The Central Board of Revenue (CBR) has issued procedure for registered manufacturers, using cooking oil/ghee as input for claiming input tax adjustment. In this regard, the board on Saturday issued a clarification to all sales tax collectors.
Official sources told Business Recorder the CBR has directed ghee/cooking oil manufacturers and suppliers to issue sales tax invoices to buyers for claiming input tax adjustment, as they were unable to claim adjustment after issuance of a notification on January 7.
According to CBR instructions, the Pakistan Biscuit and Confectionery Manufacturers Association has raised the issue regarding their inability to claim adjustment of input tax paid by them to cooking oil/ghee manufacturers/suppliers.
Manufacturers of edible oil/ghee are required to pay federal excise duty at the rate of Re1 per kg in lieu of duty payable at production or manufacturing stage under SRO.24(I)/2006, the CBR maintained.
Accordingly, the transaction value at which the commodity is supplied also includes the component of duty paid at import stage as well as that paid in lieu of duty payable on 'value addition'.
Resultantly, the invoice issued by manufacturers/suppliers of cooking oil/ghee does not mention the amount of duty separately, thereby, adjustment is not available to purchasers.
The board has examined the issue and it is clarified that in cases where cooking oil/ghee is supplied to manufacturers of other items in which the said commodity is used as an input, the manufacturer/supplier of cooking oil/ghee shall issue sales tax invoice showing the total value of supply (inclusive of duty) and mention the component of excise duty (paid at import stage as well as Re1 per kg paid in lieu of duty payable on value addition).
Moreover, such invoice shall be issued only to registered manufacturers engaged in making taxable supplies of goods in which cooking oil/ghee is used as an input. In case supplies are made to persons other than registered manufacturers, sales tax invoice shall be issued in the different format.
Manufacturers would also submit a summary of all such invoices to concerned sales tax collectors.
To check possible misuse of the facility, collectors would closely monitor the 'input tax adjustment' claimed by purchasers and where any abnormal increase in adjustment vis-à-vis the adjustment claimed during corresponding period of last fiscal year is noticed, thorough audit of the concerned manufacturer shall be carried out to determine its actual tax liability, instructions added.
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