Controversial payment of sales tax refund.

Inland Revenue Tribunal has set aside Public Accounts Committee directive for the recovery of millions of rupees excess payment of sales tax refund to the payphone companies, saying that no such payments were made, sources said on Thursday.

The Customs, Sales Tax and Federal Excise Tribunal, which has the jurisdiction over sales tax, had upheld that it was illegal payment of refunds in one of the main company whose director holds key public office, they said.

The case of this company is pending in the Lahore High Court, where 20 per cent evaded amount was already recovered, the sources said.

Later, Income Tax Tribunal, which is renamed as appellate tribunal Inland Revenue has found that no illegal refund was paid and, hence, is not recoverable. Initially, Pakistan Telecommunication Company Limited (PTCL) was selling airtime and charging central excise duty on gross amount. Later, it was decided that the duty has to be paid on discounted rates, the sources said, adding that when the payphone companies started paying the duty on the discounted price the sale price remained the same, which clearly shows that the payphone companies were charging price paid to the PTCL along with their profits from the end consumer.

The Public Accounts Committee took serious notice of illegal payment on central excise duty to the payphone companies and, also, issued instructions to the Federal Board of revenue (FBR) for recovery of this amount and arrests its directors. The department lodged an FIR against the payphone companies registered in Lahore, they said.

The revenue body, however, restrained the tax office from demanding any arrests, the sources said.

The decision of the Income Tax Tribunal brings into question the status of officers who had paid this refund and have been preceded against. One of the collectors was demoted, whereas the other one was made officer on special duty (OSD) on the PAC directive, they said.

Tax experts wonder why the Regional Tax Office did not defend this case properly before its own tribunal. The tribunal, however, said that the payphone companies did not pass on the incidence of duty after tax discount. By keeping price at pre-discount level they only raised their rate of profit, the sources said.

The tribunal has noted in its order that the payphone companies are exempted from taxes and have neither paid the tax nor charged it from the consumer.

Tax experts pointed out that if this contention is accepted then why it has allowed refund amounting to millions of rupees to the payphone companies when they had nothing to do with tax collection, the sources said.

Experts said that either the income tax-based RTO does not have complete understanding of the sales tax refund, or it did not plead the case of sales tax and central excise duty properly before the Income Tax Tribunal, which cost the exchequer more than Rs300 million.

They also wonder as to why no reference in this decision has been made to the decision of the Customs and Sales Tax Tribunal, the sources added.

Source :- thenews.com.pk