Federal Board of Revenue (FBR) has directed its field formation to conduct audit of the registered persons who were previously included in five reduced/zero rated sectors. According to the directions made to all chief commissioners, the administrative measures are required to implement the policy corrections made in Sales Tax Act 1990 and Federal Excise Act 2005 through Finance Act 2019 to bridge the gap between actual collection of sales tax / federal excise and its true potential.
The board directed its field formation to take immediate action against non-filers of July and August 2019 especially where the registered persons have filed their sales tax returns for the tax periods of May and June 2019. In addition, audit of the registered persons who filed returns for the month of July and August 2019 should be conducted especially those who were previously included in five reduced/zero rated sectors.
It said that monitoring of registered persons paying sales tax under Eighth Schedule of the Sales Tax Act 1990 especially in those cases where registered persons are supplying at reduced rate should be initiated besides reports must be made by the field formations having jurisdiction over a specific sector and these reports should be shared with board as well as other field formations having jurisdiction over same sectors.
Furthermore, the registered persons dealing in Third Schedule items to be monitored to ensure the sales tax collection at retail price and printing of 'retail prices' has to be ensured and price lists of all such products have to be obtained from the manufacturers/ importers falling in Third Schedule to compare with the printed prices of products supplied in markets.
FBR also ordered to monitor stock positions as on 30-06-2019 filed by the manufacturers/importers of goods which have been included in Third Schedule to ensure that supply was made and tax was charged at retail price.
It urged the field formation to pay heed on those cases which have piled up massive carry forward and are only paying sales tax under section 8B of the Sales Tax Act 1990 and added that the complete data of sales and monthly turn-over of different retailers who have integrated their Point of Sales (POS) with FBR was available on ITMS.
Extensive data is available on portal on that subject be used for analysis of sales trend as well as to identify the sales point which are showing no or little sales or where sales are not being uploaded on portal and evasion of tax is being made.
The suppliers who are just filers to remain on ATL should be monitored as majority of them are null filers or nil filers and field formations are directed to activate working on these suppliers.
In addition, monitoring of sales tax withholding @5% on purchases from un-registered persons (11th Schedule) should be initiated and post refund audit for sanctioning of refund through Fully Automated Sales Tax e- Refund System (FASTER) and Expeditious Refund System (ERS) to be placed on ground.
Furthermore, it said that monitoring of beverages sector in order to ensure that 5% FED on retail price was being charged and paid against supply of fruit juices, syrups and squashes, waters containing added sugar or sweetening matter etc. excluding mineral and aerated waters, which were placed under Third Schedule in 2019-20.
It said that the rate of Federal Excise Duty has been increased in cement from Rs 1.5/Kg to Rs 2/Kg hence field formations has been directed to closely monitor the stocks, production and dispatches and examine the percentage increase in FED collection, which is due to increased rate or increased production.
The FBR also asked to monitor oil & ghee sector where FED has been imposed @ 17% ad valorem be made and emphasized to immediately verify input tax of steel sector and enforcement of new sales tax mode FED collection @ 17% ad valorem introduced through Finance Act, 2019.
It said that Focus must be made on those withholding agents/registered persons who made purchases in bulk from un-registered persons and are not depositing 5% withheld tax and investigative audit must be conducted in cases where the registered persons showed negative value addition or high input-output ratio, continuous carry forward and low output tax in order to create deterrence against tax evasion.