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ISLAMABAD: The Federal Board of Revenue (FBR) is conducting a survey of the industrial units located in the non-taxable areas, i.e., erstwhile Federally Administered Tribal Areas (Fata) and the Provincially Administered Tribal Areas (Pata) to confirm misuse of tax exemptions available to them.

Sources told Business Recorder here on Wednesday that a meeting on “joint survey reports on units located in tribal areas” was held at the FBR Headquarters, which was attended by the FBR chairman, senior customs officials, officials of Regional Tax Office, Peshawar, and Customs officials from the field formations of the KP.

According to the sources, the meeting discussed in detail the “joint survey reports on industrial units located in tribal areas”.

The meeting also discussed the status of the established Inland Revenue Enforcement Network (IREN) check posts to ensure foolproof surveillance of exit points from non-taxable areas to taxable territories.

Recently, the FBR chairman reportedly said that there should be no misuse of tax exemptions in FATA and PATA.

He said that to rectify the things, a system is well on the way.

Business and trade has repeatedly requested the FBR to take notice of the misuse of tax exemptions by the industries in Fata/Pata. The misuse of tax exemptions by the industries based in erstwhile Fata/Patais hampering the competitiveness of industries.

The FBR had granted sales tax and income tax exemption to industries based in erstwhile Fata/Patain 2018 on imports of certain raw materials for their consumption under SROs 889(I)/2018, 890(I)/2018 and 1213(I)/2018.

The exemption of FED has also been granted to the industries based in erstwhile FATA/PATA w.e.f July 1, 2021.

These raw materials are imported and sold in Punjab which results in heavy Tax Evasion. This misuse is seriously hurting the regular industries based outside FATA/PATA especially the foam industry and steel melters etc.

According to the FBR’s 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.”

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.

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 non-taxable 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, 2022

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