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ISLAMABAD: The Ministry of Finance has returned the amount of Rs31.9 billion to the Sindh Revenue Board (SRB) on account of cross-input tax adjustment (CITA) for the past years, which was wrongly deducted by the Federal Board of Revenue (FBR).

Sources told Business Recorder on Thursday that a meeting was held between the FBR and the SRB senior officials at the FBR Headquarters to resolve sales tax-related issues between the federation and the province. In February 2022, the FBR had deducted an amount of Rs31.9 billion from the SRB under the head of cross-input tax adjustment. However, the federal government has now returned the said amount to the Sindh government. During the meeting between the FBR and the SRB, the tax authorities have assured the SRB that all issues would be resolved amicably.

According to the sources, meeting with the FBR was useful and fruitful as many disputes were resolved, satisfactorily. The next meeting of the Accounting Committee on settlement of CITA (Cross Input Tax Adjustment) issues will be held soon between the senior management of the FBR and the SRB to arrive at a decision.

A tax expert told Business Recorder that the memorandum of understanding (MoU) was signed between the SRB and the FBR on March 13, 2014, in connection with the Cross Input Tax Adjustment, which meant that the taxpayers would be allowed to adjust their sales tax return based on the input tax paid in the other’s jurisdiction.

March SRB collection shows 30pc growth YoY

This cross-adjustment was supposed to be scrutinised and reconciled, after which the net amount was payable to the administration in whose return higher quantum of cross-adjustment was made. Another agreement was signed in August 2016 to implement the MOU.

In the meeting held on August 26, 2016, the FBR and the SRB reached an agreement regarding the parameters for cross-adjustment/ verification of claim of input tax in light of the MOU signed between the two authorities on 13/03/2014. The understanding was reached after extensive deliberations and meetings between the two revenue authorities. The agreement shall facilitate the taxpayers and allow them to adjust provincial tax paid on services against their liability of sales tax on goods.

A joint committee as laid down in the MOU was also formed and a series of meetings were also held. The MOU also took care of the situation where some amount went disputed and in such a case, it was agreed that the disputed/ un-reconciled amount would be referred to an accounting committee.

A tax expert stated that the FBR had on its own determined a net amount of Rs31.978 billion payable by the SRB by rejecting the latter’s valid claim of Rs42.5 billion against different heads.

The agreed principle for intra sales tax adjustment between federal and provincial governments is based on the transfer of revenue to the extent of the actual amount of adjustment claimed by taxpayers in the sales tax return filed either with the FBR or SRB/ PRA/ KPRA. The same would be monitored and verified by the committee consisted on the federal and provincial authorities; hence, there remain no dispute/ concern for excessive or lesser distribution of sales tax collection to any stakeholder; therefore, the agreement can also be termed fair and equitable.

Copyright Business Recorder, 2022

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