FTO censures tax body over failure to audit cigarette manufacturers

Updated November 08, 2019

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Federal Tax Ombudsman (FTO) has found that tax department is not realising full potential of federal excise duty and general sales tax from majority of cigarette manufacturers by either failing to conduct proper audit or ensuring account of production of these units. — AP/File
Federal Tax Ombudsman (FTO) has found that tax department is not realising full potential of federal excise duty and general sales tax from majority of cigarette manufacturers by either failing to conduct proper audit or ensuring account of production of these units. — AP/File

ISLAMABAD: Federal Tax Ombudsman (FTO) has found that tax department is not realising full potential of federal excise duty and general sales tax from majority of cigarette manufacturers by either failing to conduct proper audit or ensuring account of production of these units.

FTO Mushtaq Ahmad Sukhera, in a suo moto case, directed the Federal Board of Revenue (FBR) to develop a special, focused and across the board monitoring and enforcement regime for high revenue yielding sectors like cigarette, cement, sugar, beverages and fertilisers.

The FTO observed that in these sectors, rules for record keeping of raw material, production, storage, compliance and monitoring be re-aligned with classic model of central excise, and implemented in IT-based system.

According to FTO’s findings, the information provided by the FBR and its field formations was reviewed in order to investigate the effectiveness of monitoring and audit provisions of relevant laws for collection of due government revenue.

According to the FTO report, despite the fact that snap monitoring of production of the cigarette units was in place for smaller units, since 2016-17, revenue from cigarette sector had considerably declined.

The FTO identified non-implementation of certain laws and poor monitoring of the value chain of cigarettes and other products.

It was also observed that the monitoring regime is confined to the small KP-based cigarette manufacturing units. Large units run by multinationals are not covered under the regime.

Published in Dawn, November 8th, 2019