FBR Proposes Reforms to Curb Frauds by Battery Manufacturers

FBR Proposes Reforms to Curb Frauds by Battery Manufacturers

Islamabad, May 26, 2024 – In a decisive move to clamp down on pervasive tax frauds, the Federal Board of Revenue (FBR) has proposed significant reforms in the budget for 2024-25 aimed at lead battery manufacturers.

The proposed changes, meticulously crafted by the FBR’s tax management team, call for a stringent 100 percent withholding of sales tax from all lead and scrap battery suppliers. This measure, if implemented, will apply indiscriminately to both Active and Inactive taxpayers, ensuring no loophole remains for fraudulent exploitation.

An FBR insider revealed that registered lead battery manufacturers have been engaging in extensive tax frauds, leveraging fake and flying invoices to claim illegal input tax credits. This deceitful practice has been particularly facilitated by Serial No.(viii) at the end of the Table in the Eleventh Schedule of the Sales Tax Act, 1990, which exempts Active Taxpayers from withholding tax. Exploiting this exemption, unscrupulous manufacturers have devised elaborate schemes, creating fictitious companies and registering them under the Sales Tax Act to fraudulently claim input tax based on counterfeit invoices.

The proposed amendments aim to dismantle these fraudulent networks by mandating that registered persons manufacturing lead batteries withhold 100 percent sales tax from all suppliers, regardless of their taxpayer status. This blanket approach is designed to close existing loopholes, thereby securing substantial revenue for the government. The FBR’s tax managers assert that this reform will not only augment revenue collection but also restore integrity within the tax system.

The implications of this proposal are far-reaching. By enforcing comprehensive withholding requirements, the FBR aims to stymie the creation of fake companies and prevent the proliferation of fraudulent invoices. This move is expected to deter tax evasion significantly and ensure that the tax liabilities are duly met by all manufacturers and suppliers within the lead battery industry.

As the budget 2024-25 approaches finalization, stakeholders within the industry await further deliberation and possible implementation of these stringent measures. The FBR’s robust stance signals a broader commitment to eradicating tax fraud and enhancing fiscal responsibility across Pakistan’s economic landscape.

This proactive approach underscores the FBR’s determination to safeguard the nation’s revenue base while promoting fair and lawful business practices within the manufacturing sector.