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ISLAMABAD: Tax authorities of Azad Jammu and Kashmir and the Federal Board of Revenue (FBR) have decided to jointly chalk out modalities to regulate the incoming goods from the tax exempt areas of the AJK and Gilgit-Baltistan into tariff areas of Pakistan.

Sources told Business Recorder here on Monday that the senior tax officials of the AJK and the FBR discussed the issue of enforcement of SRO 96(I)/2021, pertaining to the supplies of taxable goods brought from tax-exempt areas into taxable areas.

In this regard, a meeting between the AJK tax authorities and the FBR was recently held at the FBR Headquarters.

According to the SRO 96(I)/2021, the person bringing taxable goods from tax exempt area shall be required to be registered under the Sales Tax Act or, as the case may be, the Sales Tax Act, 1990 as adopted in Azad Jammu and Kashmir and all the provisions of the Acts ibid shall apply accordingly.

The liability of payment of tax or taxes and furnishing of prescribed documents shall be on the person bringing, or causing to bring, taxable goods from tax exempt area and supplying the same in taxable area in the course and furtherance of taxable activity.

Subject to the applicable provisions of the Act and the rules made there under, a registered person shall be entitled to the adjustment of any input tax paid under the Sales Tax Act, 1990 as adopted in the Azad Jammu and Kashmir.

Under the new regulations, the FBR has directed the Regional Tax Offices (RTOs) of Peshawar, Abbottabad, Rawalpindi, Sialkot, and Quetta to establish check-posts to strictly check movement of goods from tax exempt areas of Azad Jammu and Kashmir, Gilgit-Baltistan and tribal areas to the taxable areas of Pakistan.

Every registered person bringing, or causing to bring, taxable goods from tax-exempt areas into taxable area, in the course and furtherance of taxable activity, shall login to FBR computerised system and electronically generate e-transport advice, with a unique identification number, in the form specified in STR 32.

The e-transport advice shall be issued prior to entry of the taxable goods in to the taxable area.

Sources said the Inland Revenue officers of the FBR were empowered to search vehicles coming from tax-exempt areas of the Azad Jammu and Kashmir (AJK), the Gilgit-Baltistan and tribal areas to check entry of exempted goods into tariff areas of Pakistan and impose heavy penalty on non-duty/taxes paid items.

According to the FBR, there is no sales tax in Pakistan on the supplies of goods as originating from AJK.

The tax on the same is payable in the AJK.

The tax is, however, applicable if the recipient of such supply makes further supply in Pakistan, and he had to deposit tax due after adjustment of input tax paid in the AJK.

The goods so exempted are generally supplies to Pakistan, the FBR maintained.

Although such goods are taxable in case of further supply in Pakistan, as stated, but due to lack of documentation and proper checking, such goods escape taxation in Pakistan and thus, have competitive edge over similar goods manufactured in Pakistan, the FBR said. Similar concerns exist in relation to other tax-exempt areas.

Copyright Business Recorder, 2021