FBR moves to control evasion of sales tax: five zero-rated sectors being monitored

The Federal Board of Revenue (FBR) has started monitoring of sales tax exemptions and zero-rated sectors to check misuse of concessions given to various sectors and importers for controlling evasion of sales tax.
Sources told Business Recorder on Thursday that the FBR had issued instructions to the collectors of sales tax to analyse areas of exemptions and zero-rating regularly to avert any misuse of these concessions.
According to the sources, the board has implemented an enforcement plan across the country to improve compliance with broadening the tax-base. The FBR would particularly monitor five zero-rated sectors, including textile, leather, sports, surgical goods and carpets. In case of zero-rating regime, the inputs are mostly used in the export of finished products. If goods were not exported and forged documents were used, there are apprehensions that the so-called exporters of zero-rated sectors might claim illegal input refund.
It is important to mention that the cost of sales tax exemptions was Rs 17.60 billion in 2007-2008 against Rs 12 billion during 2006-2007 (46.7 percent increase). Major sales tax exemptions are on agriculture products, pharmaceutical items, pulses and information technology.
The revenue loss on account of exemption to pharmaceutical products was Rs 2.30 billion in 2007-2008 against Rs 5.50 billion in the same period previous fiscal. Exemptions to tractors and other agricultural machinery caused a loss of Rs 5.60 billion against rupees two billion; fertilisers: Rs 9.20 billion against rupees four billion; and exemptions to others inputs, including agri seeds and cattle feed caused a loss of Rs 0.50 billion in 2007-2008 against Rs 0.50 billion in the same period previous fiscal.