1

FEDERAL EXCISE RULES 2005

2

OverviewOverview

Federal Excise Rules, 2005

Registration & allied matters

Invoicing & issuance of debit & credit note

Manufacturing of goods & their removal

Special procedures for levy of duty on excisable services

Alternative dispute resolution

3

Registration & allied matters

Registration The person engaged in the production of goods or rendering services liable

to FED required to obtain registration

No Threshold of Annual Turnover for Goods or Services

Person registered under the Sales Tax Act 1990 not required to obtain excise

registration separately. Sales Tax Registration will deemed for excise

registration

A person required to be registered, before commencing manufacturing of

any excisable goods or before rendering or providing any excisable services,

shall apply to the Collector for registration in the Form FE-I.

In case of a company, the application for registration shall be filed to the

Collector having jurisdiction over that area where the registered head office of

such company is located

Other then company having a single manufacturing unit, whose business

premises and manufacturing unit are located in different areas, shall apply to

the Collector of the area in whose jurisdiction his manufacturing unit is

located

4

Registration & allied mattersRegistration & allied matters

Failure to get registration + Cancellation

A person required to be registered failed to apply for registration, the Collector or his authorized officer shall issue notice to such person for obtaining registration

The Collector, if deemed fit, may pass order to register compulsory

specifying the reason for such registration

If any person registered wrongly by inadvertence, the Central Registration Office will cancel such wrong registration

Change in particulars of registration

In case of change in name, address or other particulars as stated in the registration application or registration certificate, the registered person shall notify such change to the Collector.

5

Registration & allied mattersRegistration & allied matters

Transfer of change

The Board may by an order transfer the registration of registered person from the jurisdiction of one Collectorate to another Collectorate.

Where a registered person intends to shift his business activity from the jurisdiction from one Collectorate to another, there should be some valid reason for such transfer. In this case, the registered person shall apply to the Collector for transfer of his registration.

The Collector whose jurisdiction the registration has been transferred, will issue new certificate to the taxpayer and such certificate shall contain the reference of previous certificate.

6

Registration & allied mattersRegistration & allied matters

Others matters relating to registration

In case, a person ceases:

to manufacture excisable goods to provide or render excisable services

he shall apply to Collector for cancellation of his registration in the Form FE-2

The Collector may after audit / inquiry may cancel the registration of that person not latter then three months from the date of such application.

The registered person will have to deposit the arrears, if accrued on account of audit for de-registration purpose

7

Registration & allied mattersRegistration & allied matters

Others matters relating to registration

Collector may suspend registration of a taxpayer, if he is involves in issuance of fake invoices, evaded duty or committed any offence or irregularity

The order for suspension of registration can be withdrawn by the Collector upon the request of taxpayer in consultation with concerned association

The procedures prescribed under the sales tax law with respect to: de-registration Suspension or cancellation of registration Transfer of registration

Changes or amendments in registration

will be applicable in the case of excise matters

8

Invoicing & issuance of debit & Invoicing & issuance of debit & credit notecredit noteNumbering of invoice Manufacturer of excisable goods or providing / rendering of excisable

services is required to issue serially numbered invoice in triplicate, commencing from the first day of each financial year

Consolidated, clubbed or aggregated invoices not to be issued by the taxpayers under any circumstances

Computer generated invoice Computer generated may be issued provided each copy of such invoice

is signed by the taxpayer or authorized person

Proof in support of adjustment Adjustment of duty on credit transaction not allowed. For adjustment of

duty, proof of payment is compulsory-contrary to sales tax

9

Invoicing & issuance of debit & Invoicing & issuance of debit & credit notecredit note A registered person may claim adjustment of duty already paid

on his inputs within a period of six months. Provided, in case of un-manufactured tobacco, the manufacturers of cigarettes may adjust within two years.

Apportionment of adjustment

In case of manufacturing and selling of both excisable and non-excisable goods from duty-paid inputs, adjustment of duty allowed to the extent of excisable services produced

Credit & debit notes

in case of return or cancellation of supply, the registered person is required to issue debit and credit notes and make correspondent adjustment as per procedures provided under Chapter-III of the Sales Tax Rules, 2006

10

Manufacturing of goods & their Manufacturing of goods & their removalremovalDeclaration of business premises & equipment

Registered person, while applying for registration, is required to declare in writing details of business premises, godwons, plant, machinery, raw material, etc.

Storage of excisable goods

Every manufacturer of excisable goods will maintain a separate store-room or any place for storage on his registered manufacturing premises and place all such excisable manufactured goods thereon

No duty paid goods or other than excisable goods shall be kept in such store room or place of storage

11

Manufacturing of goods & their Manufacturing of goods & their removalremovalDaily production, clearance and balance of excisable goods

Every manufacturer will maintain a production account and enter daily the description, quantity and rating of all excisable goods and other goods which are:

manufactured or produced in his factory; removed on payment of duty from the factory for home

consumption; removed without payment of duty from factory for export outside

Pakistan; issued for use in the manufacture of other goods within the

factory or reprocessing or remanufacture; goods sent for value addition or further processing to other

manufacturing premises

in balance at the close of each day.

12

Manufacturing of goods & their Manufacturing of goods & their removalremovalDestruction of excisable goods

Excisable goods rendered misfit for consumption for manufacture, after approval of the Collector, may be destroyed in presence of the officer deputed by the Collector.

If excisable goods lodged within business premises or during movement there on are lost or destroyed, the Collector may after verification may forego duty which might be payable on future sales had their not been lost or destroyed

No adjustment of duty will be admissible in respect of goods lost or destroyed

13

Services by Aircraft Operators for Services by Aircraft Operators for Air Travel by Passengers Air Travel by Passengers

Carriage of passengers on air journey within Pakistan and international air travel of passengers embarking from Pakistan for abroad or embarking for Pakistan from anywhere in the world, including chartered flights attracts FED

Domestic journey undertaken on concessional rate / without charges also subject to levy of FED

FED is chargeable on all international air tickets issued for the international journey starting from and where in Pakistan or terminating in Pakistan, whether such tickets issued in Pakistan or outside Pakistan

Air ticket issued for international journey covering more than one destination on flights operated by one or more airlines shall be chargeable to FED

FED to be charged by the airline or through its agent at the time of issuance of tickets or at the time of charging flights. If FED not collected at the time of issuance of ticket, the same to be charged before boarding of the passengers on the aircraft

14

Services by Aircraft Operators for Services by Aircraft Operators for Air Travel by PassengersAir Travel by Passengers

Duty due to be deposited in treasury by 15th day of the following second month relating to a month

FED charged on tickets, subsequently cancelled or not utilized for travel are refundable to the passengers in the same manner as the fare is refundable. Tickets partially utilized are not refundable for the purpose of FED.

Records of cancelled tickets to be maintained by airline

Records prescribed under excise law to be maintained by the air line

No input FED adjustment allowed on international air travel !

15

Franchise services subject to FED @ 10% of the value of taxable service

Value of taxable service = gross amount of the franchise fee or technical fee or royalty charged by the franchiser from the franchisee for using the right to deal with the goods or services of the franchiser

Franchise ! An authority given by a franchiser under which the franchisee is

contractually or otherwise granted any right to

Produce Manufacture Sell Trade Do any other business activity Do service or undertake any process

Collection of FED on Franchise Fee / Technical Fee / Royalty

16

Collection of FED on Franchise Fee / Collection of FED on Franchise Fee / Technical Fee / RoyaltyTechnical Fee / Royalty

identified with franchiser against an agreed fee, whether or not trade

mark, service mark, trade name, logo, brand name or any such

representation of symbol Franchise for beverage companies Franchise for food companies

Where franchiser and franchisee are locally based companies, liability to FED on royalty payment lies upon the franchiser

FED on franchise fee is payable on 15th day of the month, following the payment month laid down in the franchise agreement

Where no date prescribed in agreement or no agreement in lieu of franchise services, FED shall be payable on 15th day on quarterly basis

If any remittance is made through bank on account of franchise fee, technical fee or royalty and the bank is satisfied that the franchisee has not paid FED thereon, the bank is authorized to:

17

ADJUSTMENT OF DUTIES OF ADJUSTMENT OF DUTIES OF EXCISEEXCISE

Deduct the amount of FED from such remittance Issue certificate on its letter head showing the name &

registration number of the franchisee and the amount of FED so deducted

Deposit the amount of FED against its own monthly return

Where duty deducted by the bank, the franchisee will declare the amount of FED in the return

Issue ! Authorities treat all types of remittances as royalty fee /

technical fee / franchise fee If franchisee not registered, bank faces problems in

payment of FED

18

Alternative Dispute Resolution Alternative Dispute Resolution

Appointment of ADRC

Any registered person interested for resolution of any dispute may submit a written application for constitution of ADRC to the Board

The Board, after examination of the contents of an application by a registered person and facts stated therein may constitute ADRC for examination of the issues involved in the dispute

The Board may appoint one of the members of the ADRC, other than a public servant, to be its Chairman.

ADRC may determine the issue and may thereafter seek further information or data or expert opinion and shall formulate its recommendations on the matter within 90 days of its constitution.

In case ADRC fails to make recommendations within the prescribed time, the Board will dissolve ADRC and constitute new committee.

19

Alternative Dispute ResolutionAlternative Dispute Resolution

Appointment of ADRC

If this committee also fails to decide the matter within stipulated time, the matter will be decided by appropriate forum

The Chairman of the committee shall send a copy of the recommendations of the committee to the Board, applicant and the concerned Collector simultaneously

The Board, after examining the recommendations of the committee, shall finally decide the dispute and make such orders in such manner for the resolution of the dispute under intimation to the applicant, the Chairman of the committee and the concerned Collectorate.

The concerned Collectorate shall implement the order in such manner and within such period as may be specified by the Board in the order.

20

Thank You !