Indirect Taxes – Current Trends Across South Asia And UAE
Indirect taxes –current trendsacross South Asiaand UAE
About ACCAACCA (the Association of Chartered Certified Accountants) isthe global body for professional accountants. It offersbusiness-relevant, first-choice qualifications to people ofapplication, ability and ambition around the world who seeka rewarding career in accountancy, finance and management.ACCA supports its 188,000 members and 480,000 studentsin 181 countries, helping them to develop successful careersin accounting and business, with the skills required byemployers. ACCA works through a network of 95 offices andcentres and more than 7,110 Approved Employersworldwide, who provide high standards of employee learningand development. Through its public interest remit, ACCApromotes appropriate regulation of accounting and conductsrelevant research to ensure accountancy continues to grow inreputation and influence.Founded in 1904, ACCA has consistently held unique corevalues: opportunity, diversity, innovation, integrity andaccountability. It believes that accountants bring value toeconomies in all stages of development and seek to developcapacity in the profession and encourage the adoption ofglobal standards. ACCA’s core values are aligned to theneeds of employers in all sectors and it ensures that, throughits range of qualifications, it prepares accountants forbusiness. ACCA seeks to open up the profession to peopleof all backgrounds and remove artificial barriers, innovatingits qualifications and delivery to meet the diverse needs oftrainee professionals and their employers.In June 2016 ACCA formed a strategic alliance withChartered Accountants Australia and New Zealand (CA ANZ).The alliance represents the voice of 788,000 members andfuture professional accountants around the world, who sharethe commitment to uphold the highest ethical, professionaland technical standards.This report discuses theevolution of VAT andcurrent trends of indirecttaxes across South Asiaand UAE. The countriesselected for the purposesof this research includeBangladesh, India, Pakistan,Sri Lanka and UAE. Thesecountries are in the processof reforming their taxsystems for better andefficient collection of taxes.This report discusses theimportance of indirecttaxes and revenuecollection, thresholds,tax rates, zero-rating,exemptions and variousother areas of indirecttax administration alongwith recommendations toimprove the same.More information is available at: www.accaglobal.comACKNOWLEDGEMENTSIftikhar Qutub, Member, Federal Board of Revenue,Islamabad. Over 15 years of experience in tax policyformulation from Second Secretary to Member in Federal Boardof Revenue, nearly 14 years of experience in Tax Administrationfrom Assistant Collector (Customs & Central Excise) to ChiefCommissioner Inland Revenue (Income Tax, Sales Tax & FederalExcise). Qutub has extensive experience in drafting Sales Tax,Federal Excise and Customs Laws – drafted Federal Excise Act,2005; Federal Excise Rules 2005; Value Added Tax (VAT) Bill 2010and Reformed General Sales Tax (RGST) Bill 2011, Punjab SalesTax on Services Act, 2012 and rules thereof and numerous otherrules, regulations, notifications, circulars and general ordersetc. He has also authored three books on social philosophy. The Association of Chartered Certified AccountantsNovember 2016Omer Zaheer Meer. An experienced FCCA holding CFA Charterand anti-money laundering specialization. Managing Partner atMLCC (pioneer ACCA practising firm in Pak). Life member andthird time serving Chairman Liaison Committee LTBA. MemberGlobal Tax Forum ACCA, Chairman Taxation Committee ACCAand member Taxation & Finance Committee LCCI.
ContentsForeword.4Abbreviations.6Introduction.71. History of VAT.92. Country profiles. 11Bangladesh. 11India. 12Pakistan. 15Sri Lanka. 16United Arab Emirates. 173. Indirect tax laws. 184. Importance of indirect taxes and revenue collection. 22Indirect taxes as a percentage of GDP. 24Sales tax thresholds. 27Tax rates. 29Zero rating, exemptions and reduced rates. 325. Administrative practices. 36Payment methodology and due dates. 37Penalties. 37Appeals. 45Tax refunds. 47Factors contributing to accumulation of tax refunds. 47Period taken for issuance of refunds. 47Technology and the design of tax systems. 50Human resource. 51Bangladesh. 51India. 51Pakistan. 51Sri Lanka. 51Authorized representative qualifications. 52Bangladesh. 52India. 52Pakistan. 52Sri Lanka. 52UAE. 52Conclusion. 53Recommendations. 54References. 55
Foreword4ACCA believes there are key inherent taxprinciples that should underpin a good taxsystem. These include certainty,transparency, accountability, simplicity,efficiency and the recognition of humanrights, among others.At ACCA we also recognize that thecountries in which our members work areall unique and their economies are atdifferent stages of socio-economicdevelopment. It is imperative that we studythe unfolding story of taxation in some ofour most strategically important countrieslike Pakistan, Bangladesh, Sri Lanka, theUAE and India and begin to document thetrends of Indirect taxes in these states.Why Indirect taxes? Because all theevidence suggests that taxes such as salestax and VAT are now generally seen bygovernments as simple to implement andprovide a large fiscal return for minimumeffort, sometimes politically speaking also;the governments of these countries, forright or wrong reasons are very challengedwhen it comes to increasing the tax to GDPratio through direct taxes.multi nationals to MSMEs; sometimesmanaging indirect taxes is a hugechallenge in economies that have largeundocumented sectors, symptoms ofbribery and corruption, and bureaucraticprocedures in very large agencies. ACCAmembers have to navigate the entirelandscape of a taxation system that isconstantly evolving; like for example incountries of the UAE where a lack oftaxation has been the region’s maineconomic incentive to attract foreign directinvestment, expert talent and economictourism, but the rapid decline in both thedemand and subsequent price of oil hashuge implications for the futuredevelopment budgets of the UAE stateswhere we are now seeing a commitmentby UAE and GCC countries toimplementing VAT in 2018, here againACCA members in UAE enterprises willplay a vital role by supporting the financialmanagement steps in accounting, planningand compliance of the new VAT laws.This report has been produced through asuccessful collaboration between ACCAand EY Pakistan.This report Indirect taxes – current trendsacross South Asia and the UAE attempts tolook at the increasing reliance states areplacing on sales tax by looking at thespectrum of tax rates as well as legislative,regulatory and administrativerequirements. The report provides manytalking points for stakeholders throughintra-regional comparisons.It represents a unique regional outlook ofthe indirect tax landscape that ACCAmembers and other stakeholders have tonavigate routinely.ACCA members in the countries featuredin the report are working in diverseemployers in the private sector, from largeHelen Brand OBEChief executiveACCAManaging taxation is a core area forfinance professionals and businesses andso I am delighted to be able to share thisreport with you.
Indirect taxes – current trends acrossSouth Asia and UAEForewordSouth Asia and the UAE is an environmentwith many similarities and challenges,South Asia especially can trace its businesslegislative frameworks back to the days ofthe British rule of the Indian subcontinent.But fast forward 70 years and theeconomies of Bangladesh, Pakistan, SriLanka, The UAE and India are driving globaleconomic growth, provide a workforce ofover 1.5 billion people and have some ofthe highest economic growth rates in theworld. The full potential of this region is yetto be realized but one thing is certain thatwith economic growth the divisionsbetween the have and the have nots iswidening, economies still require statefunds to lead development both social andnon-social which means governments facea common challenge of ever increasingexpenditure budget and raising fiscalrevenues to meet budgetary expendituresand to correct economic disparities.5while also aiding the tax authorities toapply the said laws in an equitable and fairmanner. EY's taxation team works acrossindustries in the private sector. As taxintermediaries the EY team is working ontwo coal faces, meeting the demands ofthe taxation authorities at both federal andprovincial levels, again something we seeacross the region as growing countriesdevolve the taxation collection methodsand the second coal face is that of meetingclients demands for minimising compliancerisk and tax incidence.Democracies in this regional are stillevolving and political leadership isbalancing the need to raise more and morefiscal revenues and vested interests. Whenit comes to taxation governments acrossthe region have been deliberately weak inraising direct taxes which has repercussionsfor their vested interest groups but haveinstead scaled up their dependency onindirect taxes which on paper tick off theequality and simplicity boxes.This report Indirect taxes – current trendsacross South Asia and the UAE is anattempt to document the facts aroundrates, thresholds, administrative practicesacross the region and then attempt to drawsome conclusions from the trends. Part ofthe message of the report will come fromthe dialogue the report initiates withfinance professionals and otherstakeholders. Indirect taxes are here to stayand are rapidly becoming the bread andbutter fiscal tool for government revenuesin this region. More than any other taxesboth Sales Tax and VAT are woven into thetransactions of all businesses. I hope thereport will also send a message to thebusiness community that ever growingtaxation regimes can be managed with thesupport of finance professionals and no onecountry is unique in adopting indirect taxes.The EY team is involved in providingassistance to clients for making compliancewith both federal and provincial tax laws,Muhammad AwaisTax PartnerEY Pakistan
Abbreviations6APAndhra PradeshNBTNation Building TaxATAdvertisement TaxPECPrimary Education CessBCDBasic Custom DutyPADLPorts & Airports Development LevyBAGLBetting and Gaming LevySADSpecial Additional DutyBTBetting TaxSBCSwachh Bharat Cess (Clean India Cess)CDCustoms DutiesSCService chargesCENVATCentral [government] Value Added TaxSDStamp DutyCGSTCentral GSTSEDState Excise DutiesCSTCentral Sales TaxSGSTState GSTCTCorporate TaxSHECSecondary / Higher Education CessCVDCountervailing DutySRFStamp and registration feesECEducation CessSTService TaxEDExcise DutySTLShare Transaction LevyENTEntertainment TaxSTSSales Tax on ServicesETEntry TaxTDETax and Duty on ElectricityFEDFederal Excise DutyTOGPTax on Goods and PassengersFGSTFederal General Sales TaxTORJTax on Raw JuteFTTForeign Travel TaxTOSCTax on SugarcaneGCCGulf Cooperation CouncilTOVMotor Vehicle Tax or Road TaxGDPGross Domestic ProduceUPUttar PradeshGSTGeneral Sales TaxVATValue Added TaxHYHaryanaIGSTIntegrated GSTIMFInternational Monetary FundITIncome TaxKNKarnatakaLTLuxury TaxMODVATModified Value Added TaxMSSTMotorspirit Sales TaxMTMunicipal Tax
IntroductionGiven the importance of VAT,this study discusses its featuresand the problems commonlyfaced by South Asian countries.7Tax is an instrument used to generaterevenue and to regulate nationaleconomies. The primary purpose oftaxation is to finance governmentexpenditures. However, taxes are also usedfor other purposes, which may include:changing societal behaviours, preventingthe concentration of wealth, andredistributing it for the benefit of the wholecommunity through development andwelfare programmes. In developingcountries, governments provide taxexemptions and concessions, includingzero-ratings, allowable deductions andreduced rates to promote industrial growth,attract investments, reduce unemploymentand support economic activities in particularregions/sectors or for specific demographicsegments or classes of people.Taxes are broadly divided into twocategories, ie direct and indirect. Tax that islevied on a person or legal entity’s income/profits and is generally paid by suchperson/legal entity directly to thegovernment, can be classified as a directtax. Alternatively, tax that is levied ongoods and/or services and charged to theperson who consumes such goods and/orservices can be classified as an indirect taxand is indirectly paid/born by theconsumer, while collected and depositedin the government treasury by the supplier.In many developing countries, thecontribution of VAT in total tax collectionsis increasing over time. This can be owingto an increase in unemployment or low percapita income as well as to innate featuresof VAT that make it less prone to taxevasion than income taxes, which areeasier to evade/avoid. The governments ofBangladesh, India, Pakistan and Sri Lankahave intensified their focus onstrengthening their taxation systems, whileputting more emphasis on VAT collections.Given the importance of VAT, this studydiscusses its features and the problemscommonly faced by South Asian countries.Further, the United Arab Emirates (UAE) isin the process of introducing VAT and maybenefit from the developments made inthe VAT systems of various other countries.
Indirect taxes – current trends acrossSouth Asia and UAECollection of taxescreates administrativecomplexities forgovernments, besidesincreasing enforcementand compliance costs.IntroductionIn the Indian subcontinent, indirect taxeswere first introduced by the British asexcise duties to protect British machinemade products, which were costlier thanIndian products. Similarly, after theindependence of Pakistan and India in1947, these countries introduced customsduties to protect their local productsagainst imports that were cheaper thantheir local versions. Over time, however,indirect taxes started playing an importantrole in the growth of gross domesticproduct (GDP), as discussed in Chapter 4of this report.Collection of taxes creates administrativecomplexities for governments, besidesincreasing enforcement and compliancecosts. Likewise, providing too manyexemptions in order to stimulate economicgrowth is bound to minimise the taxproceeds and hence adversely affect tax’smain purpose of providing governmentwith revenue. Moreover, indirect taxessuch as VAT and sales tax may reduceconsumer spending, which reducesbusiness revenue, thereby counterbalancing the advantages of economicgrowth and reduced unemployment.The adverse effects of indirect taxation canbe mitigated by setting a single rate whilekeeping that rate as low as possible. Thereduction in rate may be compensated forby levying it across the board on all typesof sale/purchase transactions, therebyexpanding the tax base, so that a lowburden of taxation can be levied on a largepopulation of taxpayers. In order to ensureneutrality and non-interference withmarket processes, VAT has to be applieduniformly to all sectors of the economy.However, items of basic necessity may bekept exempt.8It is commonly observed that despite somereform efforts over the past decades,application of VAT in the countries understudy remains complex, mainly owing tothe dissimilarity of regulations for variousindustries. This results in a misallocation ofresources and thus creates an unfair taxburden on enterprises that are not allowedbenefits from special schemes; and,furthermore, it introduces disincentives forbusiness formalisation. Increasedlegislation may lead to increasedcomplexity and cumbersome compliancecosts. Such complexity and costs may becompensated by introducing fair taxadministration practices that would tend tofoster trust between taxpayers and thegovernment in the context of fairapplication of law. In practice, the countriesunder study have to go a long way yet toset up such model tax administrations.Governments in these countries haveintroduced a number of changes to theirtax laws to simplify tax systems andimprove overall revenue collection. In 2005,India replaced its old sales tax law, whichdid not offer input tax credit. In 2011, theSri Lankan government unified its VAT rateat 11%. Bangladesh is also working towardsthe introduction of new VAT legislation tobe in line with the international standards.In the UAE, VAT is likely to be introducedon 1 January 2018 with a rate expected tobe as low as 5%. Pakistan’s c
current trends of indirect taxes across South Asia and UAE. The countries selected for the purposes of this research include Bangladesh, India, Pakistan, Sri Lanka and UAE. These countries are in the process of reforming their tax systems for better and efficient collection of taxes. This report discusses the importance of indirect taxes and .
1.iscover the three basic tax types—taxes on what you earn, taxes on D what you buy, and taxes on what you own. 2. Learn about 12 specific taxes, four within each main category—earn: individual income taxes, corporate income taxes, payroll taxes, and capital gains taxes; buy: sales taxes, gross receipts taxes, value-
Global Indirect Taxes September 2015 Issue 06 Indirect tax continues to be the tax of choice by the OECD and IMF, with both bodies preferring indirect taxes over direct taxes as a revenue raising tool which they see as less harmful to growth. There are now over 160 countries around the world, all operating a system of indirect tax based on .
INDIRECT TAXATION. Amendments brought in by the Finance Act, 2015. Study Note 1 : Canons of Taxation- Indirect taxes. 1.1 Basis for Taxation 1.1 1.2 Direct Taxes and Indirect Taxes 1.1 1.3 Features of Indirect Tax, 1.2 1.4 Constitutional Validity 1.4 1.5 Administration and Relevant Procedures 1.4. Study Note 2 : Central Excise Act, 1944
INDIRECT TAXES Service Tax AIFTP ra A 05 Malhotra Distributors Pvt. Ltd. v. CCE [2015] 55 taxmann.com 245 (Mumbai – CESTAT) 16. The Apex Court held that supervising and liaisoning with coal companies and railways for verification of material as per requirement of cement companies cannot be termed as a
Due to lack of any precise definition, all taxes on commodities and services other than personal services are treated as indirect taxes Thus, all types of sales tax, excise and customs duties are grouped as indirect taxes. Merits of Indirect Taxes 1. Highly Revenue givers in Developing Countries 2. Convenient 3. Elastic 4. Productive 5.
Taxes generate financial resources that governments us to provide public goods and redistribute income. Governments use five types of taxes: Income taxes Social security taxes Sales taxes Property taxes Excise tax Figure 9.5 shows the sources of tax revenues: Income taxes 51% (43%
GST vs Current Indirect Tax Structure The current indirect tax structure, which comprises of so many different taxes, can be classifiedas: Central taxes: levied by the Central govt (includes Central Sales Tax, Excise Duty etc.) The current indirect tax has one major problem - the cascading effect. When you buy something, youpaya tax on tax itself.
Genes and DNA Methylation associated with Prenatal Protein Undernutrition by Albumen Removal in an avian model . the main source of protein for the developing embryo8, the net effect is prenatal protein undernutrition. Thus, in the chicken only strictly nutritional effects are involved, in contrast to mammalian models where maternal effects (e.g. hormonal effects) are implicated. Indeed, in .
