FBR verifies inventory position of businessmen to prevent tax evasion

KARACHI: The Federal Board of Revenue (FBR) has started scrutinising inventory position of manufacturers and importers to preempt sales tax evasion following withdrawal of concessions and exemptions, sources said on Saturday.

The sources in Corporate Regional Tax Office Karachi said significant changes were brought to Sales Tax Act 1990 by eliminating exemptions and concessions from the current fiscal year.

Sales tax rate of 17 percent has been implemented on most of the supplies including local supplies by textile manufacturers, which were enjoying lower tax rates up till June 30, 2019.

The sources said the FBR directed all the taxpayers especially manufacturers and commercial importers to file stock position of raw material/semi-finished goods and finished goods as available till June 30, 2019 through their monthly sales tax and federal excise return for June to be filed in July.

They said the FBR feared huge tax loss due to underreporting of stocks by manufacturers and importers following increase in tax rate. The FBR directed the chief commissioners of Inland Revenue to monitor the declaration of taxpayers and take action in case of any concealment found in stock position.

The sources said the Finance Act, 2019 deleted sales tax special procedure, which granted concessions and exemptions to several economic sectors. With the deletion of the special procedures the tax rates would be 17 percent instead of reduced rates or zero percent.

They further said the concessions allowed through a statutory regulatory order (SRO 1125(I)/2019) to textile and leather items have been abolished and now all the items would be subject to 17 percent sales tax, except for the integrated retail outlets for which the rate would be 14 percent.

The sources said the FBR also instructed the Inland Revenue offices to ensure application of information related to computerized national identity cards of buyers on the invoices issued by importers and manufacturers to retailers. They said the FBR intended to monitor underreporting by suppliers through sales of retailers.

FBR Chairman Shabbar Zaidi clarified that the provision of CNIC was not meant to harass the trade community but to ensure documentation of economy. Provision of CNIC and national tax number on purchases would be applicable from August 1. However, CNIC or NTN would not be required in case of supplies made by a retailer where the transaction value inclusive of sales tax amount does not exceed Rs50,000 and the sale is made to an ordinary consumer buying goods for his own consumption and not for the purpose of resale or processing.