Karachi, December 14, 2023 – The Federal Board of Revenue (FBR) has updated the Income Tax Rules, 2002, for the tax year 2024, conferring enhanced powers upon the Commissioner Inland Revenue to suspend the sales tax registration of a taxpayer without issuing prior notice.
This move is aimed at curbing tax evasion, combating fraud, and ensuring a more stringent regulatory framework in tax matters.
The amended rules delineate the circumstances under which the Commissioner can exercise this authority. The key provisions are as follows:
(i) Grounds for Suspension:
• The Commissioner, having jurisdiction, may suspend the sales tax registration of a registered person if satisfied that the individual has issued fake invoices, evaded taxes, or committed tax fraud.
• The suspension can occur without prior notice, pending further inquiry. Factors leading to such satisfaction include non-availability of the registered person at the provided address, refusal to grant access to business premises or furnish records, abnormal tax profiles, substantial dealings with blacklisted entities, non-filing of sales tax returns, recommendations from other jurisdictions’ commissioners, or any other reason specified by the Commissioner.
(ii) Procedure for Suspension:
• The suspension of registration will be executed through a written order, providing reasons for the suspension.
• The order will be endorsed to the concerned registered person, other tax units, the FBR’s computer system, the STARR computer system, and the Customs Wing computer system for information and necessary action as per the law.
(iii) Automatic Suspension for Non-Filing:
• A registered person failing to file sales tax returns for six consecutive months will face automatic suspension without any notice.
(iv) Intimation to Other Jurisdictions:
• If buyers or suppliers associated with the suspended person belong to another jurisdiction, the Commissioner will intimate the Chief Commissioner of that jurisdiction to initiate proceedings for the suspension or blacklisting of the buyers/suppliers.
(v) Implications of Suspension:
• No input tax adjustment/refund will be admissible to the suspended person during the suspension period.
• Other registered persons will not be allowed input tax adjustment/refund based on invoices issued by the suspended person during the suspension.
(vi) Show Cause Notice and Hearing:
• The Commissioner must issue a show cause notice within seven days of the suspension order, providing an opportunity for a hearing within fifteen days. This notice will indicate the possibility of blacklisting if there is no response or compliance.
(vii) Time Limit for Show Cause Notice:
• If a show cause notice is not issued within seven days, the suspension order becomes void ab-initio.
(viii) Notice Affixation:
• In case of non-availability of the suspended person at the given address, the notice may be affixed on the main notice board of the LTU/RTO.
(ix) Revocation of Suspension:
• Upon receiving a reply to the notice and after affording the registered person an opportunity for a hearing, the Commissioner may order the revocation of suspension if satisfied with the response.
This amendment signifies a robust approach by the FBR to strengthen tax compliance, deter fraudulent practices, and streamline the process of handling non-compliance issues in the realm of sales tax registration. It is anticipated to contribute to a more transparent and accountable tax ecosystem.
