The Central Board of Revenue (CBR) has launched a countrywide investigation to identify main reasons for decrease in sales tax collection from cement manufacturers during current year. However, some Collectors of Sales Tax have correlated decrease in GST collection from cement with huge exports of the commodity during current financial year.
Secondly, the sales tax figures of 2004-05 do not contain collection of 'further tax' as the same was abolished in the budget 2004-05 whereas the sales tax collection in 2003-04 was bagging 'further tax' payment which enhanced the figures.
Sources told Business Recorder here on Tuesday that CBR has issued instructions to all collectors of sales tax to submit reports giving reasons for decrease in GST collection during first quarter of current financial year. Certain Collectorates of Sales Tax, including Large Taxpayer Unit (LTU), Karachi, have submitted their reports.
Collectorate of sales tax and central excise, Peshawar has observed that output tax in case of Lucky Cement, Kohat Cement, Saadi Cement and Cherat Cement had increased. The decrease in sales tax collection was due to increase in input adjustment by these registered units in first quarter of fiscal year 2004-05 as compared to corresponding period of last year.
In case of Lucky Cement, the input tax has increased from Rs 54 million to Rs 125 million (ie difference of Rs 71 million) which affected the net sales tax payment. Similarly, in case of other units the same upward trend of 'input adjustment' has been noticed.
The report said that another reason for decrease in net sales tax payment on account of cement was due to tremendous increase in export of cement. An amount of Rs 439 million cement was exported during first quarter 2004-05 against Rs 169 million exported during the same period last year.
The units engaged in export of cement have adjusted the net sales tax payable against the input tax credit of zero-rating supplies, resulting in decrease of net sales tax, though the output tax on local supplies increased, the collector, Peshawar added.
In its report, Large Taxpayer Unit (LTU), Karachi has conveyed to the Board that the analysis of GST collection from Pakland Cement Karachi itself speaks about the reasons for overall decrease in sales tax collection during first quarter 2004-05.
According to the report pertaining to the unit, the output tax in the first quarter of current financial year increased by Rs 16.4813 million as compared to corresponding period of last year and collection of central excise duty increased by Rs 18.437 million during the same period. However, net sales tax collection decreased by Rs 3.158 million.
The management of unit has given reasons for this shortfall to the LTU, Karachi. The unit claimed excess input tax proportionally to Rs 12.7757 million due to higher purchases mainly to maintenance/optimisation work being underway in the first quarter of current financial year.
Secondly, the revenue figures of quarter of financial year 2003-04 included 'further tax' collection of Rs 2.40123 million, which has been abolished in fiscal 2004-05.