The National Board of Revenue has asked its large taxpayers unit (value-added tax) to check authenticity of declared prices of products for ensuring VAT collection at proper rate.
VAT wing of NBR on August 14 said that LTU would examine the accuracy of prices of products declared by manufacturers and traders to VAT offices as per existing rules and regulations.
It asked VAT officials to verify the authenticity of expenditures for different components of production with annual audit reports of the companies to bear out the actual price of the products.
VAT officials would also have to examine the accuracy of input-output co-efficient with the help of Duty Exemption and Drawback Office of the NBR and other organisations having expertise on the issue, it said.
NBR officials said that the decision was made at a revenue evaluation meeting for LTU held on July 27 with NBR member (VAT implementation and IT) Shahnaj Parvin.
Price declaration is the most important matter for setting the applicable amount of VAT. The declared price is considered as base price for VAT.
Officials said NBR issued the directive to the LTU suspecting that many businesses declared the prices of their products lower than the actual wholesale or retail price to pay less VAT.
VAT officials would also check the market prices of the products of the competitive companies, they said.
Officials said verification with the prices of same products declared by different companies would also be another mechanism to check the misuse.
VAT officials would examine the prices of same products declared by different companies, they added.
According to the VAT act and VAT rules, traders have to declare the prices of products to the VAT offices
for the purpose of VAT payment.
The declared price contains the prices of inputs like raw materials and packing materials, and other expenditures such as wages, salaries, transportation, administration, marketing and profit margin related to value addition, customs duties and other taxes, VAT-able price, wholesale and printed retail price.
Field-level offices of the NBR usually collect VAT-based on the prices declared by traders.
A senior NBR official said the government would get less VAT if the prices of products were declared lower than the actual sale prices.
Field level VAT offices in many occasions found that traders misuse the provision, he said, adding that the VAT law prohibits selling of products at higher prices than the declared ones.
He said as per law VAT offices could claim VAT on gap amount of declared price and actual market price once they could detect.