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  • Sales Tax Act 1990: IR officers empowered with free access to enter business premises

    Sales Tax Act 1990: IR officers empowered with free access to enter business premises

    KARACHI: Authorized officers of Inland Revenue have access to business premises of sales tax registered taxpayers to inspect record of sales and purchases.

    According to Section 38 of updated Sales Tax Act, 1990 issued by Federal Board of Revenue (FBR), explained the powers of authorized officers of Inland Revenue to enter business premises for inspecting records.

    Section 38: Authorized officers to have access to premises, stocks, accounts and records

    Sub-Section (1): Any officer authorized in this behalf by the Board or the Commissioner shall have free access to business or manufacturing premises, registered office or any other place where any stocks, business records or documents required under this Act are kept or maintained belonging to any registered person or a person liable for registration or whose business activities are covered under this Act or who may be required for any inquiry or investigation in any tax fraud committed by him or his agent or any other person; and such officer may, at any time, inspect the goods, stocks, records, data, documents, correspondence, accounts and statements, utility bills, bank statements, information regarding nature and sources of funds or assets with which his business is financed, and any other records or documents, including those which are required under any of the Federal, Provincial or local laws maintained in any form or mode and may take into his custody such records, statements, diskettes, documents or any part thereof, in original or copies thereof in such form as the authorized officer may deem fit against a signed receipt.

    Sub-Section (2): The registered person, his agent or any other person specified in sub-section (1) shall be bound to answer any question or furnish such information or explanation as may be asked by the authorized officer.

    Sub-Section(3): The department of direct and indirect taxes or any other Government department, local bodies, autonomous bodies, corporations or such other institutions shall supply requisite information and render necessary assistance to the authorized officer in the course of inquiry or investigation under this section.

    Section 38A: Power to call for information

    The Commissioner may, by notice in writing, require any person, including a banking company, to furnish such information or such statement in connection with any investigation or inquiry in cases of tax fraud, as may be specified in such notice:

    Provided that the Commissioner may require any regulatory authority to provide information concerning the licenses and authorizations issued by it.

    Section 38B: Obligation to produce documents and provide information

    Sub-Section (1): Notwithstanding anything contained in this Act or any other law for the time being in force, any person required to maintain the record under the Act, on demand by an officer, not below the rank of an Assistant Commissioner Inland Revenue, by notice in writing, as and when specified in the notice, shall,–

    (a) produce for examination, such documents or records which the officer of Inland Revenue considers necessary or relevant to the audit, inquiry or investigation under the Act;

    (b) allow the officer of Inland Revenue to take extracts from or copies of such documents or records; and

    (c) appear before the officer of Inland Revenue and answer any question put to him concerning the documents and records relating to the audit or inquiry or investigation referred to in clause (a) above.

    Sub-Section (2): An officer of Inland Revenue conducting an audit, inquiry or, as the case may be, an investigation under the Act, may require in writing any person, department, company or organization to furnish such information as is held by that person, department, company or organization, which, in the opinion of the officer of Inland Revenue, is relevant to such audit, inquiry or investigation.

    Sub-Section (3): The Board may require, in writing, any person, department, company or organization, as the case may be, to provide any information or data held by that person, department, company or organization, which, in the opinion of the Board, is required for purposes of formulation of policy or administering the Customs, Sales Tax, Federal Excise or Income Tax.

    Sub-Section (4): Every person, department, company or organization shall furnish the information requisitioned by the Board or the officer of Sales Tax under sub-section (2) or (3), within the time specified in the notice issued by the Board or, as the case may be, the officer of Inland Revenue.

  • Sales Tax Act 1990: IR officers authorized to arrest fraudsters

    Sales Tax Act 1990: IR officers authorized to arrest fraudsters

    KARACHI: The sales tax law has authorized officers of Inland Revenue to arrest persons committing fraud or any other offence.

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  • Sales Tax Act 1990: IR officers empowered to summon persons

    Sales Tax Act 1990: IR officers empowered to summon persons

    KARACHI: The sales tax laws have empowered officers of Inland Revenue to summon person in legal proceedings for evidence and produce documents.

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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.

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  • 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.

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