Reduced, fixed tax not allowed input adjustment under Sindh sales tax on services

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KARACHI: Sindh government has made part of main statute that input adjustment is not available to persons subject to provincial tax at reduced or fixed rate.
According to Rule 22A provides that input tax credit will not be allowed in respect of goods or services which are liable to sales tax, whether a federal sales tax or a provincial sales tax, at reduced rate or fixed rate.
Sindh Finance Bill 2017 has proposed this provision in Sindh Sales Tax on Services Act 2011.
At present, sales tax paid on taxable goods and services in excess of 13 percent ad valorem is not allowable as input tax. It is now proposed that telecommunication service providers charging sales tax at not less than 19.5 percent ad valorem, can claim input tax paid on goods and services up to 17 percent.
Adjustment of input tax paid on certain goods and services (Section 15A) input tax paid on acquisition of the capital goods, machinery and fixed assets as are classified under section XVI, Chapters 84 and 85 of the First Schedule to the Customs Act,1969 is proposed to be allowed in twelve equal monthly installments as against the allowability of input tax in the same month.
Analysts at Deloitte Yousuf Adil Chartered Accountants said that the proposed amendment would have a negative cash flow impact on the businesses.
Similar provision existed in the Sales Tax Act, 1990 till 2011, that was removed considering the hardship and other procedural issues faced by the taxpayer. Similar amendment has also been proposed in Punjab Finance Bill 2017.

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