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LAHORE: A bicycle manufacturer has failed to fulfill the conditions prescribed for claiming input tax adjustment against local procurement of raw materials for manufacturing purposes, said Inland Revenue sources.

It may be noted that the relevant SRO declared supply of bicycles chargeable to zero percent tax. However, the availability of Input-Output Co-efficient Organization (IOCO) was essential for claiming benefit of statutory instrument. Though, this condition doesn’t apply in case of import of finished goods and their supply in same state.

But the bicycle manufacturer pleaded that he had sought issuance of IOCO certificate, however, procurement thereof was unnecessarily delayed and compelled him to procurement raw materials for manufacturing.

The department, on the other hand, stressed that the determination of input/output ratios is a necessary requirement and a fundamental-cum-primary condition for claiming the privilege of zero-rating facility. The requirement of determination of input/output ratios and would be deemed fulfilled if Commissioner IOCO has either approved it or is otherwise available in terms of the alternatives provided in the relevant SRO.

According to the departmental sources, for import and local procurement of raw materials, packing materials, sub-components, components, sub-assemblies and assemblies for the manufacture of the goods, the Commissioner shall approve the declaration of input-output ratio of the manufacturer without physical verification in case the declared input-output ratio and input requirement is in accordance with the prevailing industry average or the inputs consumption pattern of the applicant manufacturer or as already determined by IOCO under an earlier notification issued for such goods.

They have added that in case the Commissioner is not satisfied with the declared input-output ratios of the goods to be manufactured because of their being prima facie not in accordance with the prevalent average of the relevant industry or in case the input-output ratios are not already determined by IOCO, he may, after allowing a six months provisional quantity, make a reference to the IOCO for final determination thereof.

On receipt of report from IOCO the Commissioner shall then determine the final annual quantitative entitlement of inputs and grant final approval for zero-rated purchases or imports.

In case of non-receipt of report from IOCO within four months of the application made by manufacturer, the Commissioner shall provisionally allow another six months quantity to the applicant manufacturer.

Copyright Business Recorder, 2024

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