ISLAMABAD - Fertilizer industry has expressed concerns over show cause notices from FBR for disallowance of input tax for sales to unregistered persons.

In a letter to chairman FBR Dr Muhammad Ashfaq Ahmed, Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC) has shown concerns over show cause notices from FBR received by industry players for disallowance of input tax for sales to unregistered persons despite following the guidelines set by the FBR in its SRO 1337 issued in December 2020.

According to Executive Director FMPAC, Brig (retd) Sher Shah Malik, fertilizer industry appreciates the efforts of FBR towards documentation of economy and ease of doing business. It was through industry’s cooperation and support that over 1,000 major fertilizer dealers have registered themselves for GST and almost 100 percent are having NTN. “In the same context, we wish to draw your attention to the following issue,” he added.

ED FMPAC further explained that post promulgation of the Tax Laws (Second Amendment) Ordinance 2019, input GST was disallowed on sales made to unregistered persons exceeding Rs10 million in a month/ Rs100 million in a financial year, adding significant exposure for the fertilizer industry. After due deliberation, FBR issued a notification (SRO 1337) in December 2020, whereby exemption would be granted subject to provision of dealers’ information, including bank account etc to FBR. The industry has submitted all information pertaining to the dealers except in few cases bank accounts of terminated/ one-off customers. During various meetings, the industry was given an understanding about the exemption being granted in this case after compliance of SRO 1337.

Brig (retd) Sher Shah Malik said that it is very disturbing fact that companies have started receiving show cause notices for disallowance of input tax for sales to unregistered persons despite submission of the aforementioned information and a favourable report from concerned field formation. While mentioning in its letter to FBR that fertilizer industry is one of the best documented and tax compliant sectors, FMPAC requested FBR chairman that the field formations be educated on grant of exemption from input tax inadmissibility/ expenditure disallowance on sales to unregistered dealers whose information has been furnished in compliance with the SRO and be directed to withdraw the notices.