Manufacturing units in tribal areas: RTO Peshawar disallows excess quota for exempted raw materials

ISLAMABAD: The Regional Tax Office (RTO) Peshawar has disallowed excess quota of exempted raw materials wrongly claimed by manufacturing units of steel, ghee, textile, and plastic etc operating in merged tribal areas.

Details of the case revealed that in the wake of the Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA) merger with Khyber Pakhtunkhwa, the government extended the benefit of exemption from collection of income tax and sales tax on imports of raw material to the manufacturing units located in these areas. To ensure that the raw material being imported by these units is used solely for in-house consumption to produce finished goods, the Federal Board of Revenue (FBR), among others, introduced the scheme of quota allocation of raw material on the basis of installed production capacity of the manufacturing units.

The task of quota determination was jointly assigned to the RTO, Peshawar and Directorate General of Input Output Coefficient Organisation (IOCO).For this purpose, teams were constituted from time to time to determine the production capacity of the units and allot quota of raw material on its basis to them. However, on revisiting the quota-related record, it was observed that due to tricks of the manufacturing units excess quota was availed by these units.

To arrest this trend, at the directions of Aqeel Ahmed Siddiqui, Chief Commissioner RTO, Peshawar, Shaukat Hayat, Commissioner Corporate Zone and his able team identified the main factors responsible for the misuse of quota and took corrective measures accordingly.

As a result of these efforts, quota across main sectors (steel, ghee, textile, plastic etc), to the Rs 143322 million with approximate market value of Rs 11659.4 million and revenue implications of Rs 2219.62 million has been disallowed so far since November 2022.

The reasons for quota disallowance included ghost units/fake installed capacity/lack of funds with owner. Legal issues involve non-filing of returns, suspension, non-payment of sales tax on taxable supplies.

Other reasons for quota disallowance included there is a limited market for finished goods, lack of technical know-how regarding non-compatibility of raw material with machinery, working out production vis-à-vis electricity consumption, identifying limiting factor in manufacturing process.

Copyright Business Recorder, 2023