Karachi, December 28, 2023 – The Federal Board of Revenue (FBR) has laid out comprehensive conditions for businesses seeking to avail themselves of the zero-rated sales tax facility during the tax year 2024.
The move comes as part of the FBR’s ongoing efforts to streamline tax procedures and ensure compliance within the business community.
The FBR, through its Sales Tax Rules for Tax Year 2024, has provided detailed guidelines and stipulations for businesses aiming to benefit from the zero-rate sales tax on specific supplies. The conditions and limitations set by the FBR are designed to foster transparency and accountability among businesses engaging in zero-rated transactions.
Key Conditions and Limitations:
1. Input-Output Ratios Determination:
• Zero-rating of goods specified against S. No. 12 of the Fifth Schedule to the Act is contingent upon the determination of input-output ratios by the Input-Output Co-efficient Organization (IOCO).
2. Import and Local Procurement of Raw Materials:
• Registered manufacturers intending to zero-rate the import and local procurement of raw materials must adhere to specific conditions and procedures.
• Manufacturers with suitable in-house facilities are required to submit an application, including a complete list of their annual input requirements, to the Commissioner Inland Revenue.
• The Commissioner may approve the input-output ratio based on industry averages or IOCO’s previous determinations.
3. Approval Process:
• The Commissioner shall secure the tax involved in approvals through an indemnity bond furnished by the applicant.
• The Commissioner may provisionally allow quantity for six months, with a reference to IOCO for final determination if needed.
4. Record-Keeping and Reporting:
• Applicants must maintain comprehensive records of imported or purchased inputs and the goods manufactured from them.
• Input goods must be imported or purchased before the expiry date of the approval and consumed within twelve months.
5. Refund and Consumption Reporting:
• The applicant is entitled to claim a refund of input tax paid on utilities and other inputs.
• The applicant must inform the Commissioner about the consumption of imported or purchased input goods within ninety days.
6. Penalties and Audits:
• Penalties may be imposed if input goods are not properly accounted for or consumed in the manufacturing process.
• The Commissioner may initiate proceedings for recovery of sales tax on unaccounted inputs and impose penalties if necessary.
7. Relaxation of Conditions:
• The concerned Commissioner may relax conditions under exceptional circumstances, subject to surety or guarantee, if satisfied that such conditions are detrimental to the bona fide purposes of the manufacturer’s business.
The stringent conditions outlined by the FBR aim to ensure that businesses availing zero-rated sales tax benefits do so transparently and in adherence to industry standards. The emphasis on record-keeping, reporting, and accountability is expected to contribute to a more efficient and compliant tax environment, benefiting both businesses and the broader economy. As the FBR continues to refine tax regulations, businesses are urged to stay informed and align their practices with the evolving legal framework.
