FBR reopens input adjustment of ST claims against K-Electric

Federal Board of Revenue (FBR) has reopened an input adjustment of sale tax claims against M/s K Electric in line with the observation of the Auditor General of Pakistan (AGP). Public Accounts Committee (PAC) headed by Syed Khursheed Shah examined the audit reports of the FBR for the year 2013-14 here on Wednesday. The committee was informed that a reference of Rs 1.19 billion was sent to FBR against M/s K Electric.

According to rule 20 (2) (c) of the Sale Tax Special Procedure Rules 2007, the gas transmission and distribution company shall charge sale tax at the rate of 25 per cent of the value of supply of natural gas to CNG stations while according to rule 58H, the electric supply company shall charge and pay sales tax at the rate of Rs 6 per unit of electricity consumed by the steel melter, re-rollers and composite units.

Audit officials pointed out that two field offices of the FBR did not realise amount of sale 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 Rs 4.1 billion for the years 2010-11 and 2011-12.

Chairman FBR Nisar Muhammad Khan said that although the FBR’s decision could not be challenged at any forum even by audit department under the law, yet they decided to reopen the claims of K Electric and some other organisations voluntarily. He further explained that tax filers submitted their annual returns based on self-assessment which could not be audited. However in a latest development, they are now auditing the tax returns. He claimed that up-gradation of IT department helped the board reduce the input adjustment claims of sale tax by Rs 120 billion as compared to the last year. Member PAC Shafqat Mahmood questioned the jurisdiction of audit department, saying whether audit 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 SROs issued by the FBR and working of the FBR.

In another audit para, the audit observed that in 11 filed formations of the FBR, tax liability of 105 taxpayers was short assessed, which resulted in excess determination of refund amounting to Rs 3.9 billion. Member PAC 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 chairman committee said that the FBR should provide a list of those ministries and government departments, which had disputes of Rs 200 billion with the FBR on tax matters.