ISLAMABAD (January 10 2003) : To make audit apparatus more effective, the Central Board of Revenue (CBR) has announced new audit procedure for the Banaspati ghee and cooking oil industry.<br>
Under the new set of parameters, tax authorities would compare the electricity/gas consumed to manufacture one ton of product in one unit with other units of the same industry for verification of total supply value.
Laying special emphasis on the documentation of ghee/cooking oil sector, the CBR has also specified standards for calculation of cost/minimum price of ghee/cooking oil produced keeping in view per ton consumption of chemicals/energy.
The CBR on Thursday notified new parameters to collectors of sales tax for conducting sales tax audit of over 150 registered cooking oil/Banaspati ghee manufacturers in the documented sector.
The collectorates would regularly follow the new audit parameters and costing of RBD Palm Oil, RBD Palm Olein and Soyabean Oil during audit, scrutinising adjustment of input tax and sanction of refund to the registered factories of Banaspati ghee/cooking oil sector.
The stocks would be physically verified with the records at the start of audit and samples for import/local edible oil consumption are to be drawn for laboratory tests to verify the correct declaration of stocks.
According to the revised audit standards, the supply/sale of wastage ie containers etc is accounted for at open market rates.
The wastage percentage should be in accordance with the accepted norms in the concerned industry.
Scrap and industrial wastage such as tin cutting wastage, used chemical waste like fuller cakes, nickel catalyst empty drums would be considered as source of income and should be properly accounted for.
The percentage of the wastage should be in accordance with the accepted norms in the industry.
The units could only claim input tax adjustment for the quantity cleared on or after June 15, 2002.
The permission for adjustment of input tax on quantity cleared before June 1, 2002 has to be granted by collector under section 66 in case of already registered persons.
Following are the Audit Parameters for Banaspati Ghee units:
INPUT TAX ADJUSTMENT:
1.: Input tax adjustment has been claimed only for the quantity cleared on or after 15th June, 2002. Permission for adjustment of input tax on quantity cleared before 1st June, 2002 has to be granted by Collector under section 66 in case of already registered persons.
1.: Input tax has been apportioned under the apportionment rules issued vide SRO 698(I)/96 dated 22.08.1996, if exempt goods are produced or supplies are made. Electricity/Gas apportionment in case of use in non-taxable goods etc shall be verified.
1.: No input tax adjustment on purchase of goods notified under section 8 of the Act vide notification SRO 578(I)/98 dated 12.06.1998 has been claimed.
VERIFICATION OF STOCKS:
1.: Stocks of all materials (edible oil, chemicals, containers, gas etc finished/packed goods are as per record. The stocks should be physically verified at the start of the audit and compared with stock records. Reconciliation at this date shall prove accuracy of records as at 15.11.2002.
1.: Verification that stocks shown and input tax claimed on 15.06.2002 was correct and no stocks of local materials (edible oil) were available.
1.: Receipt of locally manufactured oil is properly shown in records. Samples of imported/local edible oil (raw materials) are to be drawn for laboratory test that the declarations are correct about description of stocks.
1.: Quantification/verification of stocks by applying dip method as was done at the time of Central Excise, if not, meters to measure outflow are installed at the storage tanks.
WASTAGE/BY PRODUCTS VERIFICATION:
1. Supply/sale of wastage ie containers etc is accounted for at open market prices. The wastage percentages are in accordance with the acceptance norms in the industry.
2. By-products like, oxygen gas and carbon dioxide gas, and sales tax on these, is correctly accounted for.
3. Scrap and industrial waste such as tin cutting wastage, used chemical waste like tuller cakes, nickel catalyst empty drums are all source of income and should be properly accounted for. Percentage of these wastages are in accordance with the acceptance norms in the industry.
RECORDS:
4. All the records are kept as prescribed under the Act.
5. Purchase and sales returns ie debit and credit notes are issued in conformity of the section-9 of the Act.
6. In ward and outward gate passes should be available for comparison/accounting of sales and purchases as per section-22 of the Act.
7. Invoice of purchases and sales are in conformity of section-23 of the Act.
EXPORTS VERIFICATION:
8. Exports, if any, are made as per-conditions laid down by the Ministry of Commerce verification that conditions are complied with.
PROOF OF PAYMENT:
9. Payment proof of all purchases of Rs 50,000/- and above should be available as per section-73 of the Act. Payment proof of all taxable supplies to registered persons as per section-73 provisio-7.
VERIFICATION OF VALUE OF SUPPLY:
10. Value of supply is correct and comparable with other units.
11. Electricity/Gas consumption for manufacture of one ton is comparable with other units in the industry. Input-output ratio (IOR) is to be calculated for each raw material for the sake of comparison with others.
Following are the Audit Parameters for Cooking Oil Units:
INPUT TAX ADJUSTMENT:
1. Input tax adjustment has been claimed only for the quantity cleared on or after 15th June, 2002. Permission for adjustment of input tax on quantity cleared before 1st June, 2002 has to be granted by Collector under section 66 in case of already registered persons.
2. Input tax has been apportioned under the apportionment rules issued vide SRO 698(I)/96 dated 22.08.1996, if exempt goods are produced or supplies are made. Electricity/Gas apportionment in case of use in non-taxable goods etc shall be verified.
3. No input tax adjustment on purchase of goods notified under section 8 of the Act vide notification SRO 578(I)/98 dated 12.06.1998 has been claimed.
VERIFICATION OF STOCKS:
4. Stocks of all materials (edible oil, chemicals, containers, gas etc finished/packed goods) are as per record. The stocks should be physically verified at the start of the audit and compared with stock records. Reconciliation at this date shall prove accuracy of records as at 15.11.2002.
5. Verification that stocks shown and input tax claimed on June 15, 2002 was correct and no stocks of local materials (edible oil) were available.
6. Receipt of locally manufactured oil is properly shown in records. Samples of imported/local edible oil (raw materials) are to be drawn for laboratory test that the declarations are correct about description of stocks.
7. Quantification/verification of stocks by applying dip method as was done at the time of Central Excise, if not, meters to measure outflow are installed at the storage tanks.
WASTAGE/BY PRODUCTS VERIFICATION:
8. Supply/sale of wastage ie containers etc is accounted for at open market prices. The wastage percentages are in accordance with the acceptance norms in the industry.
9. By-products like, Acid Oil, Oil Slug, soap, glycerine and sales tax on these, is correctly accounted for.
10. Scrap and industrial waste such as tin cutting wastage, used chemical waste like fuller cakes, nickel catalyst empty drums are all source of income and should be properly accounted for. Percentages of these wastages are in accordance with the acceptance norms in the industry.
RECORDS:
11. All the records are kept as prescribed under the Act.
12. Purchase and sales returns ie debit and credit notes are issued in conformity of the section-9 of the Act.
13. In ward and out ward gate passes should be available for comparison/accounting of sales and purchases as per section-22 of the Act.
14. Invoice of purchases and sales are in conformity of section-23 of the Act.
EXPORTS VERIFICATION:
15. Exports, if any, are made as per-conditions laid down by the Ministry of Commerce verification that conditions are complied with.
PROOF OF PAYMENT:
16. Payment proof of all purchases of Rs 50,000/- and above should be available as per section-73 of the Act. Payment proof of all taxable supplies to registered persons as per section-73 provisio-7.
VERIFICATION OF VALUE OF SUPPLY:
17. Value of supply is correct and comparable with other units.
18. Electricity/Gas consumption for manufacture of one ton is comparable with other units in the industry. Input-output ratio (IOR) is to be calculated for each raw material for the sake of comparison with others.
