The Central Board of Revenue (CBR) is devising a new policy to effectively check the misuse of exemption certificates by the importers, manufacturers and other segments of the business community.
In this regard, the Board is examining the recommendations of the Directorate General of Inspection and Internal Audit (Direct Taxes).
Sources told Business Recorder on Sunday that the CBR had sought recommendations of the directorate regarding misuse of exemption certificates. It was brought to the notice of the Board that several industrial sectors are allegedly involved in misusing these certificates to evade duties/taxes on the exempted raw materials imported for use in the manufacture of finished products. However, the said exempted material was not consumed as per declarations and subsequently sold in the open market resulting in a huge loss to the national kitty.
The directorate has collected the data from the field formation and submitted some suggestions, including punishments to the persons involved in obtaining wrong exemption certificates in violation of the laid down rules/regulations.
It has been recommended that detailed scrutiny of tax records should be made in cases selected for audit to check any misuse of the facility.
In this regard, the Commissioner of Income Tax (CIT) should be empowered to examine the details of imports and raw materials issued for self-consumption at the time of issuance of exemption certificates.
Some punishment should be devised for deliberate violation of declaration given by the manufacturers and importers as required under section 148 of the Income Tax Ordinance 2001 read with circular no. 2 of 2003.
The submission of proper manufacturing during the fiscal year along with quantitative ad qualitative details should be made mandatory in case of manufacturers-cum-importers.
The exemption certificates should only be issued for a period of three months for the purpose of proper monitoring, sources maintained.
The information regarding installed production capacity and actual production of each item during the fiscal year should be obtained by the income tax officials.
In order to ensure that no evasion of tax takes place through misuse of exemption certificates, factory premises of such units should be inspected at least once during the account period to ascertain the actual production of various items.
Exemption certificates should be issued on fulfilment of certain conditions as determined by the concerned commissioner depending on the circumstances, they added.