FBR to Conduct Cost Audit of Agricultural Tractor Manufacturers

The Federal Board of Revenue (FBR) has decided to engage third-party auditors to conduct the cost audit of registered agricultural tractor manufacturers, who are claiming sales tax refunds.

The FBR has issued SRO.563(I) to amend the Sales Tax Rules 2006 for the issuance of new rules i.e. “Refund to Agricultural Tractor Manufacturers”.

The provisions of these rules shall apply only if the incidence of tax sought to be refunded has not been passed on to the consumers.

According to the new rules, to determine that the incidence of excess input tax claimed as a refund under these rules by an eligible person has not been passed on to the consumers, an annual cost audit will be conducted by a Cost Accountant authorised by the Board. The cost audit for a tax year shall be conducted based on twelve sales tax returns for the tax year, documents filed for refund under these rules, and any other documents called by the Cost Accountant.

The refund procedure shall apply to existing and future refund claims as filed by the registered agricultural tractor manufacturers engaged in the supply of agricultural tractors. The provisions of these rules shall apply only if the incidence of tax sought to be refunded has not been passed on to the consumers.

The “agricultural tractor” means a tractor used by farmers or growers engaged in the production of agricultural produce through tractor; an “eligible person” means a manufacturer of agricultural tractors who supplies tractors to a person holding a valid proof of landholding such as an agriculture passbook and copy of the record of rights of agricultural land duly verified from Provincial Land Revenue Authorities.

Only eligible persons shall qualify for availing reduced rate under the Sr. No. 25 of Table-1 of the eighth schedule to the Sales Tax Act, 1990.

The eligible person shall file a refund claim through STARR/RCPS system and refund application to the Commissioner Inland Revenue having jurisdiction, along with the specified documents.

The rules said that where the processing officer or the officer-in-charge is of the opinion that any further inquiry or audit is required in respect of refund claim or for any other reason to establish genuineness and admissibility of the claim, he may make or cause to make such inquiry or audit as deemed appropriate, after seeking approval from the concerned Additional Commissioner and inform the refund claimant accordingly. Audit under this rule shall be completed within thirty days of initiation of the proceedings.

The refund of admissible excess input tax shall be allowed and issued within seven days of the completion of proceedings initiated under rule 39S and in case no pre-refund audit is conducted, within fifteen days of the filing of the refund claim. In any case, the refund of admissible excess input tax under these rules shall not be processed through FASTER module. Filing of complete refund claim — within fifteen days of the sanctioning of refund, the eligible person shall file a complete refund claim along with the requisite supportive documents prescribed under Chapter V of the Sales Tax Rules, 2006, FBR added.

The rules added that the post refund audit of the refund claims processed under these rules shall be carried out by the concerned division based on the documents submitted by the eligible person and any other relevant documents called by the concerned officer to ascertain the admissibility and genuineness of the refund processed and issued under rule 39T. The proceedings under this rule shall be concluded within sixty days of the filing of a complete refund claim by the refund claimant under rule 39U, FBR added.