The Federal Board of Revenue (FBR) has unearthed massive evasion of sales tax by the registered manufacturers, importers and dealers of the arms and ammunition during the last two financial years. Sources told Business Recorder on Monday that the arms and ammunition dealers, importers and manufactures had shown low turnover for suppression of sales despite exceptional increase in prices of such commodity.
At the same time, importers of arms/ammunition have been involved in under-invoicing to evade duties and taxes. Thirty big sales tax registered taxpayers in the category of arms and ammunition had shown poor sales tax collection during 2008-09, which prompted the officials to investigate the whole sector. All units have obtained the National Tax Numbers (NTNs), but are paying meagre amount of sales tax into the national kitty.
According to FBR analysis, the tax offices had totally ignored this potential sector for collection of accurate amount of sales tax by checking tax evasion. The data analysis further showed that no dealer, importer or manufacturer of arms/ammunition had claimed sales tax refund.
Data showed that 30 leading manufacturers, importers, retailers/dealers of arms/ammunition made net payment of Rs 18.180 million as sales tax during first eleven months of 2008-09. There is a gross difference of Rs 22.751 million in sales tax payment in view of input/output of this sector.
The tax profiles of sales tax payment by the arms and ammunition sector for the year 2007-08 vis-à-vis 2008-09 was taken for the purpose of comparative analysis. The profile for the aforesaid period reflects that all the registered persons in the arms and ammunition sector are paying negligible amount of sales tax despite the fact that all imports/sales and manufactures have to be fully documented.
It is pertinent to mention here that the prices of arms and ammunition of various bores have gone very high in the open market whereas the annual sales of the arms and ammunition sector portray a dismal picture of the annual turnover which apparently seems to have been suppressed.
It is interesting to mention that the values of these items at the time of import are being grossly under-invoiced which need to be investigated and compared vis-a-vis the values of arms and ammunition supplied locally. The collection from this source/sector appears to have been ignored all along by the concerned RTOs/ LTUs. Therefore, to tap the potential revenue from this source there is a need to initiate an in-depth investigative audit by the LTUs and RTOs.
The investigative report would help in plugging the leakage of revenue in this sector. FBR data showed that a registered unit of Large Taxpayer Unit (LTU), Islamabad had shown gross difference of Rs 16.968 million in sales tax payment in view of input/output analysis during first 11 months of 2008-09. The unit had made net payment of Rs 6.230 million during this period.
Similar trend in sales tax collection has been observed in cases of registered units at Regional Tax Office (RTO), Peshawar. A registered manufacturer within the jurisdiction of RTO, Karachi has made net payment of Rs 1.501 million during this period. A registered manufacturer within the jurisdiction of RTO, Faisalabad made net payment of Rs 1.114 million.
Other units relating to the arms and ammunition within the jurisdiction of RTO Peshawar has shown downward trend in sales tax payment during this period. For example, a manufacturer within the RTO Peshawar has paid Rs 1.928 million as net sales tax.
Some importers of arms and ammunition within the jurisdiction of RTO, Karachi and Lahore had made sales tax payment of Rs 0.002 million each. An importer and arms dealer of this item within the jurisdiction of RTO, Sialkot has made net sales tax payment of Rs 0.012 million during this period. Another importer of RTO Karachi has made the same payment of Rs 0.012 million.
The same kind of sales tax payment trend has been observed by the arms manufacturers falling within the jurisdiction of RTO, Rawalpindi. For example, two manufacturers of RTO Rawalpindi paid Rs 0.87 million and Rs 0.105 million as net sales tax. A retailer registered with the RTO Karachi has paid Rs 0.155 million as sales tax during first 11 months of 2008-09.
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