Minimum output, wastage: FBR to issue industrial benchmarks

ISLAMABAD: The Federal Board of Revenue (FBR) will issue industrial benchmarks for minimum production and wastage of input goods/raw materials in different sectors during 2020-21. The FBR has issued circular number 1 of 2020 here on Thursday to explain important amendments made in the Sales Tax Act and Federal Excise Act through Finance Act 2020.

According to the FBR's explanation, a new subsection (5) has been inserted in Section 7 for empowering the Board to give industrial benchmarks for minimum production and wastage of input goods/raw materials in respect of various sectors. The change has been made for eliminating discretion of the adjudicating officers and for according similar treatment across the board on allowability/disallowability of input tax credit against input goods wasted during normal business processes, to the extent such credit is in excess of the Board-prescribed benchmarks/limits.

The FBR further explained that the Eleventh Schedule provides for withholding agents to deduct tax at the time of purchase from both registered and unregistered persons. The categories of withholding agents include Federal and Provincial Government departments, companies, public sector organizations and autonomous bodies.

However, it has been noticed that most of the registered suppliers whose tax has been withheld do not usually file their sales tax returns and resultantly, fail to pay their remaining amount of 4/5th tax in case 1/5th of the tax involved is withheld by the purchaser as aforementioned. To enforce returns by the such suppliers and payment of remaining tax involved, the whole concept of withholding has now been linked to the supplier (withholdee) being on the ATL list of the FBR or otherwise.

The persons other than Active Taxpayers shall be given the same treatment as was previously accorded to unregistered persons i.e. government and public sector enterprises shall deduct whole of the tax involved in case of supplies made by persons other than those on ATL and the companies shall deduct 5 percent of gross value of supplies on supplies by such persons. This aims at promoting return filing and documentation culture in the country, the FBR added.

Copyright Business Recorder, 2020