FBR deputes officials at cigarette factories to track tax evasion

KARACHI: The Federal Board of Revenue (FBR) has deputed tax officials at all cigarette factories across the country to monitor inventories following reports of revenue leakages, sources said on Friday.

They said that the FBR had detected huge mismatch between production and the subsequent sales in to the market. “The decision to depute officials at factory premises is taken following less than expected revenue growth despite revising upward rates of federal excise rates in the budget 2019/2020,”a source said.

“FBR headquarters had approved deputing officials at all factories across the country, including two giant manufacturers.” Officials said the FBR invoked Section 40B of Sales Tax Act, 1990 to monitor purchases of raw material and supplies of tobacco industry,

It is worth mentioning that the tax offices had been barred to invoke the Section 40B of Sales Tax Act, 1990 on the instructions of FBR chairman. The tax offices following the chairman orders, can only recommend deputation by presenting solid grounds of concealment and on the basis of such recommendations the FBR grants approval.

Prior to July 1, 2019 a chief commissioner had the power to post officers at any factory premises. However, through Finance Act, 2019 the power has been curtailed. Under Section 40B, the deputed officer has been authorised to monitor production, sale of taxable goods and the stock position.

Officials said the growth in federal excise duty collection has remained uneven. The first quarter collection growth of FED shows that it was 25 percent in fiscal year 2017/2018, 8.5 percent in fiscal year 2018/2019, and 18.7 percent in fiscal year 2019/2020.

Growth in FED in recent collection was due to increase in duty rate for various sectors. The FED has been increased to Rs5,200 per 1,000 sticks in the last budget as compared with Rs4,500 per 1,000 sticks in fiscal year 2018/2019.

A FBR official said that the significant increase in duty on sale of cigarettes had not reflected in the tax collection so far.

The FBR had also launched a campaign against counterfeit and non-duty paid cigarettes, the official added. The FBR has set minimum rate of a cigarettes packet at Rs63. If persons were found selling below this rate, they would be penalised with fine of Rs20,000.

Besides, persons selling counterfeit cigarettes were liable to pay monetary penalty of Rs100,000 and up to five year imprisonment. Last month the FBR authorised deputation of tax officials at around 29 sugar mills falling within the jurisdiction of the Large Taxpayers Unit Karachi.