KARACHI: Collector Appraisement West Shahnaz Maqbool has approached Federal Board of Revenue (FBR) seeking clarifications pertaining to various provisions of SRO 1125(I)/2011, as the confusion created by over a dozen amendments in the SRO has left doors wide open for misuse.
Shahnaz Maqbool has taken the task to plug revenue leakage because of the misuse of concessionary regime.
Sr. No.1 and 2 of Table I of SRO 1125(I)/2011 excludes the locally manufactured finished articles of leather and artificial leather and locally manufactured finished articles of textile and textile made ups.
However, serial No. 4 of Table II allows imported finished goods of the five value added textile sectors ready for use by the general public.
Shahnaz Maqbool is of the view that finished goods even of the five sectors (e.g. shoes, garments, hand bags etc.) are not entitled to concessionary/reduced rate of value addition tax and income tax being excluded from the SRO.
Even otherwise, exemption/concession on finished goods is not only against the spirit of SRO 1125(1)/2011, which was primarily issued to facilitate the export oriented sectors of the country, but also hampering the growth of the local manufacturing industry.
There have been around dozens amendments since 2011, which created much confusions regarding the applicability of the SRO. Commercial importers are availing benefits under SRO 1125(I)/2011 as they are importing raw materials of the five export oriented sectors. Customs is bound to allow the exemptions.
Customs has no access to the information to confirm whether the importer was a commercial importer or actually a manufacturing business. Inland Revenue is responsible to maintain the record that importers availing the benefit of SRO are actually manufacturers or not. Moreover, Inland Revenue is responsible to maintain the record regarding consumption of importer raw material and subsequent exports.
At present, import of fabric for in-house consumption by registered manufacturers of the five sectors is charged at zero percent under sub clause (i) of Sr. No. I of Table II of the SRO. Shahnaz Maqbool seeks clarification whether this concession is admissible to manufacturing industry or restricted to export-oriented industry only.
It may be recalled that the FBR in March 2014 had ordered an inquiry into the misuse of concessionary regulatory order related to the textile sector. It is estimated, the exchequer suffered losses to the tune of billions because of the over-use of SRO 1125 by certain elements particularly on the import of fabric and yarn.
