Post Clearance Audit detects revenue evasion of Rs14 billion

KARACHI: Directorate of Post Clearance Audit (PCA) has detected revenue evasion of Rs14 billion, as many importers did not pay or short-paid sales tax on retail price.

Sales tax on retail price was levied on a number of items vide 3rd schedule of sales tax act 1990 W.e.f 15.7.2019.

On the instructions of DG PCA Seema Raza Bukhari, Additional Director PCA Sheeraz Ahmed initiated sectoral audits by constituting two teams headed by ADC Amir Rasheed, DD Saima Zeb Butt and AD Mustafa Zamir.

More than 532,000 GDs were scrutinised by working day and night and 38 sectors were audited in which more than 8,631 importers (with and 71,236 GDs) have been identified who had either not paid or short paid sales tax on actual retail price in terms of 3rd schedule of the sales tax act 1990.

On the basis of initial findings of sectoral audits, evasion of Rs 14 Billion was detected and the importers are being provided the opportunity to defend their position through documentary proofs. Some importers have approached the PCA Directorate South with the willingness to pay outstanding tax with the excuse that initially WeBOC system was not accepting sales tax on retail price due to which they were unable to pay the same at the time of import. Rs 18 million is under process of recovery while some importers have sought time for response.

FBR has recently posted new officers having audit aptitude to strength post clearance audit function that is necessary in view of increasing quantum of green and yellow channel clearances. Ineffectiveness of post clearance audit formations poses grave risk and challenge to tax revenue and tax compliance.

Increasing quantum of green and yellow channel clearances have not synced with the corresponding effectiveness of post clearance audit capabilities of customs that has itself become a risk factor for FBR. Recently on 14th April 2021, FBR also issued Post Clearance Audit Policy of Customs to envision the the intended direction of customs in the domain of post audit and its shift of priority from transactional to entity-based or sector-based audits that are most effective to ensure tax compliance.

FBR has also recently posted an able Director Mr Khalil Yousafani from Customs Intelligence to PCA South that is expected to further improve the working of Directorate. The newly posted officers in PCA have high hopes that they can make a difference in the domain of post audits in line with vision of FBR as chalked out in the recently issued Post Audit Policy of Customs. Shortage of HR is a challenge as monitoring clearances at post audit stage of all collecteates lying in the provinces of Sindh and Balochistan is a humongous task that needs sufficient work force.

Director General PCA has also taken up the matter with FBR for more operational staff and has also approached DG Reforms & Automation with necessary changes to improve PCA WeBOC module to make it more effective for entity-based audits and sector-based audits.

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