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Units set up after July 1, 2011: FBR wakes up to misuse of tax credit

Units set up after July 1, 2011: FBR wakes up to misuse of tax credit

ISLAMABAD: To check misuse of investment scheme, the Federal Board of Revenue (FBR) has planned compiling data of all industrial units, especially ghee and cooking oil, established after July 1, 2011 and availed tax credit under section 65D of Income Tax Ordinance, 2001.

It is to be noted that Section 65 D (investment scheme) of Income Tax Ordinance, 2001 deals with tax exemptions and concessions to new industrial units.

The board is also analyzing applications for tax exemption under Section 65D to ascertain the revenue implications of the provision to attract investment.

As per details, the FBR is collecting data from Regional Tax Offices (RTOs) to ascertain whether or not certificates for exemption from withholding tax under section 148 of the Income Tax Ordinance 2001, on import of edible oil, in cases falling u/s 65D of Income Tax Ordinance, 2001 have been issued? If so, the RTOs will furnish details of such cases with the reasons for issuing such certificates to the FBR.

According to provisions of section 65D of the Income Tax Ordinance 200l, a tax credit equal to 100 percent of tax payable including minimum tax is allowed subject to fulfilment of certain conditions. However, minimum tax payable under section 113 of the Ordinance 2001 is different to that of minimum tax under section 148(8) of Income Tax Ordinance, 2001. Under Section 113, an amount equal to 1 percent of the total turnover is to be paid under certain conditions leading to the situation that either no tax is payable on taxable income or it is less than 1 percent of the total turnover.

On the other hand, the import of edible oil by oil/ghee manufacturers, it is the tax collected at import stage, which shall be minimum tax in case either no tax is payable on taxable income or it is less than the tax collected on import of edible oil. In other words, at the time of import of edible oil by oil/ghee manufacturers, tax u/s 148 is, invariably, to be collected. Thus in the context of provisions of Section 65D, and the facts given by the concerned industry, the RTOs should provide the following information:

It is to be noted that number of industrial units established after July 1, 2011, which availed tax credit u/s 65D. This data should also give the amount of tax payable/tax credit. Secondly, whether or not certificates for exemption on collection under section 148, on import of edible oil, in cases falling u/s 65D of Income Tax Ordinance, 2001 have been issued? If so then such cases may be furnished case-wise citing reasons for issuing exemption certificate, sources added.