The Federal Board of Revenue (FBR) has violated a resolution of the Cabinet’s Economic Coordination Committee (ECC) by delaying the processing of exporters’ applications for concessionary tariff regimes.
According to the FTO order, the ECC directed the FBR, Ministry of Commerce, and other stakeholders to develop a standard operating procedure (SOP) for enrolment of registered persons under the export-oriented sectors (previously zero-rated sectors) in order to qualify for concessionary electricity, regasified liquefied natural gas (RLNG), and gas tariff regimes.
The Export-Oriented Sectors Registration Cell (ESRC) was formed under the plan and was required to review the particulars and suggestions of the relevant Associations as well as counter-verify taxpayer particulars, including declarations in the registration profile.
Despite the fact that the said circular 4 of 2020 states that discrepancies spotted by ESRC during scrutiny/verification of data forwarded by concerned trade associations with the registration profile maintained by FBR will be referred to field formation for a ground check, report, and recommendation, the complainant alleges that instead of expeditious processing of export concerns, ESRC has engaged in an unauthorized exercise that amounts to audit, according to FTO.
It has been noticed that in numerous situations, following the elimination of ESRC objections, the cases were recommended for concessionary tariff, but the delay in such cases put a severe toll on exporters, as they had to bear the cost of standard tariff throughout the pendency of the case at ESRC.
Understandably this system is subject to the hazards of misstatements, misdeclarations, and even tax fraud, but such risks must not overwhelm the fundamental goal of ECC. Cases involving procedural failures and other differences in return profiles must be reported with appropriate field formations with legal authority and powers to resolve the stated dangers using legal methods and procedures, according to the FTO regulation.
The export industry, being the lifeblood of the Pakistani economy, deserves special attention, compassion, and care. It should not be held captive by ordinary administrative wrangling, it argued.
During hearings, the complainants fiercely reaffirmed their charges and gave specifics of delay created by ESRC in transferring their cases to the Ministry of Commerce. They were also upset that they had to pay regular tariffs throughout the period taken by ESRC, which not only added to the cost on exporters, but also weakened their market
The FTO’s conclusions found that the circumstances of the current case suggest that, while processing the complainants’ case, ESRC failed to conduct the procedures in the spirit intended by ECC.
Instead of referring the issue to the Ministry of Commerce, the ESRC submitted the complainant’s case to the Large Taxpayers’ Office (LTO) Karachi on 19 April 2022, and there was no resolution until 8 June 2022. After the participation of FTO, this matter was finally sent on June 22, 2022. In accordance with section 2(3)(ii) of the FTO Ordinance, 2000, such delay, inattention, and incompetence constitute maladministration.
The FTO has asked the FBR to guarantee that cases received by ESRC from trade groups be handled quickly and on a daily basis. The ESRC closely adheres to the requirements of Circular No. 4 of 2020 and resolves cases without delay, preventing exporters from incurring irreversible losses. ESRC may share any discrepancies discovered during the processing with the relevant field formations without delaying the process.
Cases of obvious tax fraud may be discussed honestly and equitably with the appropriate Trade organizations, Inland Revenue (IR) field formations, and FTO controlled by FBR. Instead of time-consuming communication, the FTO order requires ESRC to have regular consultation sessions and meetings with interested Trade organizations for speedy processing and to report compliance on a monthly basis.