A tea whitener manufacturing company was found to be involved in tax evasion worth approximately Rs. 16 billion.
According to the FBR, the company illegally reported the product as a dairy product, a national daily stated on Friday.
Official sources at Large Taxpayers Office (LTO) Karachi, while speaking to media, said that they conducted a detailed audit of taxpayers engaged in the production of the tea whitener. By law, milk or product manufacturers using dairy products are exempt from sales tax under the law. An FBR official said that the exemption of zero-rating was granted under the Sales Tax Act 1990 on goods, which are beneficial to public health and could be used as nutrition.
However, this company was manufacturing a tea whitener but claimed to be under zero-rated sales tax by declaring the whitener as milk. The company claimed the zero-rating on the basis of classification of a product, namely ‘tea max’ (a compliant product) – condensed milk with added sweeteners.
The LTO Karachi referred the tea whitener to the classification committee of Pakistan Customs, where chemical examiners declared that the tea whitener was not milk.
The official said in the past leading powdered manufacturing companies claimed their product as milk but it was established that their products were not milk. The Supreme Court of Pakistan in its order in March 2018 directed such companies to remove the word milk.
The FBR official informed that in the latest cases a summary has been sent to the FBR headquarter and that the FBR has allowed recovery of the amount from the manufacturers and suppliers of tea whitener against the wrong claim of sales tax exemption.
