ISLAMABAD : 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 FBR would also rescind special procedure for processing of refund claims filed by persons engaged in making zero-rated supply of ginned cotton. 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.

Sources said that the VAT Rules and Regulations would be made public for comments after passage of the 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.

Similarly, sales tax rules applied for processing of refund claims filed by registered cotton ginners engaged in separating cottonseeds from cotton and pressing of ginned cotton and making zero-rated supply of the cotton so ginned special procedure would no more remain applicable after abolition of zero-rating under the Federal VAT Act.

A special procedure is applicable for collection and payment of sales tax on electric power imported, generated, produced, transmitted and supplied by electricity generation, transmission and distribution companies. 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.