Oil, ghee and steel sectors: Input tax adjustment disallowed on 778 goods

ISLAMABAD: The Federal Board of Revenue (FBR) has issued a list of 778 goods on which manufacturers of oil and ghee and steel melters/rerolling mills cannot claim input tax adjustment in their monthly sales tax return.

In this connection, the FBR has issued Sales Tax General Order (STGO) 12 of 2022 on the input tax adjustment to manufacturers of oil and ghee and steel sector.

From April 1, 2022, the manufacturers of oil and ghee would not be entitled to claim input tax adjustment on 348 items. However, the steel melters and re-rollers would not be able to claim input tax adjustment on 430 items.

Sector experts told Business Recorder that the denial of input tax adjustment on 778 items would have serious consequences for the manufacturers of oil and ghee and steel sector. This restriction of disallowing input tax adjustment would increase the cost of these sectors.

Waiver of tax relief: FBR yet to begin refund payments to various sectors

In case of manufacturers of oil and ghee, the disallowance of input tax adjustment covers items such as bones and horn-cores; pepper of the genus piper dried or crushed; wheat or meslin flour; flour, meal, and flakes of potatoes; wheat gluten whether or not dried; cane sugar; sugars, including lactose, maltose, glucose; molasses; sauces and preparations therefor; mineral waters; natural water; oil-cake and other solid residues; sunflower oil cake; rape or colza seed oil cake and other items specified.

The FBR has issued a separate list of 430 items for the steel sector on which the input tax adjustment cannot be claimed.

According to the FBR, the Sales Tax Act, 1990 (Act) mandates a taxpayer registered with the FBR to claim input tax credit on import/purchases from registered suppliers only. The section 8(1)(a) of the Act restricts the adjustment of input on goods or services used or to be used for any purpose other than for taxable supplies made or to be made.

Similarly, Section 8(1)(f) and (i) of the Act provide that tax credit shall not be admissible on the goods or services not related to the taxable supplies made by the taxpayer. This essentially being a self-assessment based system warrants high standards of responsibility and integrity on part of the UST filers.

Copyright Business Recorder, 2022