The Federal Board of Revenue (FBR) has posted Inland Revenue officers at the manufacturing premises of five sugar mills in Sindh to monitor their production and payment of sales tax.

According to a letter of the FBR to chief commissioner Large Taxpayer Unit (LTU) Karachi, in exercise of the powers conferred under section 40B of the Sales Tax Act 1990, the FBR has allowed permission for posting of officials of Inland Revenue at the business premises of five sugar mills.

Under section 40B of the Sales Tax Act, subject to such conditions and restrictions, the FBR may post a officer of Inland Revenue to the premises of registered person or class of such persons to monitor production, sale of taxable goods and the stock position.

According to a tax expert, the FBR had clarified that the investigative audit has nothing to do with any kind of tax evasion/fraudulent activities by some sugar mills. The FBR then stated that it is actually to improve tax compliance and ensure transparency in sugar industry and hence, FBR will conduct panel audit under Section 32A (Special Audit by CA) of the Sales Tax Act (STA).

Now three officers each of Inland Revenue have been allowed permission as per section 40B for posting in 5 sugar mills in order to monitor production, sales and stock positions, tax expert added.

Tax expert was of the view that certain entities are not properly disclosing their sales production quantities, stock whilst others are not properly stating real selling price. For example, if the retail price is Rs 100 per kg, certain manufacturers are showing selling price at Rs 60 per Kg while the remaining Rs 40 is supply chain margin as per the claims of the manufacturers. On the other hand, supply chain sectors' entities (distributors, wholesalers & retailers) claim that they are getting goods at high price from manufacturers and their all gross margin is hardly Rs 10. Consequently, there are revenue leakages (viz income tax, sales tax & even on FED) on Rs 30 in these cases, the expert said. He added that the posting of IR officers is expected in other sugar mills, manufacturers/ mills as well as supply chain entities.