Supplies from Fata, Pata to taxable areas: FBR to set up 'IREN' checkposts for surveillance

ISLAMABAD: The Federal Board of Revenue (FBR) has decided to establish Inland Revenue Enforcement Network (IREN) checkposts to ensure foolproof surveillance of exit points from non-taxable areas, ie, erstwhile Federally Administered Tribal Areas (Fata) and the Provincially Administered Tribal Areas (Pata) to taxable territories.

In this regard, the FBR has issued Circular No 3 of 2021 (Operations), here on Tuesday.

According to the procedure, a number of significant amendments have been introduced via Finance Act, 2021, in the Sales Tax Act, 1990 (STA, 1990) as applicable to various industries located in erstwhile Fata/Pata regions.

The most important change brought about by the Finance Act, 2021, is vis-à-vis the new entry No 74 added in 8th Schedule to the STA, 1990, to charge 16 percent sales tax on all, "Goods supplied from tax-exempt areas of erstwhile Fata/Pata to the taxable areas."

Tax-exempt areas of Fata/Pata: 16pc GST levied on goods supplied to taxable areas

Accordingly, a Fata/Pata-domiciled person having status of "active taxpayer" in terms of Section 2(1) of the STA, 1990, would continue to import raw materials for consumption at his own manufacturing site against deposit of post-dated cheques (PDC) in line with its determined installed production capacity.

The importation, transportation, exemption (from import-stage income tax), and consumption of raw materials have been elaborately dealt with vide FBR's CGO # 1 of 2021, Circular # 5 of 2021, Circular # 9 of 2021 and Circular No13 of 2021, which continue to be applicable.

In order to facilitate the operationalisation of benefits laid down in the law, the Fata/Pata-domiciled industrial units may acquire installed capacity determination certificate (ICDC) from the Khyber-Pakhtunkhwa Department of Industries or the Ministry of Industries, Government of Pakistan.

Purchases made from persons in Fata, Pata not liable to GST: ATIR

The Commissioner concerned shall accept the ICDC presented until he has reasons to believe that the actual capacity installed is less than the capacity determined and certified.

It goes without saying that only the goods meant for value addition are to be imported and not finished products, the FBR maintained.

In order to undertake foolproof surveillance of exit points from nontaxable to taxable territories, IREN checkposts under Section 40D of the STA, 1990 are being established and functionalised to ensure that due tax is paid at the rate of 16 percent on goods supplied into taxable territories.

The Regional Tax Office, Peshawar shall also establish a tax office in Malakand Division for prompt release of consignments, processing of consumption and exemption certificates and effective and timely implementation of law in letter and spirit, the FBR added.

Copyright Business Recorder, 2021