'Poor' monitoring of GLT units: FTO report says FBR suffers Rs40bn loss

Updated 07 Sep, 2021

Islamabad: The Federal Board of Revenue (FBR) suffered massive revenue loss of around Rs40 billion due to poor monitoring of the Green Leaf Thrashing (GLT) units during two years ie 2017-18 and 2018-19. This has been revealed in the inspection report of the Federal Tax Ombudsman (FTO) issued on Monday.

The Federal Tax Ombudsman (FTO)'s inspection team of GLT units found massive tax evasion at GLT stage, reflecting alleged maladministration of the FBR's field force due to defective monitoring of the GLT units.

The FTO has issued an inspection report' for inspection of the office of commissioner Inland Revenue, Regional Tax Office, Peshawar, holding jurisdiction over monitoring of GLT units.

The internal analysis also indicated massive tax evasion at GLT stage, evident from the simple fact that as per the FBR's own findings, there is an alarming gap between tobacco produced (as per data maintained by the Pakistan Tobacco Board) and tobacco used in declared cigarette manufacturing (as per tax record). The comparative analysis reflects the huge volume of annual loss.

The FTO has recommended the FBR to implement real-time and verifiable issuance of invoices blocking all types of post seizure verifications or data fudging/forgery. The FTO has recommended the FBR to immediate implementation of Rule 89 especially sub-rules (2) and (3) read SRO 1149 (1) dated 18th September 2018.

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Non-implementation of this rule despite lapse of three years is the root of most of the enforcement hazards in tobacco/cigarette sector. This implementation alone would minimise most of the risks currently confronting the FBR's machinery.

The FBR is directed to identify the officers, to be proceeded against, who have deliberately delayed the implementation of Rule 89, SRO 1149 and thus, brazenly compromised the interest of revenue; Unit officers Tobacco/Cigarette Squads RTO Peshawar, who have miserably failed in implementing law, rules and prescribed procedure need to be identified, questioned for fixation of responsibility and necessary disciplinary action taken thereof.

The FTO has further directed the FBR to conduct yearly analysis of cigarette tobacco produced in Pakistan vis-à-vis declared consumption of tobacco by all cigarette manufacturing units, for 2019-20 onwards, so as to gauge the loss of revenue caused by un-accounted for tobacco.

IREN KPK Hub needs serious reorganisation on professional lines and through assigning exhaustive jurisdiction of all GLTs, so as to ensure uniform pattern of compliance, monitoring and enforcement. Officers and officials with sectoral know-how, professional competence and aptitude may be assigned the important task of monitoring and enforcement of this sector.

Track and Trace project FBR being the core stakeholder must cater for necessary training and development of core staff deputed for tobacco/cigarette sector. Tax Policy Wing, IR to conduct a periodic review of this sector so as to plug the newly-emerging loopholes in cigarette/tobacco sector.

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Similar inspections of GLTs assessed at LTOs Islamabad and Karachi are urgently warranted. Rule 89(2) and (3) read with SRO 1149 is related to the issuance of tax invoice unmanufactured tobacco, Stock Transport Advice Cigarette and Sales cum Transport Invoice all bearing unique and distinguishable numbers to be generated through FBR's portal.

This check inserted in regulatory regime of Tobacco/Cigarette in September, 2018 has yet not been implemented. This well-conceived pre Track and Trace monitoring mechanism can be easily configured in FBR's portal Iris, yet even after lapse of almost three years, this Rule has not been implemented: reasons best known to FBR management.

If this single Rule 89 is implemented it would ensure; Real time and verifiable issuance of invoices blocking all types of post seizure verifications or data fudging/forgery.

The job of IREN becomes much easier as while intercepting any vehicle or checking any warehouse/depot/storage accuracy and timing of all invoices presented can be cross checked from the system.

Commissioners concerned can have an updated online data of all clearances giving ample time for any remedial/ corrective strategy. Genuine invoice holders would be saved against any administrative excess or harassment. The need and utility of physical monitoring and its related hazards can be minimised through this electronic intervention.

Copyright Business Recorder, 2021

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