KARACHI: The Federal Tax Ombudsman (FTO) has concluded an inspection under Section 17 of FTO Ordinance, 2000 and recommended a way for the Federal Board of Revenue (FBR) to recover evaded government revenue by addressing the misuse of Rule 3(A) of Rule 58H of Sales Tax Special Procedure Rule, 2007.
The Special Procedure Rules were introduced in 2007 to facilitate the Steel Sector, and collection of Sales Tax from steel melters was charged at specified rates under Rule 58H. However, sub Rule (3A) was inserted in 2014 to simplify the Sales Tax collection process.
During the facilitation scheme, several discrepancies were noticed, and FTO’s investigation findings revealed the misuse of authority in the issuance of exclusion certificates. The FTO team examined voluminous data provided by Corporate Tax Office, Lahore, and retrieved relevant data from Lahore Electrical Supply Corporation (LESCO). FTO’s findings suggest that approximately Rs. 5.5 billion is suspected to be evaded in such cases at CTO Lahore.
FTO recommends that FBR should take timely and directional action to recover the loss by reconciling the amounts as per Exclusion Certificates and recovering any differences. FTO also recommends re-locating the jurisdiction of Steel Cases from CTO Lahore to LTO Lahore or RTO Lahore for more effective recovery proceedings, and any officers/officials linked to the cases of Steel melters should not be associated with the fresh jurisdiction of the cases.
Finally, FTO recommends internal investigation on all Pakistan basis, with special emphasis at Lahore, solely aiming at the recovery of the loss incurred by probing all cases of exclusion certificates.