ISLAMABAD: The Federal Board of Revenue (FBR) informed the Public Accounts Committee (PAC) on Wednesday that it has reopened an input adjustment of sales tax claims worth Rs1.19 billion against K-Electric.

The committee was informed that a reference of Rs1.19bn was sent to the FBR against KE. According to Rule 20(2c) of the Sales Tax Special Procedure Rules 2007, gas transmission and distribution companies shall charge sales tax at the rate of 25 per cent of the value of supply of natural gas to CNG stations. Similarly, according to Rule 58(h), electric supply companies shall charge and pay sales tax at the rate of Rs6 per unit of electricity consumed by steel-melters, re-rollers and composite units.

Audit officials pointed out that two field offices of the FBR did not realise the amount of sales tax relating to CNG stations and steel-melters collected by three registered companies, which was adjusted against their input liability, depriving the government of its revenue amounting to Rs4.1bn for the years 2010-11 and 2011-12.

FBR chairman Nisar Muhammad Khan said that the FBR’s decision could not be challenged at any forum, even by the audit department, under the law, but the board decided to reopen the claims of K-Electric and some other organisations voluntarily.

Moreover, in a latest development, the tax returns filed by individual filers based on self-assessment are also being audited, he said. He added that upgrading the IT department has helped the FBR reduce the input adjustment claims of sales tax by Rs120bn as compared to the last year.

On this, PAC member Shafqat Mahmood questioned the audit department’s jurisdiction that whether it had access to records of self-assessment made by individual filers.

Acting auditor general said the audit had the mandate to check the control of the FBR over their revenue receipts and expenditure. He explained that audit could not advise the FBR but only gave observations in the light of FBR’s working and the statutory regulatory orders it issues.

Another audit para observed that in 11 field formations of the FBR, tax liability of 105 taxpayers was short-assessed, which resulted in excess determination of refunds amounting to Rs3.9bn.

PAC member Arif Alvi recommended the committee to direct the FBR not to give extension in expiry date of annual returns filing. He said they should levy penalty on those who failed to submit returns in due time.

At one point, the committee’s chairman said the FBR should provide a list of those ministries and government departments which had disputes of Rs200bn with the FBR on tax matters.

Published in Dawn, January 12th, 2017