Zero rating facility: Meter manufacturers object to issuance of tax notices by FBR

LAHORE: Field formations of the Federal Board of Revenue (FBR) are found issuing tax recovery notices to the electricity manufacturers in violation of the SRO on zero rating facility.

They are of the view that the electricity meters are consumer durables and not eligible for classification as equipment. On the other hand, the meter manufacturers are contesting that their product is not a consumer durable but equivalent to an equipment eligible for zero rating of sales tax under SRO No 530(I)/2005 dated 6th June 2005.

Sources from among the meter manufacturers said the metering equipment can be for different purposes. In relation to machinery, they said, equipment that measures temperature, speed, pressure etc, are also in the nature of metering equipments.

According to them, power supply is a crucial factor for the operation of plant and machinery. Therefore, electricity meters should be classified as equipment used in the operation of the industrial process at the tax payer’s premises.

They have lamented that the FBR officers were not acting fairly in dealing with taxpayers and to abide by the law governing tax matters. They said the tax authorities leave no stone unturned in withholding benefit accrued to taxpayers under the law which leads to needless wastage of time and resources of both the department and taxpayers. Not only this, they stressed, a frivolous litigation on such matters also end up on waste of time of tribunals as well as higher courts.

It may be noted that field formations of the Board are involved in creating fake demands against taxpayers without sharing audit reports with them. The formations create fake demands in tonnes while most of them are challenged and turned down by the courts, costing millions of rupees to both the taxpayers and the Board in terms of litigation. For the tax year 2021-22, said the sources, the Board had assigned a target of Rs 85 billion to the Large Tax Office (LTO) Lahore and the LTO staff had generated 90 percent fake demands to appease the Board pressure.

They said the field formations were under severe stress because of the fact that the higher authorities from the Board were pursuing them to create fake demands in order to ensure maximum tax generation. Accordingly, tax authorities at the level of field formations ignore prerequisites for issuing tax notices.

Similarly, the field formations are found least bothered about the fact that majority of the tax matters are already decided and settled by the competent forums simply because that the Board was maintaining no data bank of tax matters adjudicated by the courts of law and both the departmental representatives and their legal councils are found unaware of whether the court already took up a particular decision or not.

Copyright Business Recorder, 2023