Massive tax evasion by top PSF maker unearthed

07 Jan, 2010

Post-Clearance Audit (PCA) Karachi has unearthed massive evasion of duties and taxes by Pakistan's largest manufacturer of polyester staple fibre (PSF), allegedly involved in misuse of statutory regulatory orders (SROs) for obtaining illegal exemption of customs duty and sales tax at the import stage.
Sources told Business Recorder here on Wednesday that it is a first kind of a case where a special team of the PCA has unearthed massive evasion of duties and taxes by a well documented top company operating in the country.
During the post-clearance audit of exemption regime under SRO567(I)/05 (customs duty exemption) and SRO509(I)/07 (sales tax exemption), the Directorate General detected 39 cases of import of Methyl Acrylate by Karachi-based company through Pakistan Customs Computerised System (PACCs) wrongly availing the benefit of aforementioned SROs. Methyl acrylate is correctly classifiable under Harmonised System (HS) Code 2916.1200 (custom duty @ 5 percent and sales tax @ 1 percent) instead of declared 2916.1400 (customs duty @ 0 percent and sales tax @ 0 percent).
The evasion of duty/taxes comes to Rs 55 million. The directorate has initiated contravention proceedings against the unit and the audit of similar imports is also underway. It is important to mention that the PCA has started detecting cases in leading companies and manufacturers operating in the documented regime. The further analysis of data of similar nature of imports may also result in detection of misuse of exemptions at the import stage.

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