ISLAMABAD: The Federal Board of Revenue (FBR) has issued a Standard Operating Procedure (SOP) for registered manufacturing units/businesses in the Azad Jammu and Kashmir (AJK) and the Gilgit-Baltistan (G-B) for enrollment with the FBR System to claim input tax adjustment.

The FBR has notified on Monday that the Board would establish Registration Cell for Enrollment (RCFE) for enrollment with the FBR automated system after transmission of data is operationalized by the AJK/G-B, IR department.

According to the sales tax general order number 6 of 2021 issued here on Monday, the Sales Tax Act, 1990 mandates a Registered Person (RP) registered with FBR to claim input tax credit on supplies made to RPs registered with the AJK Tax Department and vice versa.

Rule 161 of the Sales Tax Rules, 2006, however, warrants that RPs registered with AJK Tax Administration to have enrollment with the FBR, so as to be able to avail the benefits of input adjustments.

Apart from a few isolated memoranda issued every now and then, no systematic set of instructions have so far been formulated.

Similar instructional void exists when it comes to the G-B registered persons intending to undertake imports/exports and have to enroll with FBR’s WeBOC System. Sub-rule (3) of Rule 161 supra also stipulates that “when the AJK authorities institute e-filing for their registered persons, the adjustment as aforesaid shall only be available against electronic data of supplies as provided to the Board by AJK authorities.”

In the intervening period when the AJK Tax Department and Pakistan Revenue Automation Limited (PRAL) were negotiating and signing the Service Level Agreement (SLA), cross adjustment of input tax credit was allowed manually.

Rule 161(2) warranted all AJK-RPs to “furnish an undertaking that they will provide their supply record and the return filed in AJK” as and when required by the respective RTO or LTO, where their buyers are registered to ascertain correctness of their sales.

In anticipation of signing of the SLA between AJK Tax Department and the PRAL, manual adjustments stand disallowed.

Accordingly, it has been decided that hereinafter, in order to ensure certainty, transparency and across-the-board, SOPs are being devised that shall govern enrollment of the AJK and G-B RPs with the FBR systems for all purposes.

Status Pre-conditions: All AJK/G-B taxpayers seeking enrollment with the FBR systems for input adjustment and import/export purposes would need to fulfill the following pre-conditions:- That, the business is physically located within the territorial boundaries of AJK and G-B administrations.

That the business should have been registered with the AJK/G-B tax roll. That the applicant taxpayer must not be involved in a criminal or tax fraud proceedings at the time of filling of application anywhere in the country.

The FBR stated that the specified documents shall be accompanied with the verification of manufacturing unit/business by the AJK/G-B Tax Department.

The AJK/G-B shall forward the request electronically to Registration Cell for Enrollment (RCFE) established in the FBR for enrollment with the FBR automated system.

The FBR would establish and notify the RCFE as and when automated transmission of data is operationalised by AJK/G-B, IR department.

Copyright Business Recorder, 2021