Misuse of RRT by export-oriented sectors: FBR to conduct taxpayers’ physical verification

KARACHI: The Federal Board of Revenue (FBR) has decided to conduct taxpayers’ physical verification, falling in the five export-oriented sectors to examine the utilization of utilities connections in the products manufacturing process after the misuse of Reduced Rate Tariff (RRT) by manufacturers.

The federal government through the ministry of energy allowed a preferential tariff rate on the supply of electricity & gas to the manufacturers of five export-oriented sectors to boost the country’s exports. However, the FBR has received complaints regarding the misuse of RRT by the taxpayers that led to strict monitoring to thwart these attempts.

For this purpose, the board has issued written instructions to the chief commissioners of LTOs, MTOs, CTOs, and RTOs, directing them to ensure regular monitoring of manufacturing activities and examine the utilization of utility connections in the whole manufacturing process.

Presently, there are two tiers of taxpayers who are availing preferential utility tariff on the supply of utilities – taxpayers who were surveyed by the respective field office prior to July 2019 and recommended to the board for allowing zero-rating of utilities through the sales tax general orders and the taxpayers who are accorded preferential tariff on the recommendations of the respective trade associations. However, the facilities of concessionary rate tariffs are being misused by the taxpayers.

Therefore, the FBR has directed its field formation to compile a list of the taxpayers who are availing RRT in order to identify the fraudulent elements. The board also ordered to carry out physical verification if any taxpayer is found ‘nil filer’ for over three months and in case of any abnormality, the field formation is allowed to take legal action and issue directions to the DISCO/gas company for the withdrawal of RRT facility.

The FBR further instructed the field formation to establish teams for conducting physical verifications of taxpayers of five export-oriented sectors falling under their jurisdictions for regular monitoring of their activities as well as examining utilization of their utilities connections in manufacturing of products only.

As the facility is allowed only to the manufacturers of five export-oriented sectors but if any taxpayer is found involved in the production of goods other than those falling in the five export-oriented sectors by availing reduced rate tariff, the field formation is directed to take legal action including recommendations for withdrawal of reduced rate tariff.

Copyright Business Recorder, 2021