Sindh mines, mineral sector: Over Rs 84 billion revenue leakage identified: FBR

The Directorate of Intelligence & Investigation (Inland Revenue), Karachi has identified over Rs 84 billion revenue leakage only in Sindh mines and mineral sector.

According to a report, the Directorate has initiated an exercise regarding income tax and sales tax payments pertaining to the mines license holders on the extraction and supply of minerals such as silica sand, gravel, morum, rati, bajri, crushed stone, busxite, letrite & marble, etc, in Sindh. The department of Sindh Mines and Minerals, which awards contract of such purposes to lease holders, charges royalty fee@ Rs 8/- per metric ton from the lease holders on the extraction & carry away minerals from lease areas.

As per information regarding royalty collected against the quantity extracted/carry away by mines lease holders by the department revealed that they had collected Rs. 406.97 million against the quantity 50,872,002 metric tons minerals of Silica Sand & Marble (without onyx) extracted as provincial royalty @ Rs.8/- per metric tons during the period July, 2016 to June,2019.

However, the value for Silica Sand & Marble extracted and supplied as per draft rule 2311 is specified @ Rs.6000 per metric ton. Thus the sales tax under section 3 of the Sales Tax Act. 1990, which was not collected by the Federal Board of Revenue (FBR) as majority of lease holders are non-filers, is worked to Rs. 51.88 billion during July 2016 to June 2019.

Similarly, the sales tax on the basis of market value of Rs. 2000 per metric ton, is calculated to Rs. 15.169 billion for the said period.

When contacted, top official in the Directorate confirmed that they had sent the report to the high-ups in FBR.

Furthermore, he said that all the calculations of liabilities of sales tax @ 17% under Sales Tax Act, 1990, are based on the value specified in draft Rule 2311 of the Income Tax Rules, 2002, ie, Rs.6,000/- per metric tons for the Silica Sand & Marble (Other than Onyx) and on the basis of market survey wherein it transpired that the average rate of such goods is Rs. 2,000.

He informed that the data regarding Karachi division for the period July 2018 to April 04, 2019 was still not provided by the Sindh Mines & Minerals, department and hoped that the revenue impact would enhance when the remaining amount of royalty collection is reported to the Directorate.

He said that all the estimates of tax liabilities were based on the data provided by the Sindh Mines & Minerals, department except Karachi Division and added that the figure of collection for the year of royalty collection contained the period April, 2019 to June, 2019 only.

Now, the Sindh Mines & Minerals, department has floated the tender for collecting royalty on the extraction and supply of minerals and mines in the lease areas situated at Karachi (except district Malir), Dadu, Jamshoro, Khairpur & Sukkur for Rs.5,28,00,000, Rs.9,37,20,000. Rs. 4,36,80,000 and Rs.6,81,00,000 respectively. Therefore the cumulative amount of royalty comes to Rs. 258,300,000 by the contractors for the period 2019-2020.

In view of the fact that in 2018-19 the rate of royalty was at the rate of Rs.8 per metric tons therefore the sales tax payable for the period 2019-20 is estimated to Rs.51,88 billion on on the basis of draft Rule 2311 (Table-I) and Rs,15,16 billion as per reported market prices for the period 2019-2020

Keeping the said in view, the Directorate has recommended the FBR to direct the the concerned Regional Tax Offices (RTOs) to obtain information related to the lease holders from Sindh Mines & Minerals, department and take strict measures to get them registered in sales tax.

Furthermore, the Directorate has also suggested making Sindh Mines & Minerals, department, which was collecting royalty from these mine holders through contractors, withholding agent under section 236A of the Income Tax Ordinance. 2001 and initiate necessary proceedings for tax collection in this respect, he maintained.

Moreover, he said that the Directorate in order to plug pilferage of revenue and to collect due taxes also recommended monitoring the quantity of extraction and supply by invoking the section 40B of the Sales Tax Act. 1990 at the exit check points of mines lease area as the said measure along with the enforcement would help to collect the actual due taxes.

He said that most of the mine lease holders were non-filers and not registered for the purpose of incomes tax and sales tax hence the aforesaid exercise would also be beneficial in broadening of tax base.