FBR Cracks Down on Battery Manufacturers: 100% Sales Tax Withholding Proposed to Curb Fraud

The Federal Board of Revenue (FBR) is taking a strong stance against tax evasion in Pakistan’s lead battery industry. In its proposed reforms for the upcoming budget (2024-25), the FBR has outlined significant measures to curb fraudulent practices by lead battery manufacturers.

Clampdown on Fake Invoices and Shell Companies:

The crux of the proposal lies in a mandatory 100% withholding of sales tax from all suppliers of lead and scrap batteries. This regulation would apply equally to both registered Active Taxpayers and those classified as Inactive. This eliminates any potential loopholes that could be exploited for tax fraud.

Plugging the Exemption Gap:

According to FBR sources, registered lead battery manufacturers have been manipulating Serial No.(viii) at the end of the Table in the Eleventh Schedule of the Sales Tax Act, 1990. This exemption currently allows Active Taxpayers to avoid withholding tax. Cunning manufacturers have taken advantage of this by creating fake companies, registering them for tax purposes, and then issuing fictitious invoices to claim illegal tax credits.

A Blanket Approach for Revenue Security:

The proposed amendments aim to dismantle these fraudulent networks entirely. By mandating a 100% sales tax hold from all suppliers, irrespective of their taxpayer status, the FBR seeks to close these gaps and secure substantial tax revenue for the government. This reform goes beyond just boosting revenue; it aims to restore integrity and fairness within the tax system.

Stifling Fake Companies and Phony Invoices:

The wide-ranging implications of this proposal lie in its ability to disrupt the creation of shell companies and the circulation of fraudulent invoices. With a comprehensive withholding requirement in place, the FBR hopes to significantly deter tax evasion and ensure that all manufacturers and suppliers in the lead battery industry meet their tax obligations.

The Road Ahead and a Broader Commitment:

As the budget finalization process nears completion, stakeholders in the lead battery industry are awaiting further developments regarding the implementation of these stricter measures. The FBR’s firm stance signifies a broader commitment to eradicating tax fraud across Pakistan’s economic landscape and promoting fiscal responsibility. This proactive approach demonstrates the FBR’s dedication to protecting the national revenue base while fostering fair and lawful practices within the manufacturing sector.

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