THURSDAY MARCH 31: FBR admits SRO 231 created raw material shortage

April 04, 2011

RECORDER REPORT

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The Federal Board of Revenue has admitted that the issuance of SRO.231(I)/2011 has created huge shortage of raw material and inputs consumed by manufacturers of five leading export sectors - textile, leather, garments, sports and surgical goods.

According to the FBR instructions to all Model Customs Collectorates (MCC) and Chief Commissioners of Large Taxpayer Units (LTUs) Regional Tax Offices (RTOs) of March 29, 2011, the FBR has not anticipated that there would be shortage of raw materials due to enforcement of the SRO.231(I)/2011. Referring to the federal government notification SRO.231(I)/2011, it is stated that the government/FBR is reviewing the sales tax zero-rating scheme of SRO.509(I)/2007. The new notification will be issued shortly in this regard effective from March 15, 2011 (except reduced tax rates, which will be applied prospectively).

Since most of the import consignments lying at customs ports are held up due to the application problems of the SRO.231(I)/2011 with the result that manufacturers of the five major export sectors are facing raw material shortages. In order to overcome this unanticipated situation, the FBR has held the operations of SRO.231 (I)/2011 dated March 15, 2011 in abeyance. The held-up import consignments of all categories of imported entities to benefit from the SRO.509 (I)/2007 dated June 9, 2007 as applicable before March 15, 2001 may be cleared accordingly. The special excise duty (SED) would not be charged on such consignments, FBR directive added.

Through recently issued notifications, the Board had restricted the sales tax zero-rating facility of five export sectors including textile, leather, surgical, sports and carpets to only registered manufacturers-cum-exporters or exporters for export purpose by amending SRO509(I)/2007. The domestic supplies of these five zero-rated sectors were liable to sales tax at the standard rate of 17 percent. However, the operation of the SRO.231 (I)/2011 has been suspended till issuance of a new notification.