ISLAMABAD: If the proposal accepted in the budget for 2014-15, the Federal Board of Revenue (FBR) will introduce “electronic volume tracing”’ through Finance Bill to collect sales tax/excise duty on the basis of actual production of items such as beverages, ghee/cooking oil, fertilisers, etc.
Briefing the National Assembly Standing Committee on Industries and Production, Federal Boards Revenue Chairman Tariq Bajwa informed that one of the key budget proposals for 2014-15 was the new concept of “electronic volume tracing” likely to be implemented through Finance Bill (2014-15). If the FBR proposal is accepted in the budget, a third party will be engaged to check the actual production and supply chain through “electronic volume tracing.” Both the tax department and manufacturers should not be involved in counting production of the finished product.
Bajwa elaborated that the “electronic volume tracing” would be outsourced to a third party to ascertain actual production of goods.
The FBR chief when asked by the lawmakers about details of the concept, said it would not be restricted to excisable commodities rather would check actual production and sales within the entire supply chain. During the meeting, representatives of a leading beverage company showed willingness to follow the “electronic volume tracing.”
Endorsing the budget proposal of the FBR chairman, National Assembly Standing Committee on Industries Chairman Asad Umar said the committee fully supported the proposal of “electronic volume tracing”. It is clear that real objective of the whole exercise is that the beverage industry should pay the due taxes on the basis of volumes and production. “I fully endorse ‘electronic volume tracing’ for payment of taxes on actual production.”
The PTI lawmaker emphasized that the government should take decisions by duly considering the viewpoint of all stakeholders. In case of beverages, the viewpoint of small bottlers and manufactures was not heard before imposition of the capacity tax. Asad Umar said that the behaviour of the beverage industry itself is not based on ethics. They first proposed capacity tax and then went into litigation against the enhanced rates of the capacity tax which reflects unfair attitude of the industry.
The NA standing committee chairman was of the view that the capacity tax seemed to be introduced for some personal gains or due to political pressure. The committee was surprised to hear that the shortfall from capacity tax would touch Rs2.5 billion during current fiscal year. The representatives of the small beverage manufacturers agitated before the committee that capacity tax has been introduced without hearing their viewpoint.
Pakistan Fruit Juice Company Chief Executive Ikram Elahi said that the experiment of the capacity tax failed in the past and the government had again introduced capacity tax without taking input of local manufactures. The production valve is no criteria for fixation of tax because there are machines having different production capacity. As rate of the capacity tax decreases with increase in production, the small units to be having a disadvantageous position in the market. Only beneficiaries of capacity tax were invited during the entire process of consultation, he claimed.
Responding to these queries, Tariq Bajwa categorically declared that the government was not siding with anybody rather desired to provide level playing field to all the stakeholders. Despite the fact that decision of capacity tax was taken during the tenure of former FBR Chairman Ansar Javed, the FBR owns the decision. Capacity tax is not the only special regime for beverages sector, but special regimes are also operating in steel and other sectors. The industry committed 25 percent increase in collection after introduction of capacity tax, but major units, which availed the schemes, are now contested the fixed regime in courts.
He explained that aerated water sector was filing its sales tax/FED returns from tax period June 2012 on the basis of self-assessment. Huge variations among different players were noted by the Board during examination of yearly data available on the IT database. It was observed that bottlers with huge production capacities were paying much lesser amount of taxes as compared to other bottlers of similar or lesser size.
