Board to conduct detailed desk audit of ghee/cooking oil makers

The Federal Board of Revenue (FBR) has decided to conduct detailed desk audit of income tax and sales tax returns of edible oil industry including ghee and cooking oil manufacturers for tax year 2010 and tax year 2011 to check trends of payment of duties and taxes by the sector.
Sources told Business Recorder here on Wednesday that the decision was taken during a daylong workshop on strengthening taxation regime and plugging loopholes in edible oil and vegetable ghee sector, organised by Directorate General of Intelligence and Investigation, Inland Revenue here at FBR headquarters. The workshop was inaugurated by FBR Member Inland Revenue Khawar Khurshid Butt and participated by Amna Khalifa, Director General Strategic Planning and Statistics (SP&R) Wing and senior tax officials from the Large Taxpayers Units (LTUs) and Regional Tax Offices (RTOs).
According to the decisions taken by the directorate during the workshop, it has been agreed to conduct an in-depth sales tax and income tax desk audit of the edible oil sector, particularly ghee/cooking oil manufacturers. In this regard, the directorate IR would chalk out unified parameters for the field formations for conducting desk audit of the income tax and sales tax returns. The directorate wanted to conduct audit of the units without physical interaction with the edible oil industry based on tax profiles and data available with the tax departments.
The FBR has also decided to issue general instructions to the field formations for immediate compliance to improve sales tax registration within the edible oil industry. The field formations would take immediate action on Board's instructions. The withholding tax deductions within this sector would be checked and verified under the withholding provisions of the Income Tax Ordinance 2001.
The directorate of IR would also issue guidelines on the overall audit techniques for composite audit of sales tax and income tax based on industry's profile. As it is a gigantic task to conduct audit of the entire edible oil industry, the directorate IR would focus on sector-specific parameters and strategy to ensure compliance at the level of field formations.
In this regard, the directorate IR would analyse the best tax practices in the field formations which would be adopted in all RTOs for improving tax compliance by the ghee and cooking oil units etc. The best tax practices will be replicated in all parts of the country.
During the workshop, the tax officials discussed in detail the strategy for the registration of around 10,000 to 15,000 wholesalers and distributors etc of this sector with the sales tax department.
Sources said that the rationalisation of taxes on the edible oil industry was also discussed during the workshop. It was estimated that the revenue from this sector could increase manifold following changes in sales tax and federal excise regime. The tax officials also discussed the present taxation system applicable on the edible oil industry. At present, the treatment of sales tax and income tax on this sector is entirely different despite integration of taxes. The sales tax and income tax regimes are working in isolation in this sector.
The directorate IR has also decided to analyse 105 units, particularly commercial importers and importers-cum-manufacturers. The agency would check the profitability trends in this sector and reasons for massive level of non-registration of wholesalers, distributors and retailers of edible oil industry. The agency would conduct an in-depth analysis of this sector which would help in immediate registration of around 10,000 to 15,000 wholesalers/distributors by the field formations.
According to sources, the agency would conduct analysis based on the imports and exports data, tax profiles of registered persons, expenses of units, local sales tax domestic market, income/expenditures and actual profitability made by stakeholders of the edible oil industry. The directorate would compile an updated data on the sector without physical interaction with the taxpayers.
It is important to mention that the desk audit of the edible oil industry is part of the overall policy of the DG IR to focus on key industrial sectors for improving documentation, compliance and increase in taxes.