FRIDAY SEPTEMBER 09: Wrong sales tax exemption: diesel generating sets import data to be scrutinised

ISLAMABAD: Directorate General of Post Clearance Audit (PCA) Federal Board of Revenue has directed its regional directors in the field formations to thoroughly scrutinise import data of the diesel generating sets where sales tax exemption/zero-rating has been wrongly claimed by certain importers.
Sources told Business Recorder here on Thursday that the Directorate General PCA has written a second letter on the diesel generating sets to FBR for detailed scrutiny of import records of such diesel generating sets in cases of inadmissible sales tax exemption/zero-rating by the importers of the said items.
The directorate PCA has started the investigation against the importers of diesel generating sets before Eid. The issue is mainly related to the zero rating of sales tax under SRO.530(I)/2005, which is not applicable on import of diesel generating sets.
However, the same zero-rating facility has been wrongly claimed by certain importers of diesel generating sets. In continuation of the case detected by the PCA team at Karachi, the investigators have advised the regional directors of the PCA to check whether same kind of inadmissible exemption/zero-rating has also been availed by importers falling within the jurisdiction of Lahore.
Under the on-going investigation by the directorate PCA, the agency has informed the Director Post Clearance Audit Lahore that during scrutiny of import data of Diesel Generating Sets classifiable under PCT Heading 8502.1110 (Diesel Generating Sets of an output not exceeding 5KVA), for the period from July 2006 onwards, it was observed by the audit team of PCA, Karachi that certain consignments comprising of the aforesaid goods, imported by some importers were wrongly cleared with sales tax zero rating under SRO 530(1)/2006 along with concession of withholding tax under Income Tax Ordinance, 2001.
Zero rating of sales tax under SRO.530 (I)/2005 dated June 6, 2005 is not applicable on import of Diesel Generating Sets under PCT Heading 8502.1110 as the same are not covered in the positive list of said SRO. The aforesaid claim of inadmissible exemption/zero rating of sales tax thus, resulted in substantial short payment of taxes on these imports.
In view of the massive amount of short-payment by importers of diesel generating sets, Director General PCA has desired that regional directorate should also carry out scrutiny of the import data of diesel generating sets classifiable under PCT Heading 8502.1110 for the period from July 2006 onwards, cleared by the Model Customs Collectorates falling under relevant jurisdictions, to ascertain whether these have been wrongly cleared with sales tax zero rating under SRO.530(l)/2005 along with concession of withholding tax under Income Tax Ordinance, 2001 because zero rating of sales tax under SRO.530(I)/2005 not applicable on import of Diesel Generating Sets classifiable under PCT Heading 8502.1110 as the same are not covered in the positive list of the said SRO and then furnish the findings thereof on priority to the PCA (HQ), sources added.