KARACHI: The government has proposed to cap the tax exempted import of raw materials to 110 percent of the quantity imported and consumed in the last tax year.

Presently, taxpayers are allowed to apply for exemption from tax collection on import of raw materials, provided determined tax liability of current tax year is paid.

That facility was however, subject to compliance of Federal board of Revenue (FBR) SRO No. 717(I)/2014, which included a restriction that exempted quantity of raw material should not exceed 110 percent of the quantity imported/consumed in the last tax year.

The said restriction, through the SRO, was challenged by taxpayers before the Lahore High Court, which declared the same extra-jurisdictional on part of FBR to provide for a condition which is not part of law.

It is now proposed to include the above restriction of 110 percent of quantity, as part of a statute under the Ordinance.

It has now also been proposed that Commissioner will be entitled to audit the taxpayer availing the exemption, in respect of the consumption, production and sales of the latest tax year for which return is filed, whilst deeming the selection for such audit under section 214C of the Ordinance.

In case the taxpayer fails to produce requisite documents during the audit, recovery of unpaid tax under section 148 will be made from the taxpayer.