Federal Tax Ombudsman (FTO) has unearthed that Millat Tractors Limited (MTL) has not passed on the relief granted through Finance Act, 2022 to the end consumers by overcharging sales tax, and failed to refund the excess amount collected on delivery of tractors after July 1, 2022.
The FTO issued an order against the leading tractor manufacturing company on Tuesday.
According to the new order dated December 20, the FTO has directed the Federal Board of Revenue (FBR) to instruct Chief Commissioner IR, LTO, Lahore to conduct a probe into the charging of sales tax at the time of booking which was not disclosed by MTL while issuing invoices at the time of delivery of tractors, or while filing sales tax returns for the month of June 2022.
FTO has directed the FBR to ensure that relief granted by the legislature, through Finance Act, 2022 is passed on to the end consumers, wherever a 5 percent sales tax was charged by MTL before June 30, 2022, but the delivery of tractors was made after July 1, 2022.
The FTO observed that given the facts the complainant is entitled to a refund of Rs. 93,500 by MTL as the tax charged at the time of booking has not been paid to the state treasury. LTO Lahore must ensure that relief is granted to the complainant and other similar buyers with the same facts.
It is expected that the FTO order would resolve hundreds of similar cases where sales tax was overcharged from buyers of tractors and refunds would be issued to the purchasers, senior FTO officials said.
LTO Lahore, the concerned field formation was in complete darkness but for the intervention of the FTO office, and this “neglect, inattention, inefficiency and ineptitude, in the administration or discharge of duties and responsibilities” clearly tantamount to maladministration in terms of section 2(3)(ii) of FTO Ordinance, 2000, FTO order further added.
In the recent past, there were hundreds of cases wherein a car company had charged sales tax at 17 percent before 30th June but sales tax was reduced w.e.f. 1st July i.e. before delivery of vehicles. In said cases, the FTO office had raised the issue of excessive charge of sales tax, investigated it thoroughly, and concluded that refund of the excess amount is due to the end consumers who are entitled to the reduced tax.
In this particular case, the complaint was filed under section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance) against the alleged illegal charging of sales tax and then further overcharging of an amount of Rs. 0.245 million on purchase of a tractor by MTL.
Briefly, the complainant booked a tractor vide booking No.738103 on 03-06-2022 paying full and final consideration of Rs. 1.953 million, inclusive of sales tax at 5 percent (i.e. Rs. 93,500). But when the complainant approached for the delivery of the tractor on 03-07-2022 and 14-07-2022, the authorized dealer further demanded an amount of Rs. 0.245 million, allegedly quoting revised taxes on agricultural machinery w.e.f. 01-07-2022 and the complainant had to deposit Rs. 0.245 million.
Whereas factually w.e.f. 1st July 2022 sale of tractors was exempted from sales tax. Instead of passing the tax relief to the buyer/complainant, MTL overcharged quoting false reasons. The complainant prayed that the supplier be directed to refund the differential amount of sales tax, as per the rate applicable on the date of delivery of the vehicle.
FTO order added that the sales tax component of the price received by MTL can neither be retained by the supplier for an indefinite period nor can it be adjusted against price differential if any by the supplier on its own without disclosing this fact in the relevant sales tax return. Thus, non-declaration of the whole transaction and nonpayment of sales tax recovered from the buyer/complainant, MTL has contravened the Sales Tax Act and LTO Lahore failed to take any suo motu cognizance of this glaring default.
