President of Pakistan, Dr Arif Alvi, has directed the Federal Board of Revenue (FBR) to bring into the tax net the unregistered wholesalers, dealers or distributors of sugar buying huge quantities from sugar mills to broaden the tax base. He observed that despite making huge monetary transactions and the availability of their data with FBR, these unregistered buyers of sugar largely remained outside the tax net and were evading the prime national responsibility of paying taxes. The President passed these directions while disposing off 25 identical representations filed by FBR against the orders of the Federal Tax Ombudsman (FTO) directing FBR to bring unregistered buyers of sugar in bulk into the tax net to improve the collection of sales tax and reporting compliance within 90 days.
As per details, FTO had initiated an Own Motion investigation against the failure of FBR to bring into the tax net the unregistered buyers of sugar from sugar mills in the country. FTO observed that non-NTN holders had been buying huge quantities of sugar from sugar mills and their data was fully accessible by the FBR but this huge potential for tax collection remained unutilized. In its report, the FTO highlighted that large amounts of sugar were supplied by the mills to various unregistered buyers but the FBR had not paid due attention to broadening the tax base. It further observed that this low hanging fruit had not yet been harvested and despite making huge monetary transactions, unregistered buyers of sugar remained outside the tax net. FTO underscored that unregistered persons were easily identifiable because sugar mills were required to maintain records of supplies made during the Tax period and issue tax invoices indicating names, addresses, description, quantity, values of goods, CNIC or NTN of persons to whom the supplies were made under the Sales Tax Act of 1990. Furthermore, the Department has full access to various bank accounts of Sugar Mills and thereof the actual buyers can be tracked through analysing major credits appearing in the said accounts. Based on these findings, FTO had directed to enforce compliance after obtaining data of unregistered persons from the sugar mills and share it with concerned Regional Tax Offices to broaden the tax base. FBR filed a representation with the President against this order of FTO contesting its jurisdiction of taking Suo Moto action in such matters.
President Dr Arif Alvi disposed of the matter with the observations that FBR’s field formations were not vigilant in collecting information related to unregistered buyers and were content with just whatever was being submitted in the monthly sales tax returns of mills. He regretted that the data of unregistered buyers was not being examined for the purpose of broadening the tax net. He noted that FBR’s field formations held jurisdiction over sugar mills and could secure the complete particulars of all buyers by proper and timely analysis of withholding statements. He said that serious negligence and inefficiency on part of the field formations of FBR in the discharge of its duties was tantamount to maladministration. He observed that FTO’s recommendations were only a reiteration of the duty of FBR to strictly deal with unregistered sugar dealers to bring them under the tax net. The President held that under section 9 (1) of the FTO’s Ordinance, 2000, FTO was authorized to initiate Suo Moto Investigation against any alleged maladministration on the part of the Revenue Division or any Tax employee, therefore, the representations deserve to be disposed of accordingly.
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