FBR to pursue input tax adjustment cases in high courts

The Federal Board of Revenue (FBR) has directed field formations to strongly pursue cases of input tax adjustment on packing material to exporters in high courts and get the stay vacated for recovery of input tax adjusted on account of tax paid on purchase of packing material.
According to the FBR's instructions issued to the chief commissioners of Large Taxpayer Units (LTUs) and regional tax offices (RTOs), several registered persons (textile exporters) have filed constitution petition No 6211 in Sindh High Court against disallowance of adjustment of input tax on packing material to exporters.
The petitioners have intimated that the high court has granted an interim order in the matter. In this regard, it is pointed out that SRO 1125(1)/2011 as amended by SRO 491 (1)/2016 is applicable to all categories of registered persons mentioned in SRO 1125(1)/2011 who avail zero rating under the said notification on their purchases, irrespective of the fact whether or not they are exporters. Moreover, the decision to disallow zero rating on all sorts of packing material and other amendments were finalised after discussions made in various meetings with the industry, the FBR said.
The FBR further said that contention of the petitioners is that clause (a) of section 4 should have been invoked to make the conditions of SRO 1125(1)/2011 as amended by SRO 491(1)/2016 applicable to exporters. It is asserted that said clause (a) allows zero rating of exports in the terms specified therein and no further conditions can be imposed/ attached with this zero-rating through a notification. The objective of SRO 1125 (1)/2011 is to provide for zero-rating of local purchases/imports specified therein and the relevant clauses for this purpose are clauses (c) and (d) of section 4. Further clause (b) of sub section (1) of section 8 empowers the federal government to disallow input tax adjustment on any item. These powers have also been invoked while issuing SRO 1125(1)/2011 to disallow input tax adjustment to all those persons, whether or not exporters, who avail zero-rating on local purchase under the said SRO.
Taking this into account, chief commissioners are requested to pursue the case vigorously and get the stay vacated and recover the input tax so adjusted on account of tax paid on purchase of packing material by the petitioners. It is also added that presently sales tax return does not automatically reject the input tax on packing material and it is the responsibility and obligation of the filers to enter such input tax in column 7 of the return, the FBR added.