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ISLAMABAD: The government is planning to place a foolproof mechanism to avoid misuse of exemption of the Federal Excise Duty (FED) extended to erstwhile tribal areas to protect documented industries through strict monitoring, submission of post-dated cheques /consumption certificates and establishing new check posts.

It is learnt that the issue of possible misuse of exemption of the FED to units established in the tribal areas was discussed during a meeting of large-steel producers with Finance Minister Shaukat Tarin and Federal Board of Revenue (FBR) at the Finance Ministry.

The documented steel sector has been strongly protesting against the decision of the government of removal of the FED on erstwhile Fata, Pata, and expressed serious reservations fearing that misuse of this concession would severely damage the steel industry in the rest of the country.

The Ministry of Finance and the FBR officials fully understood the importance of documentation and tracking of the local supplies of the tax-exempt goods within the tribal areas and applicability of taxes on goods being sold in the tariff areas.

The facility of exemption on raw materials/inputs is being linked to the actual capacity of the units established in the tribal areas.

The documented industry requested the finance minister that the FBR must take measures to ensure levying of taxes including sales tax on the movement of steel products from non-tax areas to tariff areas.

In this regard, new check posts need to be created at the Fata/Pata in addition to compulsory scanning of every container at port.

To avail sales tax exemption, the Fata/Pata units must deposit post-dated cheques, which are to be released after obtaining consumption certificate by the Regional Tax Office (RTO) Peshawar that all finished goods were sold in non-tax area or otherwise.

If consumption certificates are not provided within three months, all post-dated cheques (PDC) must be en-cashed.

The industry has further proposed that the local supply within the Fata/Pata areas must be fully documented to ensure tracking and tracing.

On the issue of the Fata/Pata, the finance minister said that the exemption will be only given on the measured capacity and 17 percent sales tax would be charged in case these goods are sold in other areas of the country.

He said that the monitoring is the major challenge of this decision. The government will take certain measures to check any misuse of this facility. The exemption will be allowed only on certified capacity. There must be a complete check and balance of import, production and sale.

The FBR will erect check posts in Peshawar and other main points for mandatory clearance of the goods from the exempt areas to the tariff areas.

Moreover, the exemption would be available to value-added items only.

At the same time, the trading balance is essential – if sold in settled areas, then sales tax of 17 percent must be charged.

The finance minister principally agreed with the PALSP’s suggestion that to avail sales tax exemption, the Fata/Pata units must deposit post-dated cheques, which are to be released after obtaining consumption certificate by the FBR.

It was decided in the meeting that a Monitoring Committee will be formed to ensure and maintain check and balance. This Committee will come up with some good mechanism and suggestions with the objective that no pilferage would be allowed.

It was also decided that representatives of the PALSP will be part of the committee.

The finance minister advised the PALSP delegation to meet Tabish Gauhar, the SAPM to the Ministry of Energy, on the massive electricity theft issue with respect to the Fata/Pata.

It was also discussed that the government may give exemption to only those who submit/clear their default money.

It was agreed to resolve the issue of minimum valuation of steel products soon.

Tariq Chaudhry, Member IR Policy, was directed by the finance minister to look into the issue and resolve.

The finance minister assured the documented sector that he will hold meetings with the representative body of steel industry, PALSP, periodically/every month to resolve their urgent issues.

Copyright Business Recorder, 2021

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