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ISLAMABAD: The Federal Board of Revenue (FBR) had challenged the order of the Federal Tax Ombudsman (FTO) with President Arif Alvi, which actually benefited the FBR for broadening the tax base, increasing revenue collection, recovering evaded taxes, checking evasion in sugar sector and register supply chain of sugar mills.

Sources told Business Recorder that following the rejection of the appeal of the FBR filed against the order of the FTO, the tax department would now be in a position to recover the due amount of taxes from the unregistered buyers.

The FTO had given the order that the unregistered persons were easily identifiable because sugar mills were required to maintain records of supplies made during the tax period and issue tax invoices indicating names, addresses, description, quantity, values of goods, CNIC or NTN of persons to whom the supplies were made under the Sales Tax Act of 1990.

The FTO found that the Large Taxpayer Offices (LTOs) only have jurisdiction over the sugar mills and not their wholesalers, dealers or distributors. LTOs were not taking mandatory records of unregistered buyers of from the sugar mills.

On the other hand, Regional Tax Offices (RTOs) do not have information of buyers, etc, of sugar mills. Thus both the LTOs and RTOs were not interested in this documentation exercise.

The FBR has challenged the order of the FTO with the President taking the plea that the FTO has no jurisdiction of taking suo motu action in such matters.

Sugar sector: Jul-Dec tax collection by FBR increases 11pc YoY to Rs32.43bn

However, the president has rejected the appeal of the FBR and directed the tax machinery to bring into the tax net the unregistered wholesalers, dealers or distributors of sugar buying huge quantities from sugar mills to broaden the tax base.

The president ordered that the FTO is fully authorised to initiate suo motu investigation for any alleged maladministration on the part of the Revenue Division or any tax employee.

Sources said that it is yet not clear why the FBR challenged the order of the FTO which has actually helped the FBR to document the supply chain of sugar mills and increase collection from this potential sector. Due to litigation, there is a delay in the recovery from the un-registered buyers of sugar mills.

The FTO’s order was not against the FBR or any Chief Commissioner or any other tax official, but the recommendations to register the un-documented buyers of the commodity.

“The unregistered buyers of sugar largely remained outside the tax net and were evading the prime national responsibility of paying taxes,” the president passed these directions while upholding a decision of the Federal Tax Ombudsman (FTO) directing the FBR to bring unregistered buyers of sugar in bulk into the tax net to improve the collection of sales tax and reporting compliance within 90 days.

The president observed that the FTO’s recommendations were only a reiteration of the duty of the FBR to strictly deal with unregistered sugar dealers to bring them under the tax net. He directed that the FTO’s recommendations must be applied to the entire sugar sector to increase compliance with taxes and to enroll those who were escaping the prime national responsibility of paying taxes. The president disposed of the FBR’s representation with the direction to submit a comprehensive implementation report to the FTO within 60 days.

President Alvi disposed of the matter with the observations that the FBR’s field formations were not vigilant in collecting information related to unregistered buyers and were content with just whatever was being submitted in the monthly sales tax returns of mills. He regretted that the data of unregistered buyers was not being examined for the purpose of broadening the tax net. He noted that the FBR’s field formations held jurisdiction over sugar mills and could secure the complete particulars of all buyers by proper and timely analysis of withholding statements.

Copyright Business Recorder, 2022

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