The Federal Board of Revenue (FBR) has clarified that a taxpayer is eligible for exemption certificate even if he imports raw material which is a substitute of the raw material imported and consumed during the previous tax year. According to an income tax clarification issued to the FBR Member IT here on Tuesday, it has been sought from the Board that whether a taxpayer is eligible for exemption certificate under clause (72B) of Part IV of Second Schedule read with SRO 717(1)/2014, dated 07.08.2014, if he intends to import raw material, which is a substitute of the raw material imported and consumed in the previous tax year.
The FBR said another query has been raised whether a taxpayer is required to fulfil the conditions of SRO 717(1)/2014, dated 07.08.2014, even though he qualifies the conditions of section 159 of the Income Tax Ordinance, 2001 and has applied for exemption certificate under the said section 159?
It is clarified that a taxpayer is eligible for exemption certificate under clause (72B) of Part IV of Second Schedule read with SRO 717(1)/2014, dated 07.08.2014, even if he imports raw material, which is a substitute for the raw material already imported and consumed in the previous tax year. For example, if a taxpayer has earlier imported and consumed canola seed (as raw material) having specific PCT Code and now intends to import its substitute like soybean seed (as raw material) having different PCT Code; the taxpayer is eligible for exemption certificate in terms of the aforesaid clause and SRO, if all the other conditions stated in the said SRO are fulfilled. However, it is mandatory that the quantity of intended raw material import shall not exceed 110 percent of the quantity of raw material imported and consumed in the previous tax year, FBR said.
It may also be clarified that if a taxpayer has earlier imported and consumed a raw material and now intends to import any other raw material, which is not substitute for the raw material already imported and consumed in the previous tax year; then he is not entitled to exemption certificate in terms of aforesaid clause and SRO.
Regarding second query, it is clarified that exemption certificates to be issued under clause (728) of Part IV of Second Schedule read with SRO 717(1)/2014, dated 07.08.2014 and section 159 are independent of each other. As such, if a taxpayer is entitled to exemption certificate under section 159, then it is not mandatory to fulfil the conditions of SRO 717(1)/2014, dated 07.08.2014, FBR clarification maintained.