FTO directs LTO Karachi to refund extra ST paid on vehicles to BOP

ISLAMABAD: To facilitate car buyers, the Federal Tax Ombudsman (FTO) has directed the Large Taxpayer Office (LTO) Karachi to refund extra paid sales tax on vehicles to the Bank of Punjab (BOP) for giving benefit to the end customers.

In this connection, the FTO has issued an order (Informal Resolution of Disputes) in favour of the said bank on Thursday.

According to an order issued by the FTO, the complaints were filed under section 33 of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance), by the BOP alongwith copy of NOC from the complainant/buyers of the cars through lease from the bank. The bank filed complaints on behalf of the buyers seeking relief against charging of higher rate of sales tax in respect of these cars purchased by the complainant from the said car manufacturing company.

Briefly, the bank booked these cars when the rate of sales tax was 17 percent. Meanwhile, the rate of sales tax on cars upto 1000CC was reduced to 12.5 percent, while federal excise duty (FED) was waived off through the Finance Act, 2021, effective from July 1, 2021.

Though the company waived off FED yet it charged sales tax at the rate (17 percent) applicable at the time of booking, rather than invoice/delivery date depriving the complainant benefit of reduced tax burden. The bank has now filed application to refund the differential amount of sales tax, as per the rate applicable on the date of delivery of the vehicle on behalf of buyers.

FTO observed that all such cases are currently under implementation at Karachi. The FTO’s regional office Karachi in close liaison with LTO Karachi and car company has worked out an efficient implementation strategy. Being 100 percent parallel case, no further investigation is warranted as the petitioner is entitled to the relief sought by him, and granted by the competent authority in other similar cases.

In view of above, the LTO Karachi is directed to extend relief, in line with the referred cases, to the bank on submission of an undertaking to LTO Karachi that the benefit of refund of extra paid sales tax will be duly shared with the end customers/clients, FTO order added.

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