FTO Directs FBR to Ensure the Collection of Sales Tax on Retail Price on Specified Goods

The Federal Tax Ombudsman (FTO), while deciding its motion investigation, has ordered the Federal Board of Revenue (FBR) to ensure automated collection of sales tax on retail price in case of specified goods and effective recovery of the already evaded amount in the last three years.

It was brought to the notice of the FTO that certain goods were made chargeable to sales tax based on the retail price at the time of import by virtue of amendments made in Section 3(2) of the Sales Tax Act, 1990 vide Finance Act, 2019-20.

The FBR, in order to give effect to the budgetary changes, issued Custom General Order No. 12 of 2019, dated 30.02.2019, whereby, the Directorate General of Reforms & Automation (Customs) was required to make necessary changes in the WeBOC clearance system of Customs for charging Sales Tax on Retail Price.

FTO has observed that the department has so far failed to develop a functional and practicable solution to the problem at hand, i.e., the Development of an IT-based module to cater to the budgetary changes with a view to capture and realize the exact amount of due taxes at the import stage on items subjected to tax on retail price vide Finance Act, 2019.

In view of the foregoing, alarming situation and fear of massive revenue loss, a report was called by FTO from the Directorate General (DG) of Post Clearance Audit (PCA) regarding detections made by them in this regard.

The DG, Post Clearance Audit vide letter dated 25.04.2022 communicated that its directorate examined 580,287 no of Goods Declarations (GDs), 97963 identified and 11173 notices served besides recovering Rs. 286.632 million accounts of short payment and Non-payment of sales tax on the basis of retail price (RP).

The three committees constituted by the FBR failed to perform and complete the assigned task with sincerity of purpose despite a lapse of about three years. Although the Directorate of Post Clearance Audit has made substantial detections of revenue loss and recoveries to the tune of Rs. 286.632 million, the same appears to be the tip of an iceberg, keeping in view the enormity of the task and limited human resources, at the disposal of DG, Post Clearance Audit. The efforts of DG PCA are appreciated by FTO in realizing notable legitimate government revenue.

In view of the significant revenue potential of the issue, FTO has directed FBR to ensure a foolproof, effective, dynamic, and functional module is developed in close coordination and active engagement of DG, Reforms & Automation, (Customs) and Inland Revenue Wing; besides, DG, PCA to constitute a dedicated team under the supervision of an Additional Director at each regional Directorate for in-depth Audit of this sector and submit a monthly progress report of detections made and tax collected; till the final deployment of the WeBOC module; Chairman FBR to provide additional staff to DG PCA for the above-mentioned task in consultation with Director General, PCA, Islamabad.



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