The Federal Board of Revenue (FBR) is likely to carry out a detailed analysis of cement factories to ascertain the reasons for decrease in sales tax collection from this potential sector during 2007-08 so far. The FBR quarterly review has strongly proposed scrutiny of tax records of cement manufacturers to eliminate possibility of inconsistency in data.
On the other hand, the FBR has barred Lahore Large Taxpayer Unit (LTU) Collector from issuance of 'contravention report' to a top cement manufacturer despite violations of tax laws.
The FBR wanted to give another opportunity to the unit for verification of audit observations. The unit should be given a chance to explain its position, the board said. It is important to mention that the FBR must ensure precautionary measures so that any unit, which commits tax evasion, does not get time to alter the tax record.
According to FBR analysis, the sales tax collection from cement sector followed declining trend during the first three months of the current fiscal year. However, the significant decline of 53.2 percent in July 2007 has gradually come down to 25.2 percent in September 2007.
During the first quarter of 2007-08, it remained short by 39.8 percent as compared to last year's collection, probably due to sharp decline in sale price during the period. In the light of substantial increase in construction activities and continued investment in mega projects related to infrastructure, the domestic demand of cement appears to have increased manifold.
But there has been a decline in tax collection which, on the face of it, seems an inconsistent outcome, requiring further probing. In view of continuous expansion in production capacity, the price factor alone should not reduce profitability of the sector to the extent that GST collection has nose-dived.
Incidentally, the growth in FED from cement in August and September further confirms that 'taxable' sales are on the rise. Thus, a detailed unit-wise analysis is warranted, the report added.