KARACHI: The MCC Appraisement West Karachi underlined the misuse of SRO 1125(1)/2011 has approached Federal Board of Revenue (FBR) seeking clarification/direction regarding extension of zero rated facility of Sales Tax vide SRO 1125 to the commercial importers dealing exclusively in import of finished fabric and its supply to the retailers.

SRO 1125(1)/2011 was issued by the Federal Board of Revenue (FBR) with the intent to support five major export oriented sectors of the country. Presently, commercial importers are claiming benefit of zero percent Sales Tax vide certain entry of the said SRO.

During scrutiny of clearance of finished fabric covered under SRO 1125 (1)/2011, it has been observed that commercial importers are involved in massive misuse of the zero rated facility and routinely importing and supplying finished fabric to retailers for sale to the general public which is defeating the intent and rationale behind the issuance of SRO.

The conditions laid down in the SRO clearly outline the class of imports and supplies and their respective rates of Sales Tax. As per SRO, all commercial importers are entitled to zero rated facility if the goods are useable as industrial inputs. However, at the time of import, when the commercial importers are asked to provide evidence of supply to the industrial sector, they are unable to do so.

They either produce a ‘nil’ Sales Tax return or show supplies to retailers, non-industrial or unregistered persons at zero percent sales tax

This office is of the opinion that the condition (i) of SRO read with S.No.1 of Table II clearly limits the imports of commercial importers at zero percent Sales Tax if supplied to the industrial sector of the five export sectors for use in goods to be exported out of Pakistan. Where the commercial importers fail to establish such supplies through their return, the benefit is being disallowed.

MCC Appraisement West requested that the Board may kindly examine the issues highlighted above and may issue necessary directions/clarification regarding extension of zero rated facility of Sales Tax vide SRO 1125 (1)/2011 to the commercial importers dealing exclusively in import of finished fabric and its supply to the retailers.

There are so many companies that have been importing large quantity of fabric for dyeing and then re-export. These companies are actually paper companies and get registration for nominal bribe of Rs0.25 million.

Whenever a case is made against these traders they opt for litigation to gain time and whenever a decision comes against them, these companies turn out to be paper companies. Some clearing agents are behind this scam.