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  • Sales Tax Act 1990: imposition of default surcharge in fraud, non-payment

    Sales Tax Act 1990: imposition of default surcharge in fraud, non-payment

    KARACHI: A person willfully does not make sales tax payment or commits fraud shall liable to pay default surcharge along with actual amount.

    According to updated Sales Tax Act, 1990 issued by the Federal Board of Revenue (FBR) the default surcharge has been explained through Section 34.

    Section 34: Default Surcharge

    Sub-Section (1): Notwithstanding the provisions of section 11, if a registered person does not pay the tax due or any part thereof, whether willfully or otherwise, in time or in the manner specified under this Act, rules or notifications issued thereunder or claims a tax credit, refund or makes an adjustment which is not admissible to him, or incorrectly applies the rate of zero per cent to supplies made by him, he shall, in addition to the tax due, pay default surcharge at the rate mentioned below:—

    (a) the person liable to pay any amount of tax or charge or the amount of refund erroneously made, shall pay default surcharge at the rate of twelve percent per annum, of the amount of tax due or the amount of refund erroneously made; and

    (b) deleted

    (c) in case, the default is on account of tax fraud, the person who has committed tax fraud shall pay default surcharge at the rate of two per cent per month, of the amount of tax evaded or the amount of refund fraudulently claimed, till such time the entire liability including the amount of default surcharge is paid.

    Sub-Section (2): For the purpose of calculation of default surcharge, –

    (a) in the case of inadmissible input tax credit or refund, the period of default shall be reckoned from the date of adjustment of such credit or, as the case may be, refund is received; and

    (b) in the case of non-payment of tax or part thereof, the period of default shall be reckoned from the 16th day of a month (following the due date of the tax period to which the default relates) to the day preceding the date on which the tax due is actually paid.

    Explanation: For the purpose of this section tax due does not include the amount of penalty.

  • FBR issues rules for ADR in sales tax, federal excise cases

    FBR issues rules for ADR in sales tax, federal excise cases

    ISLAMABAD: Federal Board of Revenue (FBR) on Thursday notified rules to make Alternate Dispute Resolution Committee (ADRC) functional for cases in sales tax and federal excise.

    The FBR issued SROs 488 and 489 (I)/2019 to notify the rules. The ADRC is required to decide a case within 120 days and the decision will have binding effect on both taxpayers and tax officials.

    Under the rules any person interested for resolution of any dispute shall make a written application for alternative dispute resolution to the FBR.

    The FBR, after examination of contents of the application and facts stated therein and on satisfaction that the application may be referred to a Committee for the resolution of the hardship or dispute, shall appoint and notify a Committee, within a period of sixty days from receipt of the application.

    A retired judge not below the rank of District and Sessions Judge, appointed in a manner as aforesaid, shall be Chairperson of the Committee.

    After notification of the Committee, the applicant or the Commissioner or both, as the case may be, shall withdraw appeal pending before any court of law or an appellate authority relating to the hardship or dispute stated in the application.

    The Committee shall commence proceedings after receipt of order of withdrawal of appeal from the FBR.

    The chairperson of the Committee shall be responsible for deciding the procedure to be followed by the Committee which may, inter-alia, include the following, namely:-

    (a) to decide about the place of sitting of the Committee, in consultation with the Chief Commissioner having jurisdiction over the applicant;

    (b) to specify date and time for conducting proceedings by the Committee;

    (c) to supervise the proceedings of the Committee;

    (d) to issue notices by courier or registered post or electronic mail to the applicant;

    (e) to requisition and produce relevant records or witnesses from the Commissioner or other concerned quarters;

    (f) to ensure attendance of the applicant for hearing either in person or through an advocate, representative or a tax consultant;

    (g) to consolidate decision of the Committee and communicate it to the Board, the Commissioner and the applicant; and

    (h) for any other matter covered under these rules.

    The Committee may conduct inquiry, seek expert opinion, direct any officer of Inland Revenue or any other person to conduct an audit and make recommendations to the Committee in respect of dispute or hardship.

    The Committee may determine the issue and may thereafter seek further information or data or expert opinion or make or cause to be made such inquiries or audit as it may deem fit, to decide the matter.

    The Committee shall decide the dispute within one hundred and twenty days from the date of receipt of order of withdrawal from the FBR.

    Decision of majority members of the Committee shall be construed decision of the Committee which shall be communicated by the Committee to the FBR, the Commissioner having jurisdiction and the applicant.

    The decision of the Committee shall be binding on the Commissioner and the aggrieved person.

    On receipt of the Committee’s decision, the applicant shall make payment of sales tax and other taxes as specified by the Committee in its decision and the Commissioner shall modify order as per decision of the Committee.

  • PSX recommends CGT exemption to foreign investors

    PSX recommends CGT exemption to foreign investors

    KARACHI: Pakistan Stock Exchange (PSX) has proposed to exempt capital gain tax (CGT) on disposal of securities by foreign investors.

    The PSX in its proposals for budget 2019/2020 on Thursday, recommended the exemption of CGT on disposal of securities by foreign investors.

    Giving rationale to its proposals, the PSX said that the exemption of CGT on foreign investors would facilitate substantial capital inflow by relaxing the cumbersome and time consuming account opening and registration process for foreigners as they get discouraged and overwhelmed with the current registration structure and look for better investment alternatives in regional markets.

    It further said that Pakistan has taxation treaties with a number of countries thus foreigners would be liable to pay taxes according to the treaty. “Therefore, taxing foreigners would burden them and not only increase their cost of business but most importantly discourage them from investment in Pakistan’s capital market.”

    It is proposed that the proviso to sub – rule 2 of Rule 13N of Income Tax Rules, 2002 shall be omitted.

    The PSX said that it is observed that most countries do not impose capital gains tax on disposal of securities by foreigners.

    Bangladesh, Malaysia, and many other countries do not levy CGT on transactions of disposal of securities conducted by foreigners.

    Even in countries that do have CGT on foreign investors, the rules are distinctly different from those that apply to domestic investors, in order to provide an attractive tax environment and avoid double taxation.

    One important reason for not imposing such tax is that most of the countries have double taxation treaties.

    In Pakistan, foreign investors file income tax returns regularly and pay taxes in accordance with the provisions of the Income Tax Ordinance, 2001 or reduced rates provided under treaties executed with such countries.

    Foreign investors should be given preferential tax rates as they might still be required to pay taxes in their home country where they are considered as a resident taxpayer.

    The PSX also urged the tax authorities to review the mechanism for payment of CGT on disposal of securities for domestic investors.

    It said that at present National Clearing Company of Pakistan Limited (NCCPL) calculates and collects Withholding Tax on Capital Gains made on disposal of shares listed on Pakistan Stock Exchange Limited.

    However, it is witnessed that in many countries there is no capital gain tax collected by any institution but rather individuals/ corporate are required to file their tax returns and pay taxes if any on the capital gains made by trading of shares.

    A broad range of countries including Canada, USA, Indonesia, India, and Vietnam do not mandate the collection of CGT by any intermediary at the time of disposal of securities, and the CGT is payable at the time of filling of returns.

    In Singapore, Hong Kong, Malaysia and Mauritius there is no capital gains tax.

    Therefore, considering international perspective, it would be appropriate if in Pakistan, payment of capital gains tax be made obligatory on individuals and corporates and the status of NCCPL should be such that only the information is provided to the tax authorities by NCCPL.

    In line with the common practice internationally, the government should review and revise the mechanism for payment of tax on capital gains for filers.

    An alternative to the current convention should be explored along with pros and cons. Withholding tax at NCCPL level for filers should be debated thoroughly and replaced with the obligation on investors who are filer to pay CGT through annual tax returns.

    However, the current mechanism of withholding on CGT for investors who are non-filers shall remain the same provided no WHT on such non-filers whose Capital Gains is up to Rs100,000 per annum.

    In any case, NCCPL should provide information on all investors’ capital gains and losses to tax authorities for tracking purposes.

    In line with international practice for collection of capital gains tax, an obligation to file returns and pay taxes on disposal of securities at year end would encourage a widespread tax culture among investors.

    It is proposed that section 100B, 8th Schedule to the Income Tax Ordinance 2001 and Rule 13N of Income Tax Rules, 2002 shall be amended accordingly.

  • Sales Tax Act 1990: One year jail for unauthorized access to FBR computerized system

    Sales Tax Act 1990: One year jail for unauthorized access to FBR computerized system

    KARACHI: Any persons attempted to gain unauthorized access to computerized system of Federal Board of Revenue (FBR) is liable to penalty and imprisonment up to one year.

    According to updated Sales Tax Act, 1990 issued by the FBR, the person trying to get unlawful access to computerized system would face harsh action.

    The law explained:

    Any person who,-

    (a) knowingly and without lawful authority gains access to or attempts to gain access to the computerized system; or

    (b) unauthorizedly uses or discloses or publishes or otherwise disseminates information obtained from the computerized system; or

    (c) falsifies any record or information stored in the computerized system; or

    (d) knowingly or dishonestly damages or impairs the computerized system; or

    (e) knowingly or dishonestly damages or impairs any duplicate tape or disc or other medium on which any information obtained from the computerized system is kept or stored; or

    (f) unauthorizedly uses unique user identifier of any other registered user to authenticate a transmission of information to the computerized system; or

    (g) fails to comply with or contravenes any of the conditions prescribed for security of unique user identifier.

    “Such person shall pay a penalty of twenty-five thousand rupees or one hundred per cent of the amount of tax involved, whichever is higher.”

    “He shall, further be liable, upon conviction by the Special Judge, to imprisonment for a term which may extend to one year, or with fine which may extend to an amount equal to the loss of tax involved, or with both.”

  • Withholding tax rate on telephone cards

    Withholding tax rate on telephone cards

    KARACHI: The decision of Supreme Court of Pakistan has paved way for Federal Board of Revenue (FBR) to collect withholding tax on telephone usages under Section 236 of Income Tax Ordinance, 2001.

    The apex court on Wednesday restored taxes on pay cards to use mobile phone services. The court suspended the levy of taxes on phones in June 2018.

    Following are the applicable withholding tax rates on phone usages updated after Finance Supplementary (Second Amendment) Act, 2019:

    a. Telephone subscribers and internet will pay zero tax on monthly bill up to Rs1,000.

    However, Telephone subscribers and internet will pay 10 percent withholding tax on monthly bill up exceeding Rs1,000.

    b. In the case of subscriber of internet, mobile telephone and prepaid internet or telephone card, the FBR will collect 12.50 percent of the amount of bill or sales price of internet pre-paid card of pre-paid telephone card or sale of unit through any electronic medium or what ever form.

    The tax will be collected by person preparing telephone / Internet bill or issuing / selling prepared card for mobile phones / Internet from:

    — Telephone Subscribers, Internet subscriber, purchaser of Internet Prepaid Cards,

    — Telephone subscriber and purchaser of prepaid telephone cards

    Along with payment of telephone bill or at the time of issuance of or sales of prepared cards.

  • Amnesty scheme may be introduced for two months; may conclude before IMF program

    Amnesty scheme may be introduced for two months; may conclude before IMF program

    ISLAMABAD: The government is reportedly planning to roll out a much-anticipated tax amnesty scheme during the last two months of the current fiscal year, with a conclusion targeted before the initiation of the International Monetary Fund (IMF) loan program.

    (more…)
  • Sales Tax Act 1990: 5-year jail for obstructing IR officers to business premises

    Sales Tax Act 1990: 5-year jail for obstructing IR officers to business premises

    KARACHI: A person may be penalized up to five year imprisonment for obstructing or denying access any officer of Inland Revenue to the business premises or records.

    The updated Sales Tax Act, 1990 issued by Federal Board of Revenue (FBR) explained offenses and penalties.

    As per Section 33 of the Sales Tax Act, 1990 following are offenses and penalties:

    Any person who denies or obstructs the access of an authorized officer to the business premises, registered office or to any other place where records are kept, or otherwise refuses access to the stocks, accounts or records or fails to present the same when required under section 25, 38 38A or 40B.

    Such person shall pay a penalty of twenty five thousand rupees or one hundred per cent of the amount of tax involved, whichever is higher.

    “He shall, further be liable, upon conviction by a Special Judge, to imprisonment for a term which may extend to five years, or with fine which may extend to an amount equal to the loss of tax involved, or with both.”

    Any person who, –

    (a) submits a false or forged document to any officer of Inland revenue; or

    (b) destroys, alters, mutilates or falsifies the records including a sales tax invoice; or

    (c) Knowingly or fraudulently makes false statement, false declaration, false representation, false personification, gives any false information or issues or uses a document which is forged or false.

    Such person shall pay a penalty of twenty five thousand rupees or one hundred per cent of the amount of tax involved, whichever is higher.

    “He shall, further be liable, upon conviction by a Special Judge, to imprisonment for a term which may extend to three years, or with fine which may extend to an amount equal to the amount of tax involved, or with both.”

    Any person who commits, causes to commit or attempts to commit the tax fraud, or abets or connives in commissioning of tax fraud.

    Such person shall pay a penalty of twenty five thousand rupees or one hundred per cent of the amount of tax involved, whichever is higher.

    “He shall, further be liable, upon conviction by a Special Judge, to imprisonment for a term which may extend to five years, or with fine which may extend to an amount equal to the loss of tax involved, or with both.”

    Where any person violates any embargo placed on removal of goods in connection with recovery of tax.

    Such person shall pay a penalty of twenty five thousand rupees or ten per cent of the amount of the tax involved, whichever is higher.

    “He shall, further be liable, upon conviction by a Special Judge, to imprisonment for a term which may extend to one year, or with fine which may extend to amount equal to the amount of tax involved, or with both.”

  • Sales Tax Act 1990: penalty for non-filing, miscalculation

    Sales Tax Act 1990: penalty for non-filing, miscalculation

    KARACHI: The sales tax law has defined fine and penalty for persons fail to file sales tax returns within due date. The law also defined penalty for miscalculation and other obligations.

    The updated Sales Tax Act, 1990 issued by the Federal Board of Revenue (FBR) explained the offences and penalties under section 33.

    Following are the offences and penalties:

    If a person fails to furnish a return within the due date then Such person shall pay a penalty of five thousand rupees:

    Provided that in case a person files a return within ten days of the due date, he shall pay a penalty of one hundred rupees for each day of default.

    Any person who fails to issue an invoice when required under this Act than such person shall pay a penalty of five thousand rupees or three per cent of the amount of the tax involved, whichever is higher.

    Any person who un-authorizedly issues an invoice in which an amount of tax is specified, in such cases the person shall pay a penalty of ten thousand rupees or five per cent of the amount of the tax involved, whichever is higher.

    Any person who fails to notify the changes of material nature in the particulars of registration of taxable activity then such person shall pay a penalty of five thousand rupees.

    Any person who fails to deposit the amount of tax due or any part thereof in the time or manner laid down under this Act or rules or orders made there under.

    Such person shall pay a penalty of ten thousand rupees or five per cent of the amount of the tax involved, whichever is higher:

    Provided that, if the amount of tax or any part thereof is paid within ten days from the due date, the defaulter shall pay a penalty of five hundred rupees for each day of default:

    Provided further that no penalty shall be imposed when any miscalculation is made for the first time during a year:

    Provided further that if the amount of tax due is not paid even after the expiry of a period of sixty days of issuance of the notice for such payments by an officer of Inland Revenue, not below the rank of Assistant Commissioner Inland Revenue, the defaulter shall, further be liable, upon conviction by a Special Judge, to imprisonment for a term which may extend to three years, or with fine which may extend to amount equal to the amount of tax involved, or with both.

    Any person who repeats erroneous calculation in the return during a year whereby amount of tax less than the actual tax due is paid. In that case such person shall pay a penalty of five thousand rupees or three per cent of the amount of the tax involved, whichever is higher.

  • Sales Tax Act 1990: three years imprisonment for persons fail to get registration

    Sales Tax Act 1990: three years imprisonment for persons fail to get registration

    KARACHI: Persons making taxable supplies but failed to get registration with tax department then such persons are liable to three years imprisonment, which may be extendable.

    According to updated Sales Tax Act, 1990 issued by Federal Board of Revenue (FBR), the fines and penalties had been prescribed for persons deliberately violated the laws.

    According to the law, any person who is required to apply for registration under this Act fails to make an application for registration before making taxable supplies.

    Such person shall pay a penalty of ten thousand rupees or five per cent of the amount of tax involved, whichever is higher:

    Provided that such person who is required to get himself registered under this Act, fails to get registered within sixty days of the commencement of taxable activity, he shall, further be liable, upon conviction by a Special Judge, to imprisonment for a term which may extend to three years, or with fine which may extend to an amount equal to the amount of tax involved, or with both.

    Any person who fails to maintain records required under this Act or the rules made there under.

    Such person shall pay a penalty of ten thousand rupees or five per cent of the amount of tax involved, whichever is higher.

    Where a registered person who, without any reasonable cause, in non compliance with the provisions of section 25, –

    (a) fails to produce the record on receipt of first notice;

    (b) fails to produce the record on receipt of second notice; and

    (c) fails to produce the record on receipt of third notice.

    Then such person shall pay a penalty of five thousand rupees;

    such person shall pay a penalty of ten thousand rupees; and

    such person shall pay a penalty of fifty thousand rupees.

    Any person who fails to furnish the information required by the Board through a notification issued under sub-section (5) of section 26.

    Such person shall pay a penalty of ten thousand rupees.

  • FBR identifies retailers taking undue benefits of present registration requirement

    FBR identifies retailers taking undue benefits of present registration requirement

    KARACHI: Federal Board of Revenue (FBR) has identified that large number of retailers are suppressing electricity consumption to avoid mandatory registration.

    A tax unit in Karachi in its budget proposals for fiscal year 2019/2020, asked the FBR Headquarters to review the present regime of sales tax registration for retailers as they were taking undue advantage.

    The tax unit said that presently retailers are dealt for registration under Sales Tax Special Procedure 2007, Chapter–II, Rule 4 & 6, a retailer operating as a unit of a national or international chain of stores and other retailers paying sales tax through electricity bills.

    Before this, retailers were dealt for registration under Sales Tax Rule 2006, Chapter –I, Rule 4 (b) which is reproduced as under (omitted by SRO 494(I) 2015 dated 30-06-2015).

    “A retailer whose value of supplies, in any period during the last twelve months exceeds five million rupees”.

    At present retailers are taking benefits of this change and having turnover more than ten million are not liable to register and paying a meager amount in electric bills.

    Retailers used generators, solar energy and other sources and maintain the level of electric bills not exceeding the amount of Rs 600000/- for last twelve months and through payment of 5 percent on less than Rs20,000 electricity bill and 7.5 percent on monthly bill greater than Rs.20,000.

    The FBR has been urged that retailers having turnover more than ten million needs to be included in Rule 4 of Sales Tax Special Procedure 2007, Chapter –II, to enhance the net work of Sales Tax registration.