The backward-linkage companies that contribute to making finished products are now eligible to obtain central VAT registration for all units, said an order issued on Tuesday.
However, central production units should manufacture identical and similar products with backward-linkage products, known as inputs, it said.
They will also have to maintain accounts for all units centrally.
The order of the National Board of Revenue (NBR) relaxed the central registration rules with intent to fix central VAT registration-related complexities.
VAT wing has found a number of large manufacturing units are producing backward-linkage products only for their end or finished products.
The units were ineligible for central registration despite making identical and similar types of products as per rules under the VAT law.
Several field-level VAT offices, earlier, declined to issue central VAT registration to those manufacturing units and asked companies to obtain separate VAT registrations for their input-producing units.
They said the rules have allowed manufacturing units to obtain central VAT registration for identical and similar products.
However, some large manufacturers said they produce packaging, bottle, cap and some other products for their final products that are identical and similar.
Following complaints from manufacturers, the revenue board has relaxed the rules of central VAT registration. Now, manufacturers will be allowed to obtain central registration for all of their backward-linkage units if they maintain accounts centrally.
According to the NBR order, the inputs will have to be moved among the centrally registered units.
However, NBR has tagged some seven conditions for checking abuse of the central registration facility by manufacturers.
All input products have to be used in central manufacturing units for producing identical and similar types of end-products.
The central units should maintain all accounts, tax payment records and other documents of input units.
Both units should submit their respective input-output coefficients to the VAT offices concerned.
In case of transferring products from one unit to another, the units will have to use VAT form 6.5.
To supply products to VAT-registered buyers or consumers, the companies will have to give invoices in VAT form 6.3 to them.
If the address of an input producer is changed, the central unit will have to amend the address in its VAT registration information.
Otherwise, VAT will be imposed at a rate of 15 per cent on supply of the products from the new address of the unit.
A company will not pay VAT for transferring inputs or products from one unit to another, so there is no scope to obtain VAT refund.
NBR issued another order the same day for field-level VAT offices, making two VAT forms mandatory at the time of selling products to VAT-registered buyers and centrally registered manufacturing units.
VAT form 6.3 is now mandatory for selling products to consumers. To transfer inputs or products from one unit to another, a centrally registered company will issue VAT form 6.5.
The forms have to be accompanied with products in vehicles until reaching final destination.
The forms will be issued in two parts, one for buyers and another for sellers.
Main copy of the form should be handed to a buyer if s/he is VAT-registered and that they have to preserve for at least five years.
Also, suppliers will have to preserve a copy of the product for five years.
In case of the centrally registered businesses, product receivers will preserve the form for five years.
NBR has issued the order after it found some of the supplied products to the VAT-registered businesses do not have invoices. Such practice may cause evasion of VAT and supplementary duty, the order stated.
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