Recently, the Board had withdrawn their Clarification Letter No 1(3) CEB/04(Pt)-33698-R Dated March 5, 2012 unilaterally with no intimation either to the industry or to the manufacturers/suppliers of palm fatty acid distillate. Resultantly, in the absence of any notification or clarification the manufacturers-cum-suppliers of PFAD are experiencing impediments in claiming the input tax adjustment while filing their monthly sales tax returns.
The manufacturers of PFAD import crude palm oil (CPO) as their raw material to refine palm oil and PFAD is produced as by-product. At the import stage, the CPO importer pays 16 percent Central Excise Duty (CED) as per Second Schedule of the Federal Excise Act, 2005 and in addition they pay Re 1/kg Federal Excise Duty in lieu of output tax under SRO 24(I)/2006.
According to S.R.O.24 (I)/2006, the industry””s main product RBD palm oil is considered as final discharge of tax liability in lieu of FED being paid at the custom stage. However, the by-product PFAD is taxable after the withdrawal of C.No 1(3) CEB/04(Pt)-33698-R dated March 5, 2012 as per circular number C.No 1(3) CEB/04(Pt)/94076-R dated 11th July, 2013. In view of this, the units have to now adjust portioned input tax according to the Chapter 4 of Rule 39 of Sales Tax Rule 2006 against output tax.
While filing the sales tax return for the month of July 2013, the return does not pick up input tax paid at the custom stage whereas the refiners/manufacturers are eligible to adjust/claim input tax in the light of Rule 39 of Sales Tax Rule, 2006. The FBR is seriously considering the proposal of the industry to allow the adjustment of input tax while submitting the return, they added.