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Zero-rating restored on 19 items

July 19, 2013
- File Photo
- File Photo

ISLAMABAD: The Federal Board of Revenue on Thursday restored zero-rating on import and local supply of 19 products, mainly of stationery, dairy and bicycles, including their raw material. The facility was restored after a lapse of 26 days.

The exemption was restored vide SRO670 of 2013, but stringent conditions have been linked with it for availing the facility.

In the budget 2013-14, the ruling PML-N had imposed 17pc sales tax on import and local supply of all such products.

But on strong resistance, Finance Minister Ishaq Dar announced in his concluding budget speech on June 22 that the facility would be restored on these products. The FBR, however, issued the SRO after a lapse of 26 days.

The notification did not say anything whether the sales tax collected between June 12 and July 18 would be returned or not to the manufacturers.

The 19 products on which sales tax would not be charged include - colors ink sets, writing, drawing and marking inks, erasers, exercise books, pencils, sharpeners, geometry boxes, pens, ballpoint pens, markers and porous tipped pens, pencils, including colour pencils, milk, including flavoured milk, yogurt, cheese, butter, cream, desi ghee, whey, milk and cream, concentrated and added sugar or other sweetening matter, preparations for infant use put up for retail sale and fat filled milk and bicycles

The availing of the facility has, however, been linked with a series of conditions.

The notification says that zero-rating would be available subject to determination of input/output ratios by the Input -Output Co-efficient Organisation (IOCO), if not already determined under an earlier concessionary notification issued for such goods.

For import and local procurement of raw material, packing material, subcomponents, components, sub-assemblies and assemblies for manufacture of these goods, a sales tax registered manufacturer of these goods having suitable in-house facilities shall submit a complete list of his annual requirement of the inputs the manufacturer intends to import or purchase locally for manufacture of goods to the Commissioner Inland Revenue having jurisdiction.

The commissioner would approve the declaration of input-output ratio of the manufacturer without physical verification in case declared input–output ratio and input requirement is in accordance with the prevailing industry average or the inputs consumption pattern of the applicant manufacturer or as already determined by IOCO under an earlier notification issued for such goods.

In case the commissioner is not satisfied with the declared input-output ratios of the goods to be manufactured because of their being prima facie not in accordance with the prevalent average of the relevant industry or in case the input-output ratios are not already determined by IOCO, he may, after allowing a six months provisional quantity, make a reference to the IOCO for final determination thereof.

On receipt of report from IOCO, the commissioner shall then determine the final annual quantitative entitlement of inputs and grant final approval for zero-rated purchases or imports. In case of non-receipt of report from IOCO within four months of the application made by the manufacturer, the commissioner shall provisionally allow another six months quantity to the applicant manufacturer.

In case of goods to be imported by the registered manufacturer, the authorised officer of Inland Revenue shall furnish all relevant information online to customs computerised wystem.

Where a registered person supplies goods to a registered manufacturer of goods, he shall issue a zero-rated invoice.

The registered manufacturer of goods would be entitled to claim refund of input tax paid on utilities and such inputs, which are purchased by him after payment of sales tax.

The registered manufacturer shall maintain complete records of the inputs imported or locally purchased and the goods manufactured there from.

The input goods allowed shall be consumed within 12 months of purchase or import thereof, where the consumption period shall start from the date of purchase or import of input goods.

However, the input goods shall be purchased or imported before the expiry date of the approval.

The manufacturer shall communicate to the concerned commissioner of Inland Revenue in writing about the consumption of imported or locally procured inputs within 90 days of their consumption.

In case, the input goods are not consumed within the period allowed in the approval, the manufacturer shall pay the amount of sales tax involved or obtain extension from the commissioner of Inland Revenue and the Collector of Customs.

The Commissioner Inland Revenue concerned, whenever he deems necessary but not more than once in a calendar year, may get the record of the manufacturer audited.

In case, it is found that the inputs have not been properly accounted for or consumed in the manufacture and supply of goods as prescribed, the Commissioner may initiate proceedings for recovery of the sales tax involved on the unaccounted inputs besides penal action. The commissioner may also relax the conditions for any manufacturer.