ISLAMABAD, JULY17: The business community in Lahore and Peshawar has addressed Prime Minister Shehbaz Sharif on a number of anti-business policies enacted under the Finance Act 2024, such as the contentious SRO 350(I)/2024 issued by the Federal Board of Revenue (FBR) that will negatively impact compliant businesses.
The Prime Minister has been asked by the chambers of Lahore and KP to examine SRO 350(I)/2024 and certain unfavorable provisions of the Finance Act 2024.The PM was informed by the business community in KP and Lahore that the Pakistani business community faces complex and multifaceted economic issues. As the business community’s representative, I have brought attention to a few recent concerns that are impeding the expansion of the private sector and posing challenges for those who file taxes.
A number of changes made to the Finance Act 2024 and other newly released SROs by FBR have a disproportionately negative impact on companies who comply with tax laws.
They claimed that the SRO 350(1)/2024 has made a connection between suppliers’ compliance and purchasers’ capacity to file sales tax returns. The subsequent buyer is penalized if any of the suppliers fails to file their return since they will either be unable to file their sales tax return or will have to leave the appropriate input lax that they have already paid in order to file the return.
This move has caused a hazardous domino effect that is affecting a large number of individuals and has brought the system to a complete stop. negatively impacting companies along the entire supply chain. Despite Annexure A and Annexure C in sales tax returns, the fully automated IRIS system is unable to accept any input or output of sales tax.Instead of upsetting all the compliant taxpayers, checks should be included into the FBR’s internal system to address the issue of fictitious invoices.
The Finance Act 2024 states that the Rs. 50,000 cash payment cap under section 73 must be taken into account overall. The prior transaction limit of Rs 50,000 should have been increased in the Finance Act 2024 in light of the current inflation.
The new policy, which caps cash payments at Rs. 50,000 overall, will have a negative effect on the cash flows and business operations of manufacturers and SMEs that supply local merchants and other societal groups.
Since the economy is not digitalized at the moment, these policies are constraining the operations of local industrialists instead of helping them relax and get by during these hard times. For the benefit of local SMEs, this clause need to be removed, giving them the breathing room they require to manage their operations successfully and meet the present financial difficulties.
The Advance Income Tax that shops are required to pay under section 236H has raised from 0.5% to 2.5% as per the Finance Act 2024. If a retailer’s purchases exceed the Rs 4 million threshold, they are obligated to register for sales tax. In addition to the 4% additional sales tax that retailers need them to pay, manufacturers will also be burdened by the 2.5% advance income tax.
Rather than trying to keep certain segments out of the income tax net, the policies have to focus on getting more of them in. These stringent regulations won’t make the undocumented population pay taxes; instead, They will encourage these industries to avoid paying taxes and make it harder for SMEs to submit sales tax bills.Due to the previously outlined actions, the enterprises of currently complying taxpayers are being restricted and squeezed out of the tax net.
The government ought to incentivize merchants and non-documented sector entities to augment their documentation and augment their turnover rates. Aiming to encourage enterprises that are not registered with FBR to become part of the tax system, the undocumented sectors should be given as much assistance as possible while keeping in mind the realities on the ground.
Given the foregoing, the business community in both Lahore and KP has asked the PM to examine the aforementioned steps in collaboration with the relevant parties and develop strategies to assist individuals who fall under the tax net, according to the additions made by the chambers of Lahore and KP.
