The Auditor General of Pakistan (AGP) has directed the Federal Board of Revenue (FBR) to immediately review all standard duty drawback notifications for grant of admissible facility to the exporters.
According to the performance audit report (Feb 2019) of AGP on the determination of Input Output Ratios by Input Output Coefficient Organisation (IOCO), the audit has unearthed serious issues in the working of the IOCO.
After audit of the IOCO, the key findings of the AGP revealed non-production of record, non-revision of duty drawback SROs, non-determination of input output ratios and wastages by IOCO, late issuance of input output ratio certificate, excess wastages determined by IOCO, determination of different ratio of wastage in respect of same goods, and non-realisation of government revenue due to non-accounting of weight gains during sizing process for manufacturing of grey cloth - Rs 10.60 million.
Other areas of concern within the IOCO revealed that the audit has detected misuse of DTRE facility of Rs 0.54 million, irregular import under SRO 327(1)/2008 - Rs.176.47 million, non-disposal of wastage, short realisation of government revenue - Rs 34.23 million, loss of revenue due to unauthorised purchase of cotton - Rs 55.37 million, loss of revenue on unaccounted input goods - Rs.76.65 million, and grant of irregular benefit under DTRE scheme - Rs 14.63 million.
The Director General Audit, Customs and Petroleum, Lahore, conducted a performance audit of "determination of input output ratios by Input Output Coefficient Organisation and its implementation/monitoring by regulatory collectors" during March to June 2017. The main objectives of the audit were to examine and evaluate the performance of Input Output Coefficient Organisation for determination of input output ratios to analyse the economy, efficiency and effectiveness of the entire process. However, portrayal of performance could not be reflected in this report in true letter and spirit due to incomplete provision of record which resulted in the constraint of covering all the aspects of performance. The audit was conducted in accordance with Performance Audit Manual. Performance audit of "determination of input output ratios by Input Output Coefficient Organisation and its implementation/monitoring by regulatory collectors" was conducted by utilising 100 man-days and including expenditure of Rs 0.50 million.
The AGP has recommended the FBR to hold inquiry to probe the circumstances which led to non-production of record despite clear instructions of FBR, and record of the IOCO be scrutinised by special teams comprising representatives from FBR, and to evaluate the performance of this organisation.
The AGP has also recommended the FBR to review all duty drawback notifications immediately, take the person(s) responsible for non/delayed issuance of input output ratios to task, issue sector-wise guidelines for determination of input output ratios to avoid issuing of different ratios for same goods and issue guidelines for accounting the element of weight gains during sizing process for manufacturing of grey cloth.
The AGP has recommended the FBR to recover amount pointed out by Audit promptly along with leviable penalty and default surcharge and hold close monitoring of all cases of DTRE facilities to avoid misuse.