Taxation

Tribal areas: RTO Peshawar directed to register all steel units

The Federal Board of Revenue (FBR) has directed Regional Tax Office (RTO) Peshawar to register all steel units in tribal areas and ensure recovery of federal excise duty (FED) from these units. The direction has been given by the FBR here on Wednesday in the budget instructions (2019-20) addressed to the field formations.

The FBR has also highlighted that Board will make rules for initiating criminal proceedings against any departmental officer or official/authority, who willfully and deliberately commits or omits an act which results in undue benefit or advantage to the authority or the officer or official or to any other person.

According to the FBR, the supplies by manufacturers and imports of steel billets, ingots, ship-plates, bars and other long re-rolled profiles have been exempted from sales tax. In lieu thereof, FED has been imposed on these products by inserting serial number 58 in Table-I of First Schedule to the Act, whereby these products have been subjected to federal excise duty at 17%. An entry pertaining to these products has also been made in the Second Schedule, thus making the federal excise duty on these products chargeable in sales tax mode.

Accordingly, input sales tax can be adjusted against this FED and this FED shall also be adjustable against sales tax. The objective was to extend the levy in relation to steel products to tribal areas which enjoy exemption from sales tax, earlier under SRO1212(I)/2018, and now under Sixth Schedule. Accordingly, RTO Peshawar is requested to register all steel units in tribal areas and ensure recovery of federal excise duty due.Further, a new sub-section (5A) has been added to section 3 of the Federal Excise Act, 2005, providing for minimum production criterion for items listed in Fourth Schedule. Presently, only aforesaid steel items are listed in this schedule. Minimum criteria based on kwh of electricity have been specified and it has also been stipulated that in case minimum production exceeds actual supplies in a tax period, the FED shall be paid on the basis of minimum production. In case of ship plates and other re-rollable scrap produced from ship­ breaking, the minimum production has been prescribed as 85% of the weight of the vessel imported for breaking. Field formations are requested to study the procedure in detail and ensure implementation accordingly. In case of ship-breakers, the field formations should not make any case in relation to wastage / scrap beyond the aforesaid limit of 85% without the approval of Member (IR-Operations), FBR.

The FBR said that Rs 300 per kg of Federal Excise Duty on un-manufactured tobacco has been reduced to Rs 10 per kg. However, the supervision of GLTs as prescribed under the Federal Excise Rules, 2005, as amended vide SRO 1149(I)/2018 dated 18.09.2018 shall continue. Field formations, particularly RTO Peshawar, are requested to ensure proper monitoring and documentation of tobacco through GLTs.

In order to discourage sale of duty-not-paid cigarettes, a new clause (d) has been inserted in section 19. The sale of cigarette below the printed retail price is now an offence and shall be penalized under sub-section (2) of section 19. Field formations are advised to take necessary action without causing harassment.The FBR said that the rate of sales tax on services by call centres was 18.5% at serial number 41 of the Schedule. This rate was at par with rate of federal excise duty on telecom services. Since rate of FED on telecom services has already been reduced to 17%, the rate for call centre services has also been reduced to 17%.

The definition of cottage industry in section 2(5AB) has been modified to make it more robust and infallible. The annual turnover threshold has been reduced from Rs 10 million to Rs 3 million and three new criteria have been added in the said section. To qualify as cottage industry, all the four conditions will have to be fulfilled. The field formations should ensure registration of industries that do not fulfill any of these criteria, the FBR said.

A new condition (e) has been added to the existing definition of ‘Tier-1 retailer’ under section 2(43 A) of the Sales Tax Act, 1990. Now, a retail shop having area more than 1000 square feet shall also fall under tier-1 and shall be liable to discharge its liability under standard regime. Field formations are requested to ensure registration of such retailers and payment of due tax from them.

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