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November 13, 2015

FBR to recover Rs5bln unpaid tax from steel sector


November 13, 2015

KARACHI: The Federal Board of Revenue (FBR) has initiated a drive to recover sales tax of around Rs5 billion unpaid for the past two years from the steel sector, sources said on Thursday.
The sources said scrutiny of supplies made by steel melters showed that the industry had not paid ‘further tax’ on their sales to unregistered persons.
The apex tax authority introduced the further tax to encourage persons to get registered in the sales tax net. It was initially introduced at one percent but enhanced to two percent through the Finance Act 2013.
Now, the two percent further tax is in addition to normal sales tax rate of 17 percent.
The sub-section 1A of Section 3 of the Sales Tax Act, 1990 defines: “In case of taxable supplies are made to a person who has not obtained registration number, a two percent further tax will be charged in addition to the rate specified in sub-section 1, 1B, 2 5 and 6.”
The rates vary from the normal sales tax rate. Through this section, the government brings nearly all the unregistered supplies under the purview of further tax.
The sub-section 6 of Section 3 of the Act brings the tax rates defined in Sales Tax Special Procedure Rules, 2007 under the ambit of further tax.
The sales tax on steel sector charged under the special procedure, which says every steel-melter, steel re-roller and composite unit of steel melting, re-rolling having single electricity meter are required to pay sales tax at the rate of nine rupees per unit of electricity consumed for the production of steel billets, ingots and mild steel products excluding stainless steel, which will be considered as their final discharge of sales tax liability.
Moreover, the authority imposed adjustable sales tax at the rate of Rs5,600 per metric ton on import of re-meltable iron and steel scrap.
The similar rate is also on import of waste and scrap of compressors. The tax officials said the final tax liability, under the special

procedure, is for persons engaged in manufacturing.
However, their supplies to unregistered persons will attract further tax.
The sources said the FBR can scrutinise data of past five years of any unit for unpaid amount. They said the Large Taxpayers Unit Karachi issued notices to some industrial units for payment of the tax.

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