Misappropriation in sales tax concessions on imported goods detected

KARACHI: The Directorate of Intelligence and Investigation of the Inland Revenue (IR), Karachi has detected gross misuse of sales tax concessions allowed by the Federal Board of Revenue (FBR) at the import stage and so far recovered around Rs500 million, official sources said on Thursday.
The sources said the directorate has detected the evasion through monitoring of goods declarations in which importers evaded sales tax by applying concessionary rates allowed under various statutory regulatory orders (SROs).
An official at the directorate, on the condition of anonymity, said major detection was made in SRO 1125(I)/2011 where commercial importers got cleared the goods on the rates that were only allowed to the manufacturing units.
The official said the recovery had been made in around 10 cases and further proceedings were underway, resulting in recovery of more amounts.
The directorate is also monitoring statutory regulatory orders 670(I)/2013 under which zero percent sales tax rate was allowed on the import of raw material for stationary items.
The sources said several units had violated the SRO on import of raw material, causing substantial loss to the national exchequer.
The investigation has also been launched against the Customs officials, who were withholding agents and responsible for deducting and depositing the revenue by applying the correct rates, the sources said.
In the past, the Inland Revenue had made several requests to the revenue authority for giving direct access to consignment clearance for the realisation of direct and indirect taxes.
At present, the officials of the Inland Revenue are conducting scrutiny of the goods declaration manually and major portion of trade clearance was not in their access.
There are proposals in the FBR regarding deputing Inland Revenue officials at the Customs collectorates for conducting on spot examination of the goods declaration or allowing access to the Customs data in real-time basis, the sources said.
A year ago, PRAL CEO had directed the authorities to establish connection between IR and Customs data after the Large Taxpayers Unit (LTU) Karachi raised objection about miscalculation of the sales tax at the import stage.
However, so far no such real-time connection has been established.
Officials at the Inland Revenue said the share of the Customs duty has decreased after implementation of the WTO regime and a major chunk of the revenue on foreign trade came from land revenue.
Apart from the Customs duty, advance income tax, sales tax and federal excise duty have also been imposed at the import stage.