KARACHI: Taking strong exception to serious irregularities in collection of sales tax, Federal Excise Duty (FED) and income tax from sugar sector, the Federal Board of Revenue (FBR) has directed the Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) to act on the report of Directorate General Audit, Inland-Revenue (South), Karachi.
According to reports, the sugar sector has committed major irregularities by misusing SRO 77(I)2013 to avail concessionary rate of 0.5 percent FED on local supply of sugar, equivalent to actual export by sugar manufacturers.
The FBR has contemplated the special study on sugar sector conducted by the directorate and has dispatched the report to the field formations for comments, directing stern action. It is to be noted that the Inland Revenue (South) Karachi DG (Audit) conducted a special study on levy of sales tax, FED and income tax on sugar sector for the year 2012-13 in respect of 29 taxpayers of LTU Karachi, seven taxpayers of RTO-III Karachi and one taxpayer of RTO Sukkur. He recommended to the FBR that compliance of applicable provisions, under Income Tax Ordinance, Sales Tax Act and Federal Excise Act, should be ensured.
It is further recommended that the Internal Audit Wing should be strengthened to help the management detect such irregularities.
An internal audit may be conducted by FBR to detect other irregularities not covered by the study. He also underlined streamlining mechanism for input tax adjustment.
It reported advocated that proper checks should be applied to the cases of Duties and Tax Remission for Export (DTRE) scheme and the misuse of reduced rate of FED by the sugar mills should be checked. The study highlighted certain significant issues having far-reaching effects. It pinpointed certain irregularities involving huge amount of government revenue. It said that the tax department failed to invoke provisions of section 161 and 162 of Income Tax Ordinance, 2001 resulting in loss of Rs588.20 million. Other irregularities included excess/irregular claiming of brought forwarded losses for Rs47.11 million and short/incorrect levy of income tax of Rs15.42 million and non-Realisation of default surcharge for Rs18.72 million.
It has been noted that non/short levy of Workers Welfare Fund of Rs95.33 million. On the sales tax side, irregularities included short-payment of sales Tax owing to non-apportionment of input tax for Rs352.80 million.
