September 29, 2014

FBR & the Enemy Development Board?

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Written by: Nasir Mahmood
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The automobile industry in the country like others; is also facing acute problems of power, gas and working hours. Since June 2006, the industry is operating under tremendous pressure coupled with step motherly treatment from various federal government departments and ministries. Even the new PML (N) government was unable to remove bureaucratic hurdles and straighten up the lethargic attitude of its officials.

The political heat engulfing Islamabad mainly and other parts of the country since August 13 because of sit in by PTI and PAT is another major problem that has crippled the small and medium enterprises all over the country.

According to industry sources federal government departments including FBR need to change their attitude otherwise the situation pertaining to routine matters will remain the same. Majority of the officials in various departments of Islamabad were not transferred or changed from their offices during past 10 years that has promoted the monopoly and blackmailing culture in dealing with local industries and small investors.

In a recent move the federal board of revenue (FBR) has issued sales tax audit notices to motorcycle assembler and their vendors but surprisingly not to any other industry. The language of the notices clearly reflects the secret hand of the EDB instigating against the small investors in automobile industry. Such discriminatory moves against a particular sector of local industry are more than enough to prove that the bureaucracy of the Engineering Development Board has been converted into an Enemy Development Board.

If we go through the policies adopted by EDB officials during past decades it could be assessed that it has always favored three to four big auto sector assemblers of cars and motorcycles but created problems to kill small and medium entrepreneurs, leaving big assemblers to operate freely and establish their hegemony.

According to sales tax notices, the FBR has demanded sales tax records under section 37 and 38 (2) of the sales tax act 1990 for the period 1.07.2011 to 30.6.2013. It informed the field commissioners to examine the assemblers and vendors of motorcycles in their areas whether they were following SRO 656/2006 dated 22.6.2006 and check that have they procured the parts and components from the importers and traders instead of vendors/ manufacturers.

It may be mentioned here that the manufacturers supplying parts to other OEMs are making parts by themselves or importing these parts from China, because the cost of production of auto parts in China is much lower than Pakistan.

The FBR asked Motorcycle Assemblers to submit following documents for sales tax audit:

  1. Purchase register and sales register.
  2. Purchase invoices and bill of entries.
  3. Sales invoices and Shipping bills
  4. Stock register/Inventory record (item/product wise of both raw material & finished goods) along with opening stock, purchase, consumption, production and closing stock (both import and local purchase) with values.
  5. Party-wise ledger for payments and receipts.
  6. Proof of payments and proof of receipts with Bank statements.
  7. Proof of tax deduction by WH Agents
  8. Monthly Sales tax returns with Annexure and CPRs.
  9. Compliance of SRO. 656/2006 dated 22.06.2006 along with information provided to EDB.
  10. Details of debit/credit notes issued.
  11. Utility bills.

Commenting on this situation Chairman APMA Mohammad Sabir Shaikh said that for the last one decade the small assemblers have been facing these kinds of problems. He urged the Prime Minister, Finance Minister and FBR chairman to stop these kinds of bottlenecks as the industry has already been surviving under stiff business and political environment. The government should refrain from creating hardships and support the industry in order to pull out the assemblers from hot waters.

He also urged the government to appoint CEO of the EDB immediately and fill this post by taking a competent person from private sector or the industry. Sabir said that the industry and vendors were highly hopeful after taking over by PML-N in 2013 but so far the political crisis appears to have deepened which has put on hold the future investment plans by the local industry. He said there is a need to end the monopoly of big assemblers and vendors who enjoy upper hand in the entire policy making in every government. As a result, the voice of small and medium units remains unheard.

-Published on page#10 September-2014 edition of MOBILE WORLD Magazine

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