Plant and machinery were declared exempt from the levy of sales tax by the FBR through SRO 727(I)/2011 in consultation with the trade and industry. The notification issued under section 13 of the Sales Tax Act, 1990 provides sales tax exemption on import by the registered manufacturers and importers upon submission of post-dated cheques. The customs officials at ports are required to release the security in shape of post-dated cheques within one month after filing of sales tax return by the importer. There is no legal requirement under section 7 of the Sales Tax Act to submit details of imports in the first tax period, as the same could be declared in the sales tax returns of the next six months.
On the other hand, the customs authorities are blocking imports of all importers who did not report the imported consignment within one month in their sales tax return, resulting in dispute over interpretation of sales tax law. The wrong interpretation of SRO 727(I)/2011 by the customs officials at ports has created serious problems for the importer community.
When a leading Karachi-based sales tax expert was contacted, he referred to section 7 of the Sales Tax Act 1990, which provides reporting of imports and purchase within six consecutive months, hence in case the importer does not report bill of entry in the first tax period it does not invoke any contravention of law. He further clarified that imposing an import blockade against industries which could not escape even in case of any minor procedural mistake was a harsh approach and simply could not sustain the test of legal scrutiny.
The representative of trade at the other end alleged that the customs authorities were actually exploiting minor procedural issues rather than seeking clarification from the concerned sales tax authorities. They were of the view that customs officials were only supposed to follow the rules laid down by the FBR''s Sales Tax Wing, since they did not have the expertise of the sales tax law, drawing negative inference without consulting the sales tax lawmakers itself reflects an arrogant approach of the custom authorities. They urged the FBR officials to restrain the customs authorities from invoking such harsh action of import blocking, which not only hampers smooth industrial activity but also promotes corruption. They also appealed to the Federal Tax Ombudsman to take suo motu action against such apparent maladministration, as it would also be instrumental in addressing issues of general interest and providing a corruption-free field.