FBR orders audit of tax exempted industrial units

KARACHI: The Federal Board of Revenue has ordered tax officials to conduct audit of all those industrial taxpayers, who availed income tax exemption on manufacturing and sales activities, sources said on Saturday

The sources at the local tax offices said that the FBR had issued instructions to field offices to gather record of taxpayers who had obtained exemption certificates for the purpose of conducting audit. The issue came under discussion at a meeting between Member Inland Revenue and officials of the Large Taxpayers Unit (LTU) Karachi on Thursday (July 28).

An official at the LTU Karachi said that from the tax year 2017, the taxpayers who have availed of exemption in respect of consumption, production and sales would be selected for audit automatically.

The official also said that those taxpayers would not be part of the FBR’s annual random computerisation balloting for selection of audit.

“The taxpayer will require to present accounts and documents for audit himself for the year during which he has availed of the exemption certificate,” the official said.

The condition has been imposed to eliminate the misuse of tax exempted import of raw materials, the official said. Manufacturers have been allowed tax-free import of raw materials by presenting exemption certificate issued by the commissioner Inland Revenue.

The mandatory requirement to obtain the exemption certificate was that the import of raw materials should not exceed 110 percent of the last year.

The official said that this procedure was earlier governed through the Statutory Regulatory Order (SRO), but through the Finance Act 2016, it was made part of the statute.

In case a taxpayer obtained the exemption certificate, but failed to present accounts / documents for audit to the tax official concerned, the exemption certificate would be cancelled, the official said. Further, all the tax concessions or exemptions availed by the taxpayers through the certificate would be recovered, the official added.