Misuse of exemption certificates: FBR to tighten tax laws

The Federal Board of Revenue has decided to tighten tax laws to check the massive misuse of exemption certificates obtained in the name of importers-cum-manufacturers on the import of raw materials and inputs to be consumed in finished products.
Sources told Business Recorder here on Wednesday that the FBR has given a concession to the importers-cum-manufacturers for exemption of 3 percent tax on value addition at the import stage. However, the same concession is not available to the commercial importers.
It has been apprehended that certain importers have declared themselves as importers-cum-manufacturers to wrongly obtain exemption of taxes at the import stage. If the FBR has been able to differentiate between the genuine and fake importers-cum-manufacturers, the authorities would be able to recover the evaded amount from the fraudulent importers, who had obtained exemption certificates.
Sources said that the condition of submission of 'consumption certificate' by the importers-cum-manufacturers was abolished in the past. In the presence of the 'consumption certificate', importers-cum-manufacturers cannot hide the installed capacity and actual consumption of raw materials and inputs in the finished products.
It was practice that the importers-cum-manufacturers have to obtain the 'consumption certificates' from the concerned commissioner to verify whether the imported inputs have been dully used in the manufacturing process. The exemption certificates were linked with the submission of the 'consumption certificates' by the importers-cum-manufacturers. Due to withdrawal of the condition of submission of the 'consumption certificates' by the importers-cum-manufacturers, some unscrupulous elements are trying to misuse the facility.
The restoration of the condition of submitting the 'consumption certificates' by the importers-cum-manufacturers might be able to help the tax department to verify the consumption of imported raw materials in the finished goods. According to sources, the FBR has decided to scrutinise data of importers-cum-manufacturers, who have obtained exemption of taxes on the import of raw materials and inputs, but showing no local sales of the finished products.
Sources stated that the genuine importers-cum-manufacturers have been engaged in domestic sales of the finished products by consuming raw materials/inputs imported without payment of withholding tax. The importers who have imported exempted raw materials, but showing no local supplies for the last 6 months and one year, these might be suspicious importers-cum-manufacturers. The exercise would also conduct audit of the suspected units to check the authenticity of their consumption of exempted inputs and raw materials in the finished products, they added.