Drive to verify input tax adjustment claims to be started

The Central Board of Revenue (CBR) will start a countrywide exercise to determine the authenticity of input tax adjustment, claimed particularly by polypropylene manufacturers, claiming inadmissible adjustment against less amount of sales tax.
Sources told Business Recorder on Monday that the Board is devising a strategy to effectively deal with persons, who are deliberately claiming wrong input tax adjustment. This results in payment of less sales tax by wrong claimants against those units which are claiming accurate adjustment on the basis of input-output ratio. The CBR is facing problems in checking the inadmissible tax and collecting data from regional collectorates to check the authenticity of input tax.
When asked about huge variation in sales tax payment by different polypropylene manufacturers, sources said that there is possibility that some units are claiming higher amount of input tax adjustment. In this situation, they pay less tax, taking the plea that sales tax has already been paid on various inputs used in the manufacture and supply of taxable items.
One way to claim higher adjustment is by showing less production by suppressing sales of the product. The concealment of production is done by certain manufacturers, which remains unchecked due to curtailment of auditors' powers.
It seems that the same had happened in case of units owned by a minister, which was claiming input tax adjustment accurately as compared to other units with similar production. However, the problem is not only confined to manufacturers of polypropylene. The issue has to be seen in wider context, as the same thing might be happening in certain other manufacturing sectors as well.
In this connection, the Board would also issue instructions to the collectors of sales tax to submit the latest data on manufacturers of polypropylene. The necessary work has already been done by the Board for launching a full-fledged campaign against the violators.
Sources said that suspension of sales tax field audit is one of the major reasons, which is barring tax officials from visiting the business premises of manufacturers. The audit is closed for the last two years, which has created practical problems for the department for verifying the input data claimed by the manufacturers.
Now, the Board would again use the provisions of Sales Tax Act, 1990 to check the records available with taxpayers to determine whether the units are claiming accurate adjustments or not. Under the VAT mode, the input tax adjustment is admissible and cannot be denied to business community. If a person has already paid tax on inputs, he is entitled to input tax adjustment. However, an effective checking and monitoring system needs to be in place for such purposes.
When this scribe contacted a tax expert, he said that production factor plays an important role in determining input/output tax for payment of GST. For example, quality of production, yield, efficiency, geographical location of manufacturer, marketing strategy and terms and conditions of sales etc contribute in production/sale, which affect the sales tax payment.