Government of Pakistan is keen to implement the VAT by any means. They are in so much hurry that even they don’t know whether it will accepted by the society or not. They are doing it under the pressure of international Finance Providers. It seems that government is trying to bring all the supplies & services under the ambit of Sales Tax which was not easily possible under the existing system, as government tried so much so far.



So they might take different course to bring those areas which are outside the ambit  by diverting their attentions towards the implementation of a new law with a message that it will bring equity among the different classes of businesses.



But on the other business community is totally unwilling to accept the idea which they believe that infact is a trap for them. So a lot of resistance so far have been observed and they have rejected the idea.  And through some credible sources it is came to know that even government is reconsidering the case and try to negotiate with the international finance provider to compromise on the demand and try to induce them for other ways and means of increasing Tax to GDP ratio this year which have dropped from 14% to 9% approx. On the other hand International Finance provider are quite insistent to implement it from July 01, 2010.



Having said this lets have some brief comparison of VAT Vs ST Act:

The Value Added Tax (VAT) Rules and Regulations-2010 would abolish special procedures for collection and payment of sales tax on electricity, natural gas, compressed natural gas (CNG), liquefied petroleum gas (LPG) and by oil marketing companies (OMCs), vehicle dealers including supply of sugar to Trading Corporation of Pakistan (TCP), it is learnt.



The VAT Rules and Regulations-2010 would also abolish special procedures for steel melting, steel re-rolling, ship-breaking units and collection of sales tax from importers.



The VAT Regulations would replace the existing special procedure for payment of sales tax by wholesale-cum-retail outlets and on the supplies of electric home appliances namely, television sets, refrigerators, freezers, air conditioners, electric ovens, microwave ovens, washing machines, spin dryers, and DVD/CD players of all types of electric goods.



VAT Rules and Regulations would be made public for comments after passing Federal and Provincial VAT Bills 2010 by National Assembly and Provincial Assemblies, respectively. All sectors operating under the special procedures and fixed tax schemes would operate under the normal VAT regime to issue invoices and obtain credit. The fixed schemes have created serious distortions in the existing Sales Tax Act 1990. A uniform invoice-based mechanism would be introduced for all sectors under the VAT regime.



Under the VAT rules-regulations, there would be no fixed rates, reduced tax, enhanced tax, retail price-based tax or special tax schemes. The existing sales tax special procedures would be replaced with standard VAT procedures for all sectors under the VAT regime. The FBR will issue supplementary rules to regulate the procedures and processes under the Federal and Provincial VAT laws in a simplified manner.



At present, special procedures deal with wholesale-cum-retail outlets chains engaged in bulk import and supply of consumer goods to the general body of consumers who maintain their records electronically. The wholesale-cum-retail outlets would be brought under the standard VAT regime.



The VAT rules and regulations would abolish this procedure to ensure applicability of a uniform method for issuance of VAT invoices for claiming facility of tax credit.



The VAT rules would also rescind the procedure for collection and payment of sales tax on natural gas including compressed natural gas (CNG) and liquefied petroleum gas (LPG) imported, produced, transmitted and supplied by gas well-head companies and gas transmission and distribution companies including their distributors, dealers, sales agents and retailers.



Views expressed by

Abdus Salam Jan – FCA, FPA