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Category: Definitions

  • Associates defined under Sales Tax Act 1990

    Associates defined under Sales Tax Act 1990

    Associates or Associated Persons have been defined under Sales Tax Act, 1990.

    Section 2 of Sales Tax Act, 1990 (updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR) explained associates as:

     (3) associates (associated persons) means, –

    (i) subject to sub-clause (ii), where two persons associate and the relationship between the two is such that one may reasonably be expected to act in accordance with the intentions of the other, or both persons may reasonably be expected to act in accordance with the intentions of a third person;

    (ii) two persons shall not be associates solely by reason of the fact that one person is an employee of the other or both persons are employees of a third person;

    (iii) without limiting the generality of sub-clause (i) and subject to sub-clause (iv), the following shall be treated as associates, namely: –

    (a) an individual and a relative of the individual;

    (b) members of an association of persons;

    (c) a member of an association of persons and the association, where the member, either alone or together with an associate or associates under another application of this section, controls fifty per cent or more of the rights to income or capital of the association;

    (d) a trust and any person who benefits or may benefit under the trust;

    (e) a shareholder in a company and the company, where the shareholder, either alone or together with an associate or associates under another application of this section, controls either directly or through one or more interposed persons–

    (i) fifty per cent or more of the voting power in the company;

    (ii) fifty per cent or more of the rights to dividends; or

    (iii) fifty per cent or more of the rights to capital; and

    (f) two companies, where a person, either alone or together with an associate or associates under another application of this section, controls either directly or through one or more interposed persons –

    (i) fifty per cent or more of the voting power in both companies;

    (ii) fifty per cent or more of the rights to dividends in companies; or

    (iii) fifty per cent or more of the rights to capital in both companies.

    (iv) two persons shall not be associates under sub-clause (a) or (b) of paragraph (iii) where the Commissioner is satisfied that neither person may reasonably be expected to act in accordance with the intentions of the other.

    (v) In this clause, “relative” in relation to an individual, means–

    (a) an ancestor, a descendant of any of the grandparents, or an adopted child, of the individual, or of a spouse of the individual; or

    (b) a spouse of the individual or of any person specified in sub-clause (a).

    (3A) “association of persons” includes a firm, a Hindu undivided family, any artificial juridical person and anybody of persons formed under a foreign law, but does not include a company;

    (3AA) “banking company” means a banking company as defined in the Banking Companies Ordinance, 1962 (LVII of 1962) and includes anybody corporate which transacts the business of banking in Pakistan;

  • Active taxpayer under Sales Tax Act 1990

    Active taxpayer under Sales Tax Act 1990

    Sales Tax Act, 1990 (updated up to June 30, 2020) has defined the active taxpayer. The term ‘active taxpayer’ was introduced through Finance Act, 2015. It has been defined as a registered person who does not fall in any of the following categories, namely:-

    (a) who is blacklisted or whose registration is suspended in terms of section 21 of the Act;

    (b) fails to file the return under section 26 of the Act by the due date for two consecutive tax periods;

    (c) who fails to file an Income Tax return under section 114 or statement under section 115, of the Income Tax Ordinance, 2001(XLIX of 2001), by the due date; and

    (d) who fails to file quarterly or an annual withholding tax statement under section 165 of the Income Tax Ordinance, 2001.

    The Federal Board of Revenue (FBR) further explained:

    The Active Taxpayer List (Sales Tax) is a central record of online active Sales Tax Return filers.

    To become part of the Active Taxpayer List (ST), the Active Taxpayer must be a registered person who does not fall in the following categories:

    Blacklisted or whose registration is suspended or blocked;

    Failed to file return by the due date for two consecutive tax periods;

    Failed to file Income Tax Return by the due date;

    Failed to file withholding tax statement.

    Active Taxpayer status (ST) can be checked through the online portal.

    The ATL status check allows you to confirm your Active Taxpayer status.

    The Commissioner may suspend registration of a Taxpayer, if the person is found to have issued fake invoices, evaded tax or committed tax fraud without prior notice, pending further inquiry.

    Suspension of registration can occur due to the following possibilities:

    Non-availability of the registered person at the given address;

    Refusal to allow access to business premises or refusal to furnish records to an authorized Inland Revenue Officer;

    Abnormal tax profile, such as taking excessive input tax adjustments, continuous carry-forwards, or sudden increase in turnover;

    Making substantial purchases from or making supplies to other blacklisted or suspended person;

    Non-filing of sales tax returns by a registered person for six consecutive months;

    On recommendation of a commissioner of any other jurisdiction;

    Any other reason to be specified by the Commissioner;

    Impact of Suspension

    Commissioner shall issue written order to the concerned registered person detailing the reasons for suspension. The order shall also be provided to all other Large Taxpayer Units (LTUs)/Regional Tax Offices (RTOs), the FBR‘s computer system, the STARR computer system and the Customs Wing computer system for information and necessary action as per law;

    Suspension of registered person will make them ineligible to avail input tax adjustment/refund. Similarly, no input tax adjustment/refund shall be allowed to any other registered persons on the basis of invoices issued by such suspended person (whether issued prior to or after such suspension);

    The suspended registered person will be issued a show cause notice (through registered post or courier service) within seven days of issuance of order of suspension by the Commissioner. The registered person will have an opportunity of hearing with fifteen days of the issuance of such notice clearly indicating that the will be blacklisted. In case of non-availability of the suspended person at the given address, the notice may be placed on the main notice Board of the LTU/RTO;

    Where the show cause notice is not issued within seven days of the order of suspension, the order of suspension shall become invalid;

    For restoration of Active Taxpayer (ST), Sales Tax General Order No. 34/2010 dated 16-9-2010 may be followed.  

    A non-active taxpayer may be restored to active taxpayer status:

    If the respective RTO/LTU recommends the same to FBR after conducting audit or other investigation;

    Compotent Authority, Appellate Authority, Court or FTO orders for the restoration.