FBR Verifying Exemption Certificates
Date: March 29, 2014
The Federal Board of Revenue is verifying authenticity of thousands of exemption certificates
used for clearance of imported consignments without payment of withholding tax during July 1,
2013 – January 2014. The FBR issued instructions to field formations here on Friday. The FBR
has launched verification of exemption certificates on national level based on discrepancies
detected in the certificates issued by RTO Faisalabad.
According to the FBR instructions, the FBR has detected misuse of the exemption certificates
issued to the importers under section 148 of the Income Tax Ordinance, 2001. Sources further
said that the data analysis of the exemption certificates revealed misuse of the facility available
to the importers. It would be verified whether exemption claimed/allowed through certificate is
genuine? Secondly, whether the tax deducted under section 148 is accurate as per prescribed
rate? Thirdly, whether these imports are made for manufacturing purposes and for their own
consumption)? Whether the imports have been used by commercial importers on the basis of
exemption certificates without paying any taxes. The FBR is also verifying whether the exempt
imports are related to the industrial undertaking for the purpose of manufacturing? The FBR said
that the Regional Tax Office (RTO)-I, Karachi while monitoring section 148 has obtained
information from WeBOC regarding the imports cleared by the Customs Authorities on
production of exemption certificates issued by RTO Faisalabad for the period July 01-07-2013 to
31-01-2014. The concerned RTO is therefore requested to please take up this exercise of
verification of genuineness of the exemption certificates and other aspects of imports as
mentioned in on priority for recovery of any short deduction identified.
Sources said that a study was conducted by RTO, Karachi responsible for monitoring of
withholding taxes (WHT) under section 148 by obtaining information from Collectorate of
Customs Karachi/Central Directorate WeBOC with regards to imports cleared by the Customs
Authorities on production of exemption certificates issued by different Commissioners IR all
over Pakistan for the period 1st July, 2013 to 31st January 2014. Over four hundred thousand
lines of data were analysed during this study.
Prima facie serious discrepancies have been observed which if cross verified can result into huge
revenues. RTOs are requested to please look into the data from the following perspective:
1. As to whether exemption claimed/allowed through is genuine? (Exemption certificate veracity)
2. Whether the tax deducted under section 148 is accurate as per prescribed rate?
3. Whether these imports are made for manufacturing purposes (own consumption) or for
commercial purposes? If discrepancy detected take appropriate action to recover the short
4. Whether the exempt imports are related to the industrial undertaking or otherwise?
5. Any other area you like to verify?