Directorate General of Intelligence and Investigation Federal Board of Revenue (FBR) is focusing on a rapidly growing new sector engaged in manufacture and supply of batteries and detected massive evasion of sales tax to the tune of Rs 1 billion by the battery dealers.
Sources told Business Recorder here on Wednesday that the battery sector has shown enormous growth during recent past due to large-scale use of UPS, availability of used and old imported cars and expansion in motorcycle batteries. A lot of expansion has been witnessed by the battery industry.
The Directorate of Intelligence IR found that the manufacturers of battery are regularly paying their due amount of taxes, but the persons to whom the batteries are being sold remain out of the tax net. The purchasers of these batteries mostly dealers are not registered with the sales tax department despite having annual turnover of Rs 5 million. These battery dealers are liable to registration, but not contributing any amount of sales tax to the national kitty.
The analysis of initial data of three brands of two companies revealed that 71 cases of un-registered dealers have been detected in Lahore; 128 cases in Faisalabad; 57 in Karachi 24 in KPK and 28 cases of un-registered battery dealers have been detected in Islamabad. In these cases the directorate has unearthed sales tax evasion of Rs 81.5 million. This amount of sales tax has been worked out after excluding the input and net amount of payable tax.
In the next stage, the directorate of intelligence IR will also approach manufactures of motorcycle batteries to check their tax payments. Moreover, the wholesalers and dealers of the motorcycle batteries would also be brought into the tax net. Sources said that the manufacture and sale of batteries is an ever expanding sector of our national economy. Traditionally auto and industrial batteries were mainly in focus but since last few years due to recurring load shedding UPS batteries has emerged with a new dimension and quite recently motor cycle batteries have further revolutionised the battery market.
Consequent upon regular exercise of fiscal intelligence and discreet market survey, Directorate I&I-IR Islamabad has scrutinised & analysed sales tax returns filed by the leading auto battery manufacturers for the period September 2011 to August 2012 which revealed that a number of unregistered dealers are doing business in millions without getting registered under the Sales Tax Act, 1990. Any action against the said dealers would not only expand the sales tax base but these cases can be converted into potential income tax payers.
A list containing name, NTN, address and value of purchases along with amount of sales tax has been dispatched to the field formations for further necessary action/ proceedings. The recovery of sales tax payable in these cases would not only strengthen I&I-IR's drive against prevailing tax evasion but it would augment agency's current BTB campaign.
Information collected by this office may be taken as a first step keeping in mind that the said dealers may have similar agency arrangements with other battery manufacturers like AGS, FORCE, ATLAS and PHONEIX etc. The manufacturers and dealers of motorcycle batteries is yet another area of concern because during the last few years there is a mushroom growth in this category and most of the aforesaid entities are operating outside tax net. All such units falling in your respective jurisdictions need to be traced and brought into tax net, sources added.