The Federal Board of Revenue (FBR) has decided to set up Inland Revenue Enforcement Network (IREN) checkpoints to ensure foolproof surveillance of exit points from non-taxable areas, i.e. former Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA), to taxable territories.
On Tuesday, the FBR released Circular No. 3 of 2021, which addressed the taxes of former FATA/PATA-domiciled industries.
According to the protocol, several important revisions to the Sales Tax Act, 1990 (STA, 1990) have been enacted by the Finance Act, 2021, as applicable to various industries located in former FATA/PATA territories.
The most significant modification brought about by the Finance Act 2021 is the addition of new entry No. 74 to the 8th Schedule to the STA, 1990, to levy sales tax at a rate of 16 percent on all “Goods delivered from tax-exempt zones of former FATA/PATA to taxable areas.”
As a result, a FATA/PATA-domiciled person with the status of “Active Taxpayer” under Section 2(1) of the STA 1990 would continue to import raw materials for consumption at his manufacturing site in accordance with its determined installed production capacity.
Importation, transportation, exemption (from import-stage income tax), and consumption of raw materials have been comprehensively addressed in FBR’s CGO #1 of 2021, Circular #5 of 2021, Circular #9 of 2021, and Circular No.13 of 2021, all of which remain in effect.
To ease the implementation of the law’s advantages, FATA/PATA-domiciled industrial entities may obtain an installed capacity determination certificate (ICDC) from the Khyber Pakhtunkhwa Department of Industries or the Government of Pakistan’s Ministry of Industries.
The responsible Commissioner shall accept the ICDC until he has grounds to suspect that the actual capacity installed is less than the capacity determined and certified. It goes without saying that only goods for value addition should be imported, not finished products, according to the FBR.
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