KARACHI: The Federal Board of Revenue (FBR) has launched scrutiny of all chemical imports to detect misuse of zero rating allowed to five export sectors, sources said on Tuesday.
“Data of chemical imports has been retrieved from the Customs authorities for analysing the supplies in the local market,” an official of Inland Revenue said.
Almost all the chemicals imported during the last six months had availed of a zero-rating facility, he added.
From July 1, 2016, the government had reintroduced the sales tax zero-rating regime for five export-oriented sectors, textiles, leather, carpets, surgical and sports goods. The zero-rating was revived on the demand of exporters on the grounds that their huge amount was stuck up in refunds.
However, the revival of zero-rating facility has heavily impacted the sales tax collection of the FBR since July 1, 2016, the official said, adding that revenues of around Rs17 billion had been lost due to zero-rated sales tax facility.
Sources in the FBR said that undocumented size of the economy is huge and it is not possible that the entire imports of chemical had been consumed or supplied to registered taxpayers. The Federal Board of Revenue official said that the goods declaration of chemical importers would be analysed on the basis of exemption certificates issued by respective tax departments.
Chemicals had been used in many sectors of the economy, excluding five sectors; therefore, chances of misuse are imminent, the official added.
A meeting of senior officers of Pakistan Customs and Inland Revenue was held last week to discuss the issue, he added.
Following the government decision, the FBR on June 30, 2016, issued amended SRO 1125 (I)/2011, under which zero-rating sales tax had been allowed to import for in-house consumption by registered manufacturers of the five sectors; commercial imports at zero-rated sales tax meant for registered persons in the five sectors; and supplies to registered or unregistered persons of the five sectors, excluding sales of finished fabric.
As per the law, the sale of imported goods will attract 17 percent when it supplied to persons outside the five export sectors.