Input-output ratios: Manufacturers told to obtain IOCO nod

The manufacturers of 19 goods availing zero-rating facility have been restricted to obtain clearance from the Input-Output Co-efficient Organisation (IOCO) for determination of input-output ratios and input requirements of finished products.
According to the Federal Board of Revenue's special procedure for the goods specified in the Fifth Schedule of the Sales Tax Act issued here on Thursday, the IOCO would determine input-output ratios pertaining to manufacturers of colours in sets, writing, drawing and marking inks, erasers, exercise books, pencils sharpeners, geometry boxes, pens, ball pens, markers and porous tipped pens, pencils including colour pencils, milk including flavoured milk, yogurt, cheese, butter, cream, desi ghee whey, milk and cream, concentrated and added sugar or other sweetening matter, preparations for infant use put up for retail sale, fat filled milk and bicycles.
The provisions of the Chapter shall apply to manufacturers of goods specified against S. No 12 of the Fifth Schedule of the Sales Tax Act. Under the conditions and limitations for availing zero-rating facility, the FBR said that the zero-rating of goods specified against S. No 12 of the Fifth Schedule to the Act shall be subject to determination of input-output ratios of the manufacturer by the IOCO, if not already determined under an earlier concessionary notification issued for such goods.
For zero-rating of the import and local procurement of raw materials, packing materials, subcomponents, components, sub-assemblies and assemblies required for the manufacture of goods specified in S. No 12 of the Fifth Schedule to the Act, the following conditions and procedures shall be observed:
Firstly, a registered manufacturer of the goods specified against S. No 12 of the Fifth Schedule, having suitable in-house facilities (applicant), shall submit an application to the Commissioner Inland Revenue having jurisdiction along with the complete list of his annual requirement of inputs he intends to import or purchase for the manufacture of such goods, in the format prescribed in Annex-F to these Rules.
Secondly, the Commissioner may approve the declaration of input-output ratio of the applicant in the format prescribed as Annex-G to these Rules, without physical verification in case the input-output ratio of the applicant has already been determined by IOCO under an earlier notification issued for such goods or the declared input-output ratio and input requirements are in accordance with prevailing industry averages.
Thirdly, in case the Commissioner is not satisfied with the declared input-output ratios because of their being prima facie not in accordance with prevailing industry averages and the input-output ratios of the applicant have not already been determined by IOCO, he may, after provisionally allowing quantity required for six months, make a reference to IOCO for final determination thereof. After receipt of report from IOCO the Commissioner shall then determine the annual quantitative entitlement of inputs and grant final approval for zero-rated purchases or imports. In case of non-receipt of report from IOCO within four months of the application being forwarded by the Commissioner, he may provisionally allow another six months quantity to the applicant, provided he is satisfied from the records that the previously imported or purchased inputs are being properly consumed in the manufacture of goods specified against S. No 12 of the Fifth Schedule to the Act.
Fourthly, in case of input goods to be imported by the applicant, the authorised officer of Inland Revenue shall furnish all relevant information online to the Pakistan Customs Computerised System as per Annex-H to these Rules against a specific user ID and password obtained under section 155D of the Customs Act, 1969.
Fifthly, where a registered person supplies input goods to the applicant in terms of an approval granted or as the case may be, he shall issue a zero-rated invoice mentioning the approval number of the buyer besides all the particulars as required under section 23 of the Act.
Sixthly, the applicant will be entitled to claim refund of input tax paid on utilities and other inputs which are purchased by him on payment of sales tax, in terms of section 10 of the Act read with relevant provisions of the Sales Tax Rules, 2006. Seventh, the applicant shall maintain complete records of the inputs imported or purchased and the goods manufactured therefrom.
Eight, the input goods allowed, as the case may be, shall be imported or purchased before the expiry date of the approval, and shall be consumed within twelve months of the date of their import or purchase. Ninthly, the applicant shall inform the concerned Commissioner Inland Revenue in writing about the consumption of the imported or purchased input goods within ninety days of their consumption. The indemnity bond shall be released on receipt of written confirmation regarding consumption of goods by the applicant.
Tenth, in case the input goods are not consumed within the period allowed in the approval, the applicant shall pay the amount of sales tax involved, or may seek extension from the Commissioner Inland Revenue under intimation to the Collector of Customs.
Eleventh, the concerned Commissioner Inland Revenue, whenever he deems necessary but not more than once in a calendar year, may get the records of the manufacturer audited. In case it is found that the inputs have not been properly accounted for or consumed in the manufacture and supply of goods as prescribed, the Commissioner may initiate proceedings for recovery of the sales tax involved on the unaccounted inputs besides penal action under the relevant provisions of the Act and under circumstances of exceptional nature and for reasons to be recorded in writing, the concerned Commissioner may relax any of the conditions, if he is satisfied that such condition is detrimental to the bona fide purposes of manufacturer's business, subject to such surety or guarantee he may deem appropriate to secure the sales tax and to ensure proper account and utilisation of the imported or locally procured goods.