KARACHI: The Federal Board of Revenue (FBR) has revised the conditions for issuance of exemption certificate on import of raw material by manufacturers, according to an statutory regulatory order (SRO)717(I)/2017.
In this regard, the following conditions have been issued in order to provide exemptions to industrial manufacturing which are included:
The material imported is to be used by the industrial undertaking as raw material for now use i.e in-house production of the end-product;
The taxpayer shall identify the exact nature of raw material to be imported by mentioning its Pakistan Customs Tariff code;
The taxpayer shall specify the quantity of raw material by units/numbers or weight as the case may be, subject to condition (v);
The tax liability for the current year on the basis of determined tax liability for any of the preceding two years, whichever is higher, has been paid;
The quantity of raw material to be imported which is sought to be exempted from tax under section 148 shall not exceed 110 percent of the quantity of raw material imported and consumed in the previous tax year. The taxpayer may import entire 110 percent in first six months or partly in first six months and partly in second six months. However, the taxpayer shall be liable to pay tax at the normal rate for the quantity exceeding the said 110 percent;
Raw material already imported before applying for exemption certificate on which tax under section 148 has been paid shall not be included or considered for the said 110 percent;
Tax year for which exemption certificate is required is not the first tax year of business;
Tax has been paid during any of the proceeding two tax years on the basis of taxable income;
No arrears of income tax, sales tax and federal excise duty are outstanding; and
All income tax returns, sales tax returns and withholding statements due to be filed under the law have been filed.
FBR said that the commissioner shall issue exemption certificate for six month only and in case, if the aforementioned conditions are not met then certificate should not be issued.
The taxpayer should file an application with complete information of raw material quantity and quality consumed during the preceding year and the raw material required during the current half year period; production capacity and stock consumption and production report for the previous six months period, and since the closing date of last return filed.
It is highlighted that after satisfaction of the eligibility of the taxpayer, the commissioner shall issue the system generated certificate.
“The commissioner shall furnish a certificate to the chief commissioner concerned in every case that the manner and the conditions as specified in the law have been fulfilled,” FBR said
FBR informed that the chief commissioner shall inspect from time to time the exemption certificates issued by the commissioner to ensure compliance to the board’s directions and furnish a half-yearly report to the board within ten days after the end of every six months of the financial year, FBR notified.
It said that the commissioner shall cause to conduct inspection of the manufacturing facility at any time to ensure that the raw material being imported is in line with the manufacturing activity or capacity and it is being used as raw material for self use only and verify the production capacity and stock consumption as stated by the taxpayer.