KARACHI: The Federal Board of Revenue (FBR) in its quarterly review has noted that loss of revenue could be quantified into undue exemptions of income tax, misuse of reduced WHT and misclassification of PCT code and recommended that post clearance audit should be carried out where taxes/duties have escaped.
According to the review, exemption from Income Tax granted where no exemption/SRO is available, reduced rates of 2.0 percent WHT applied on items other than Pulses and Edible oil and levy of Custom duties at the rates lower than rates prescribed under PCT Code.
The FBR has recommended that the shortcoming and defects in the system software of 1-Customs pointed out need to be rectified. Therefore, an exercise needs to be carried out for 1st Quarter of current financial year to remove defects from the system software.
The other recommendations include:
• There should be no manual command in the system and it should also not override the default/design functions of the system. Even if there is a necessity of manual command, its justification should be reflected on the output document i.e., worksheet. The system should have all provisions of law/SROs/etc. in its memory and no officer/official of Customs Collectorate should give manual command to the 1-Customs system.
• All the inputs are provided on the GD which is a source document; therefore, the collection worksheet which is an output e-document must bear all the information present in the GD.
• The computer software of 1-Custom needs to be revisited/examined to ensure correct application of law. The following short comings should be rectified in 1-Custom software.
• All valid SROs and existing provision of law should be available in the memory (data base) of 1-Customs software.
• Invalid SROs/provisions removed from law should also be removed from the system.
The following are the two defects which need to be removed from the system:
a) The provision of manual command should be removed from 1-Customs software.
b) The invisibilities (important entries in the GD not appearing in the system output i.e., work sheet) needs to be eliminated and visibility needs to be enhanced in the 1-Customs system software so that it qualifies the test of transparency.
• There should be provision in the system that invalid SROs/law should be removed itself from the system.
• PRAL should take measures to ensure that manual certificate issued by Commissioner is fed in the system at source.
• For the purpose of recovery proceedings a new sub-section needs to be inserted after sub-section (2) of section 161 of the Income Tax Ordinance, 2001. The matter may, therefore, be referred to Policy Wing (Direct Taxes) FBR, Islamabad for consideration.
• While defining Collector of Customs u/s 148(9) the word “Assistant Collector†has not been mentioned as an authority which needs to be added.
• Furthermore it is recommended that capacity building may be provided by PRAL to officers/officials of concerned RTOs/Collecotrates to use/examine the output data i.e., worksheet generated by 1-Customs.
FBR Quarterly Review recommends post clearance audit where taxes/duties have escaped.
