This blog is written by Mr. Hussain Mahmood, Manager Taxation and Corporate Services. Please send this interesting piece and attain a most relevant information.

RESTRICTION ON PURCHASE OF CERTAIN ASSETS (Sec 227C)

This is with reference to the introduction of a new section numbered as 227C vide Finance Act, 2018. The Section is reproduced hereunder:

Quote: “Notwithstanding anything contained in any law, for the time being in force,—

  • any application for booking, registration or purchase of a new locally manufactured motor vehicle or for first registration of an imported vehicle shall not be accepted or processed by any vehicle registering authority of Excise and Taxation Department or a manufacturer of a motor vehicle respectively, unless the person is a filer.;
  • any application or request by a person to any authority responsible for registering, recording or attesting transfer of any immovable property , exceeding five million rupees, for registering or attesting the transfer shall not be accepted or processed by such authority, unless the person is a filer.”;”. Unquote emphasis supplied

As the plain reading of the text makes it obvious that through the this amendment, effectively

a non-filer cannot:

  • book, register or purchase a new locally manufactured motor vehicle; or
  • First register an imported vehicle; and
  • Cannot have register , record ot transfer any immovable property of exceeding Rs. Five million

First thing is the tax department is likely to lose a substantial amount of revenue on account of non- filers from such transactions as the rates for non-filers are substantially higher than those of filers J.

But more importantly, there was a need to develop a tax culture based on principles, however, as usual poor administration of tax department, bad practices and forcing registered taxpayers to pay tax by passing orders without proper consideration of the case yet just to create a demand to meet targets or make a forcible recovery is a bigger hindrance. Again instead of promoting and encouraging, the people are being forced to register irrespective of the fact whether there income is subject to tax or not like exempt income from agriculture or exempt capital gains or exempt capital gains. Another factor that may hit the ordinary person is access to informed or qualified consultant. It has been observed since this “compaign to register taxpayers (filers)” vide increasing rates for filer and non-filers, there are many people who become filers by unqualified consultants by filing incorrect returns and put them in trouble instead of getting them out of it. When such taxpayers were selected in audits, they were helpless.

Nevertheless, it is a great step to make people to become a filer in falling under above categories as the persons buying the motor vehicles or property of that worth may be earning that much money that should have qualified them to register, enroll and pay tax and file the returns. However, the wording have applied it on Motor cycles too which is widely used by students, employees and a lot of middle class, most of them may not be even liable to pay tax, hence putting an extra burden. It would be appropriate to introduce exceptions to the subject section.

The readers of this blog are also advised to check section 230F introduced through this act.

Hussain Mehmood