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ISLAMABAD: Federal Tax Ombudsman (FTO) has unearthed that Millat Tractors Limited (MTL) has not passed on the relief granted through Finance Act, 2022 to the end consumers by over charging sales tax, and recommended to refund the excessive amount collected on delivery of tractors after July 1, 2022.

The FTO has issued the order on the complaints filed by the farmer’s community against the said company and FTO has provided relief to the farmers on the pattern of the car company where the FTO ordered to refund the excessive sales tax collected from the consumers.

In this connection, the FTO has issued the second order against the leading tractor manufacturing company here on Tuesday.

Earlier an order was issued against the same company last month which used computerised national identity card (CNIC) numbers of unrelated persons to issue sales tax invoices in the names of Benami farmers or dummy growers to conceal commercial transactions and claim inadmissible refunds.

According to the new order dated December 20, the FTO has directed the Federal Board of Revenue (FBR) to instruct Chief Commissioner IR, LTO, Lahore to conduct probe into charging of sales tax at the time of booking but not disclosed it by MTL while issuing invoices at the time of delivery of tractors, or while filing sales tax returns for the month of June, 2022.

The FBR should ensure that relief granted by legislature, through Finance Act, 2022 is passed on to the end-consumers, wherever 5% sales tax was charged by MTL before June 30, 2022 but delivery of tractors was made after July 1, 2022.

The FTO observed that in view of facts the complainant is entitled to refund of Rs93,500 by MTL as tax charged at the time of booking has not been paid to the state treasury. LTO Lahore must ensure that relief is granted to the complainant and other similar buyers with same facts.

It is expected that the FTO order would resolve the similar nature of hundreds of cases where sales tax was overcharged from the buyers of tractors and refunds would be issued to the purchasers, senior FTO officials said.

LTO Lahore, the concerned field formation, was in complete darkness before intervention of the FTO office and this “neglect, inattention, inefficiency and ineptitude, in the administration or discharge of duties and responsibilities” clearly tantamount to maladministration in terms of section 2(3) (ii) of FTO Ordinance, 2000, FTO order further added.

In the recent past, there are hundreds of cases wherein a car company had charged ST @ 17% before 30th June but ST was reduced w.e.f. 1st July, i.e., before delivery of vehicles. In said cases, FTO Office had raised the issue of excessive charge of ST, investigated it thoroughly and concluded that refund of excess amount is due to the end-consumers, who are entitled to reduced tax burden.

The complaint was filed under section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance) against alleged illegal charging of Sales Tax and then further overcharging an amount of Rs.0.245 million on purchase of tractor by MTL.

Briefly, the complainant booked a tractor vide booking No.738103 on 03.06.2022 paying full and final consideration of Rs.1.953 million, inclusive of ST @5% (i.e., Rs.93,500). But when the complainant approached for the delivery of tractor on 03.07.2022 and 14.07.2022, the authorized dealer further demanded an amount of Rs.0.245 million, allegedly quoting revised taxes on agricultural machinery, w.e.f. 01.07.2022 and the complainant had to deposit Rs.0.245 million.

Whereas factually, w.e.f. 1st July, 2022 sale of tractors was exempted from ST under S.No.170 of Table-1 of the Sixth Schedule to the Sales Tax Act, 1990. Instead of passing the tax relief to the buyer/ complainant MTL has rather overcharged heavily quoting false reasons of revised taxes. The complainant prayed that the supplier be directed to refund the differential amount of sales tax, as per the rate applicable on the date of delivery of the vehicle.

FTO order added that the sales tax component of price received by MTL can neither be retained by the supplier for an indefinite period nor can it be adjusted against price differential, if any by supplier on its own without disclosing this fact in the relevant sales tax return. Thus, non-declaration of whole transaction and non-payment of sales tax recovered from the payer/ complainant, MTL has contravened Sales Tax Act and LTO Lahore failed to take any suo moto cognizance of this glaring default.

Copyright Business Recorder, 2022

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Muhammad Kashif Dec 21, 2022 01:54pm
This is a common practice in the economy of Pakistan that business entities want maximum tax relief from the government but on the other hand these entities want to rob their customers in the name of taxation.
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