SUNDAY DECEMBER 16: Exports to Afghanistan: FBR mulling withdrawing input tax credit facility

ISLAMABAD: The Federal Board of Revenue (FBR) is seriously considering a taxation proposal to withdraw credit allowance for input tax claimed by traders engaged in making exports to Afghanistan to check massive misuse of the facility. Sources told Business Recorder here on Saturday that a draft statutory regulatory (SRO) has been prepared which is being considered by the Board.
Recently, the Chief Commissioner of the Regional Tax Office (RTO), Peshawar, informed the FBR that all exports to Afghanistan by Pakistani exporters made their way back into Pakistan whereas exporters took credit of input tax. As a result, huge sales tax refunds had been claimed by exporters.
The Chief Commissioner RTO Peshawar has requested the FBR to withdraw the facility of allowing credit for input tax claimed by traders exporting goods to Afghanistan under Section 4 of Sales Tax Act, 1990 and Section 6 of Federal Excise Act, 2005. This move, it said, would help plug huge loss of revenue. Even draft SROs were communicated to the FBR for perusal and favourable action by the Board. A tax expert said that the Board had investigated many tax fraud cases of different sectors, in which units claimed sales tax refund/rebate on fake documents and invoices.
In the past, the Board had attempted to verify export rebates issued to oil mills located in Peshawar. Several cases, relating to Peshawar, were also investigated to nab those involved in issuing fake sales tax and customs duty drawback to exporters of non-traditional items to Afghanistan. For example, detailed investigation has been conducted in case of Kabir Aluminium, which claimed refunds/rebates on fake documents.
The latest position of the case is the RTO Peshawar has made a request to the FBR for the grant of approval for lodging FIR against another Director of the said company of Peshawar. In certain cases, the Board had also examined records of certain ghee mills in KPK to verify their exports to Afghanistan. Thus, the issue of wrongly claiming input tax adjustment on exports made to Afghanistan by the Pakistani exporters has been investigated by the Board from time to time. However the menace of wrong adjustments and refunds has not been controlled, they added.