Sales tax on specified goods: FTO directs FBR to recover the amount evaded in last three years

ISLAMABAD: The Federal Tax Ombudsman (FTO), while deciding its own motion investigation has ordered the Federal Board of Revenue (FBR) to ensure automated collection of sales tax on retail price in case of specified goods and effect recovery of the already evaded amount in the last three years.

It was brought to the notice of the FTO that certain goods were made chargeable to sales tax on the basis of Retail price at the time of import by virtue of amendments made in Section 3(2) of the Sales Tax Act, 1990 vide Finance Act, 2019-20. The FBR, in order to give effect to the budgetary changes, issued Custom General Order No 12 of 2019 dated 30.02.2019, whereby, the Directorate General of Reforms; Automation (Customs) was required to make necessary changes in the WeBOC clearance system of Customs for charging sales tax on retail price.

The FTO has observed that the department has so far failed to develop a functional and practicable solution to the problem at hand i.e. development of an IT-based module to cater for the budgetary changes with a view to capture and realise the exact amount of due taxes at the import stage on items subjected to tax on retail price vide Finance Act, 2019.

In view of the foregoing, alarming situation and fearful of worst-case scenario i.e. massive revenue loss, a report was called by FTO from the Directorate General of Post Clearance Audit regarding detections made by them in this regard. The DG, Post Clearance Audit vide letter dated 25.04.2022 communicated the following position regarding detections made by their Directorate during the period 15.02.2019 to 03.09.2021.

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The data is reflective of the actual/ potential loss of revenue being incurred due to in-action on the part of those who were made responsible for seamless and effective transition through systemic changes by devising an IT-based solution, for incorporating budgetary changes in the WeBOC. The three committees constituted by the FBR failed to perform and complete the assigned task with sincerity of purpose despite the lapse of about three years. Although the Directorate of Post Clearance Audit has made substantial detections of revenue loss and recoveries to the tune of Rs286.632 million, the same appears to be the tip of an iceberg, keeping in view the enormity of the task and limited human resource, at the disposal of DG, Post Clearance Audit. The efforts of DG PCA are appreciated by the FTO in realising notable legitimate government revenue.

In view of the significant revenue potential of the issue, the FTO has directed the FBR to ensure; that a foolproof, effective, dynamic and functional module is developed in close coordination and active engagement of DG, Reforms; Automation, (Customs) and Inland Revenue Wing.

The FTO has directed the FBR to ensure that the DG, PCA constitutes a dedicated team under the supervision of an Additional Director at each regional Directorate for in-depth audit of this sector and submit monthly progress report of detections made and tax collected; till the final deployment of the WeBOC module and the chairman FBR to provide additional staff to the DG PCA for the said-mentioned task in consultation with director general, PCA, Islamabad.

Copyright Business Recorder, 2022