An issue of jurisdiction between Inland Revenue officials of Karachi and Quetta to deal with the sales tax matters of the ship breaking industry is hampering sales tax collection from ship breakers. Sources told Business Recorder here on Saturday that Regional Tax Office-III (RTO) Karachi has approached the Federal Board of Revenue (FBR) against transfer shipbreakers cases'' from Karachi to Quetta for sales tax collection, as head offices of many ship-breaking companies are at Karachi and transfer of jurisdiction to result in legal complications.
The Chief Commissioner Inland Revenue RTO-III Karachi has informed FBR about the revenue potential of the shipbreaking sector and hindrances in its realisation. According to the Chief Commissioner, CIR/Z-IV of the RTO-III Karachi has been dealing with the shipbreaking sector for about 7 months and has an in-depth knowledge of the issues relating to the sector. Additionally, concerned Commissioner also has an excellent command over the laws and procedures relating to the assessment of such cases and is well-versed with the legal issues being faced in cases pertaining to the sector before appellate foras. Transferring of shipbreakers'' cases to Quetta at this point would result in loss in terms of compromise on the quality of assessment of the subject cases. Another important factor is that head offices of majority of ship-breaking concerns are at Karachi and transfer of jurisdiction will result in hardship for these concerns in terms of change of contact point for assessment and allied issues.
Recently, Commissioner IR ZONE-IV RTO-III Karachi has informed FBR that the official is dealing with this sector for the last seven months now and has studied its various aspects. Though the number of total cases in the sector is not more than 45, its revenue potential, if realised to the maximum, can be much higher than a number of other bigger sectors. However, this potential is not being realised to the full because of certain issues.
Referring to the issue of jurisdiction, sources said that the jurisdiction over the ship breaking sector was assigned to Zone-IV, RTO-III, Karachi vide FBR''s Notification No 57(2)/jurisdiction-2011/103739-R, dated 30/6/2012 and remained with Zone-IV in latest jurisdiction order, as under: "..All individuals, corporate or non-corporate persons or classes of persons of the following sectors whose place of business is situated in the areas falling within the limits of former Civil Division of Karachi: ship breaking".
At present there are around 41 to 45 cases of shipbreakers as per details obtained from the Pakistan Ship Breakers Association. Two of these cases have the status of Company and the rest are AoPs and Individual. Out of these, only 13 cases are registered in RTO-III, Karachi. Most of the remaining cases are registered in RTO-Quetta, whereas others are registered in RTO-II, Karachi, and a few others at RTO-I, Karachi, RTO Hyderabad, and one odd at RTO Lahore. Though there seems little justification for ship breakers, operating at Gadani, to get registered at stations like Lahore, their registration at RTO Quetta is understandable because mostly their business activity is at Gadani, Balochistan, whereas jurisdiction of Zone-IV, RTO-III, Karachi, is restricted to the limits of Civil Division, Karachi. Gadani, a sub-division of District Lasbella, Balochistan, is in the territorial jurisdiction of Commissioner Zone-II, RTO Quetta.
Source: business recorder. 15 December 2013