Auditor General of Pakistan (AGP) has emphasised that the Federal Board of Revenue (FBR) must place statutory regulatory orders (SROs) pertaining to exemptions/concessions, issued during Financial Years before the Parliament for approval to avoid loss of public revenue in case SROs are in conflict with Federal Acts/fiscal laws.
According to the latest AGP report issued in 2013-14 on audit objections against the FBR, AGP has recommended that issuance of SROs conflicting with the provisions of the Act should be reviewed; SROs pertaining to exemptions/ concessions, issued during Financial Years should be placed before parliament for approval and fixing responsibility for issuance of SROs in conflict with substantive laws.
AGP said the section 2(46) of the Sales Tax Act, 1990 provides that value of supply means the consideration in money terms all federal and provincial duties and taxes, if any, which the supplier receives from the recipient for that supply, excluding the amount of sales tax and in case of imported goods, the value determined under section 25 of the Customs Act including the amount of customs duties and federal excise duty levied thereon. Further, section 148(9) of the Income Tax Ordinance, 2001 provides that value of goods means the value as determined under Customs Act, 1969, as if the goods were subject to ad-valorem increase in customs duty, federal excise duty and sales tax, if any, payable on the import of the goods.
Contrary to the above, Part 2 (iii) under the heading Conditions and restrictions of SRO 655(1)/2007 dated 29.06.2007 issued under section 16(2) of the Federal Excise Act, 2005 states that the amount of special excise duty (SED) shall not be part of value for the purpose of assessment of custom duty, federal excise duty, sales tax or advance income tax in case of imported or locally manufactured goods.
Audit is of the view that the SRO issued under section 16(2) of the Federal Excise Act, 2005 cannot change the value of supply as defined under Sales Tax Act, 1990 and Income Tax Ordinance, 2001. When the value of supply / goods is determined by an Act of Parliament then any change in it would require an Act of Parliament in this regard, it said.
Exclusion of amount of SED from value of supply/goods for assessment of sales tax and income tax through SRO conflicting with the definition of value as explained in Sales Tax Act, 1990 and Income Tax Ordinance, 2001 caused loss to public exchequer to the tune of Rs 13,239.35 million during 2007-08 to 2011-12.
The lapse was pointed out to FBR in October, 2013. However, no reply was received. In the DAC meeting held in January, 2014, the issue of exclusion of SED from value of supply as defined under Sales Tax Act, 1990 and Income Tax Ordinance, 2001 was discussed in detail. The DAC directed the FBR to refer the matter to the Law & Justice Division for opinion as pointed out by the Audit and report compliance to Audit by January 31, 2014. Further progress was awaited till finalisation of the report, AGP added.
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