ISLAMABAD: The Federal Board of Revenue (FBR) has restricted input adjustment for manufacturers of steel and oil and ghee.
The FBR issued Sales Tax General Order (STGO) No. 12 of 2022 dated April 07, 2022, regarding input tax adjustment to manufacturers of oil and ghee and steel melters and re-rollers.
Under the STGO, the sectors of oil & ghee and steel would only avail input adjustment against invoices issued for the same products falling under these sectors.
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The FBR said the Sales Tax Act, 1990 mandates a taxpayer registered with FBR to claim input tax credit on import/purchases from registered suppliers only.
Section 8(1)(a) of the Act restricts the adjustment of input on goods or services used or to be used for any purpose other than for taxable supplies made or to be made.
Similarly, Section 8(1)(f) and (i) of the Act provide that tax credit shall not be admissible on the goods or services not related to the taxable supplies made by the taxpayer.
This essentially being a self-assessment based system warrants high standards of responsibility and integrity on part of the UST filers.
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“However, the analysis of the data available in the system has led to conclude that the facilities/benefits provided through automated sales tax return are being misused by the manufacturers of oil & ghee and steel melters and re-rolling mills who are claiming inputs other than their relevant business activities in violation of provisions of law.”
In order to ensure certainty, transparency across-the-board, it has been decided that input tax adjustment shall not be allowed to the manufacturers of Oil & Ghee and Steel Melters and Re-Rollers on the goods which are not related to their business activity.
The list of such goods attached as Annexure-I for manufacturers of Oil & Ghee and as Annexure-11 for Steel Melters and Re-Rollers on the basis of PCT heading on which input tax credit shall not be admissible under the law.
Although, all these PCT headings have been identified after due diligence, yet any hardship caused may be brought to the notice of the Commissioner concerned. This STGO become applicable with effect from April 1, 2022.
