FTO’s judgement: LTO Karachi, carmaker agree on refund mechanism

ISLAMABAD: The Large Taxpayer Office (LTO) Karachi and a leading car manufacturer have agreed on a mechanism for implementation of the Federal Tax Ombudsman (FTO)’s judgment to refund the amount of sales tax collected in excess of 12.5 percent from the consumers/ middle-income buyers of motor vehicles.

The FTO, Dr Asif Mahmood Jah, has directed Advisor Income Tax, Karachi to hold meetings with the stakeholders for smooth implementation of the recommendations in the referred complaints of overcharge of sales tax by an automobile company.

In this connection, the FTO has issued instructions to the Advisor Income Tax Karachi, here on Wednesday.

According to the FTO, 24 complaints were filed against the FBR Islamabad and the said automobile company, in terms of section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance) for charging sales tax @ 17 percent on purchase of vehicle 998-CC after July, 2021 as against 12.5 percent, which was the actual rate at that time.

In this way, the taxpayers were constrained to pay in excess of what was actually due. The FTO had recommended that collection of the sales tax in excess of being legislated in the Finance Act 2021 and delay in settling the tax refund tantamount to maladministration. President of Pakistan had upheld the decision and rejected the FBR’s pleas against recommendation for refund.

Dr Jah had directed Advisor Income Tax Karachi to hold meetings with the stakeholders for smooth implementation of the findings/ recommendations in the referred complaints of overcharge of tax by the said car manufacturer.

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Both the representative of LTO Karachi and the car company agreed to the following mechanism for implementation for the FTO’s judgment, which has been endorsed by the FTO: (i); The company will furnish the refund claims under section 66 to LTO Karachi in respect of refund due to the subject complaint (as per list provided by the FTO Office);

(ii) The refund claim will be accompanied with the relevant invoices and proof of tax paid on theses invoices. On receipt of refund claim, LTO Karachi will process the claim as per law and issue refund to the car company;

(iii) The company will then remit the amount to all the complainants as per their due share and submit proof of payment to LTO Karachi and FTO Office for final implementation of the order.

As per the information with the FTO Office, apart from the 24 initial complaints there are 9,000 such buyers of up to 1000cc vehicles who have been charged to tax not due after July 1st 2022, the FTO office added.

Copyright Business Recorder, 2022