Khawaja Tanveer has submitted viable suggestions to the FBR for increasing revenue collection from chipboard/particle board manufacturers and improving documentation within entire supply chain of the industry. According to the investigation conducted by Director General I&I IR, in Pakistan approximately there are over 100 manufacturing units of chipboard/particle board and MDF board scattered all across the country. Out of these 100 manufacturing units; 35 to 44 units are registered with All Pakistan Particle Board Manufacturers Association.
The manufacturers of chip board/particle board sell their product in local market to unregistered wholesalers and retailers at a very low value to avoid sales tax. The manufacturers apart from understating price also understate the production quantities in the official records. They are availing benefit of full input tax credit on consumption utilities like electricity, gas and other industrial inputs but are not declaring the actual production/quantities in their monthly returns. The average wholesale and retail prices of chipboard/particle board during last three years have been worked out in detail. For example, FBR has collected Rs 54 million and Rs 78 million as sales tax during 2007-2008 and 2008-2009 respectively as compared to estimated sales tax of Rs 2.3 billion and Rs 2.7 billion during the period under review.
It is evident from tax calculation done by the directorate that billions of rupees are being evaded by the chip board/particle board, manufacturers only in the sales tax head. This practice is also promoting the non-documentation of the sector as it has become a practice in the market that goods are bought and sold without sales tax invoices.
The said figures are self explanatory as there is huge gap of actual tax collected vis-à-vis estimated, Khawaja Tanveer said. Director General I&I IR suggested that the FBR can collect substantial revenue by taking new tax measures. Firstly, input sales tax adjustment of utilities (electricity/gas) for the manufacturing of board should be restricted to the extent of their actual declared production. This shall compel manufacturers to declare their correct production and its subsequent supplies.
Secondly, incorporate necessary amendment in SR0863 (1)/2008 so that manufacturers of particle board/chipboard, MDF board submit their monthly production data with FBR/concerned Regional Tax Office/Large Taxpayer Unit (LTU). Thirdly, to overcome low price, FBR may fix sales tax price for the producers of particle board and MDF board under section 46 of the Sales Tax Act, 1990. Fourthly, under section 40B, RTOs/LTUs may be directed to post Officer of Sales Tax to the premises of chipboard/Particle board, MDF board manufactures to monitor production, sale of taxable goods and the stock position.