The Directorate-General of Post-Clearance Audit, Karachi, has unearthed massive evasion of duties and taxes in several sectors, including importers of auto parts, lubricating oil, pesticides, iron and steel products and non-payment of anti-dumping duty on the import of tiles bought from China.
Besides many key sectors, the specialised audit teams of the DG PCA has decided to securitise tax record of imports from high risk countries like UAE, China, Malaysia, Taiwan, etc, and audit of imports made under the Duty and Tax Remission on Exports (DTRE) scheme, private/public and diplomatic bonded warehouses, oil imports in bulk and misuse of exemptions pertaining to income tax, customs duty, sales tax and one percent special excise duty (SED) to unearth big fish resorting to under-invoicing and evasion of duties/taxes.
Sources told Business Recorder here on Tuesday that a special team of the directorate has started analysing imports of auto parts from different countries, particularly Thailand and Taiwan. The directorate is now focusing on most important areas for 'entity based audit'.
The initial scrutiny of record has already been initiated and audit teams have been assigned specific task to unearth and detect mega cases of duty and taxes evasion and non-observance of relevant rules particularly Customs Act, 1969. The detection's of such a large number of cases of under-invoicing, misdeclarations and evasion of duties/taxes in large amounts through post-clearance audit reflects importance of such a department helping in improving revenue collection.
The main focus of audit would be on under-invoicing with special emphasis on imports from high-risk countries like UAE, China, Saudi Arabia, Malaysia and Taiwan. The consignments imported from these countries would be audited to verify the goods declarations (GDs) to check under-invoicing.
The audits pertaining to DTRE schemes would focus on manufacturers-cum-exporters, who have imported huge quantity of inputs and raw materials, but subsequently exported very small quantity of finished products. The audit of palm oil import in bulk would ascertain whether proper duties and taxes have been collected against the imported oil transported to upcountry. The imports made through 'One Customs' clearance system would be checked to verify payment of duties/taxes on imports of lubricating oil.
Sources said that detailed audit of major bonded warehouses including private, public and diplomatic warehouses would be conducted where payment of duties/taxes during removal of goods from such stores would also be checked. Another important area is to check the misuse of exemptions of customs duty, sales tax, income tax and one percent special excise duty (SED) by the importers.
Following are few examples of major cases unearthed by the DG PCA, Karachi: An expert team of the directorate unearthed misdeclaration of iron and steel items to the tune of Rs 36 million. A number of cases of misdeclaration of CRC Steel Sheets of Secondary Quality were detected which were cleared as Cobble Plates/Semi-finished products under Pakistan Customs Tariff (PCT) heading 7207.2090 @ 5 percent, instead of 7210.4900 & 7209.1510 @ 20 percent, causing loss of revenue to the extent of Rs 36.745 million. The cases are pending adjudication in Pakistan Customs Computerised System (PACCs) Collectorate. The DG PCA has requested the Collectorate to expeditiously finalise the adjudication proceedings and recover the evaded amount urgently.
The second case related to non-enforcement of anti-dumping duty on import of tiles. Over 90 importers of tiles from China did not pay anti-dumping duty amounting to Rs 57.13 million, payable under relevant circular of National Tariff Commission (NTC). Only 16 importers paid the anti-dumping duty, amounting to Rs 9,507,877. The cases of remaining importers are under adjudication with the concerned Customs Collectorates which are being reminded to effect recovery of balance amount expeditiously.
The DG PCA Karachi also detected 150 cases of evasion of one percent SED on import of lubricating oil by various importers. The total evaded amount in the said cases was Rs 6 million. The contravention cases have been framed against 150 cases.
The directorate also unearthed evasion of income tax by pesticides importers worth Rs 20 million. The import and supply of pesticides is exempted from the levy of sales tax under section 13 of the Sales Tax Act, 1990. Under the Finance Act, 2009, commercial imports are chargeable to income tax/withholding tax @ 4 percent and industrial imports @ 3 percent. However, importers of items zero-rated under section 4 of the Sales Tax Act, 1990, are required to pay income tax @ 1 percent. It was detected by the officers of the directorate that importers of pesticides had cleared their import consignments by paying 1 percent income tax and, as pesticides are not zero-rated for sales tax purposes, the importers were required to pay income tax @ 4 percent and as such evasion of Rs 20 million was detected in 200 cases on imports made during July to September, 2009.
The DG PCA Karachi also detected thousands of other cases in different commercial and industrial sectors, reflecting remarkable performance of the directorate with limited workforce.