FBR to check misuse of tax incentives by FATA industries

LAHORE: Federal Board of Revenue (FBR) on Tuesday said it had started capacity determination of tax exempted FATA/PATA industries to restrain any misuse of the provided relief.

Chairman FBR Dr. Muhammad Ashfaq said production determination process of the industries was underway and their input-output capacity would be added by 31st March into WeBoc system of customs.

The industries would not be able to clear raw materials more than their input-output capacities after syncing of the data with the WeBoc system, he added.

“This will end the issue of selling of tax exempted raw materials in settled areas markets, which will not make the settle area producers competitive, but also plug the revenue loss to the national exchequer.”

The government gave tax exemption to FATA/PATA region industries after its merger to Khyber Pakhtunkhwa (KP).

Different sectors have continuously alleged abuse of the exemptions by the industries units by selling their imported raw materials and finished products in the settled areas, making the areas industry uncompetitive. Steel melters, ghee/cooking oil manufacturers, for makers are said to be mainly affected sectors with the exemptions.

A top official of the board disclosed The News that almost 70 percent work on capacity determination of the FATA/PATA based industries was completed, and FBR was working on production capacity of the industrial units established in the region and their imports of raw materials.

“The historic data of import of raw materials is also evaluated as well along with the demand and consumption of the region,” he said. The board was checking the input-output of the steel, ghee, foam and other industries established there and getting tax incentives, he informed.

It was informed that the director general of ICOC (Customs) and RTO Peshawar was in process of determination of production capacity of the units located in the FATA/PATA and further action to discourage the misuse of duty/taxes exemption would be taken in findings accordingly.

According to industry estimates, the national exchequer has suffered a loss of more than Rs50 billion from the exemptions given to the FATA/ PATA alongside distortions are also created in the markets.

The industry officials believed the government estimated the consumption capacity of the region population or even the KP population, instead of estimating production determination of base units in the region.

Ibrahim Sheikh, foam sector representative said the FATA/PATA based units imported and stocked huge quantities of raw materials, which even could be used over next five years. The objective of duty/taxes exemptions to the area was to mainly benefit the population of the newly integrated districts in to KP settled areas.

The ghee/cooking oil manufacturers officials also argued that locals of the merged region were paying the same price of ghee/cooking of the settled areas consumers, while all of the units established there also had units in settled areas. Thus, the public of the area was not benefited rather it created distortions to settled areas markets, they said.