Proposal to make NTN necessary for electricity meter installation

[Lahore_Real_Estate]

Staff Report

ISLAMABAD: Directorate General of Internal Audit, Lahore, has proposed to the federal government to make obtaining National Tax Number (NTN) mandatory for installation of commercial electricity meter, purchase of immoveable property and for obtaining various commercial services.

It has also proposed that minimum threshold for residential electricity and gas bills may be fixed beyond which NTN requirement should be made mandatory.

Directorate General of Internal Audit, Lahore, in its budget proposals for the fiscal year 2010-11 has said that at present all sectors are not in the ambit of taxation, e.g. agricultural sector which heavily contributes to the GDP. Necessary amendment may be made to bring the agricultural income into the ambit of taxation.

Informal sector of economy, contributing substantially to the GDP, is also out of tax net because of lack of documentation. Measures should be taken for documentation to bring the informal sector in the tax net. The directorate has made following proposals.

Installation of commercial electricity meter may be subject to obtaining NTN certificate.

Provision in law should be made to make it obligatory for various local authorities to require NTN certificate from the applicant before providing various commercial services.

Purchase of immoveable property may be subjected to production of NTN certificate.

Threshold for residential electricity and gas bills may be fixed beyond which NTN should be required.

Amendment to section 205 of the Income Tax Ordinance. 2001: The Internal Audit parties of this directorate detect loss of revenue on account of non-payment of arrear and propose charge of additional tax under Section 205 of the Income Tax Ordinance, 2001. The Taxation Officers are contesting the said observation on the ground that additional tax on outstanding demand cannot be charged until it is paid as per provisions of Section 205 of the Income Tax Ordinance, 2001 as interpreted by some recent judicial pronouncement whereby it has been held that without ascertainment of the date of payment, additional tax cannot be charged. The section says: “205. Additional Tax - (1) a person who fails to pay, any tax, including any advance payment of tax U/S 147, any penalty; or any amount referred to in section 140 or 141 on or before the due date for payment shall be liable for additional tax at the rate equal to twelve percent per annum on the tax, penalty or other amount unpaid computed for the period commencing on the date on which the tax, penalty or other amount was due and ending on the date on which it was paid.”

The directorate has suggested that amendment to above Section be made with regard to charge of said additional tax before the payment of original tax demand. This will accelerate the recovery of outstanding demand and facilitate timely collection of taxes.

The directorate has also suggested reviving section 231. It said that originally the Income Tax Ordinance, 2001 provided for detailed functions and powers of the Directorate General Internal Audit (Direct Taxes) through Section 231. Later, through the Finance Act, 2005, the entire Section 231 was omitted and revised powers of the Directorate General have been laid down through SRO NO.60/1/2005 dated 30.6.2005.

The exercise of statutory powers of this important department on the basis of SRO appears to diminish the significance of this organization. In fact, statutory powers can only be exercised on the strength of the statue itself or else any action taken would be illegal and also challengeable.