzad explained.
Explaining another measure, he informed that sugar is included in the third annex. Under this amendment, sales tax on sugar must now be paid at retail price. In addition, this retail price must also be printed on the packaging or bags of sugar.
The supplies of sugar to the pharmaceutical, beverage and confectionery industries will remain excluded from the scope of the third annex.
Commenting on this amendment, Shehzad stressed that an exclusion from the retail price on supplies to industries is a correct decision. However, the government failed to provide a mechanism for the application of this exclusion on imported sugar.
Shehzad informed that imported fine sugar is generally used by industries.
Commercial importers who import crystallite sugar for this industry may be required to pay sales tax on the retail price at the import stage, whether or not they supply that sugar to the notified industry sector.
The government; therefore, must either exclude extra-fine imported sugar from the scope of the third list or find another reasonable way to deal with this problem arising from the proposed amendment.
The timeframe for the assessment and collection of sales tax under subsection 11 (5) is extended by an amendment proposed in this budget. According to the board’s explanation, audits are performed on a full six-year basis where the five-year sales tax deadline is calculated on a monthly basis. finished at that point.
It was therefore proposed to extend the period of five years until the end of the financial year in which the relevant date falls. Shehzad strongly criticized the amendment and said that instead of reducing the time limit from six years to five years, the amendment was proposed to increase the time limit.
He said if the tax apparatus with all the resources, electronic means and computerized records could not complete the audit within five years, it should not afford the luxury of enjoying another extension of time limit.
He said the government was speaking out in the media to control audit issues and harassment, however, these types of amendments suggest a step in a completely opposite direction.
Copyright Business Recorder, 2021