FBR Announces Rates of Sales Tax Default Surcharge for Tax Year 2024

FBR Announces Rates of Sales Tax Default Surcharge for Tax Year 2024

Karachi, November 21, 2023 – The Federal Board of Revenue (FBR) has notified the rates of default surcharge under the Sales Tax Act, 1990, for the tax year 2024.

The FBR released an updated version of the Sales Tax Act, 1990, which includes the prescribed rates under Section 34.

Understanding Default Surcharge Rates:

According to Section 34 of the Sales Tax Act, 1990, the default surcharge rates have been outlined to ensure timely and accurate payment of taxes. The section states that if a registered person fails to pay the due tax, either willfully or otherwise, within the specified time or in the prescribed manner, they will be liable to pay default surcharge in addition to the tax amount due.

The prescribed rates are as follows:

1. Default Surcharge for Late Payment: If a registered person fails to pay the tax due or any part of it on time, they shall pay a default surcharge at the rate of twelve per cent per annum of the amount of tax due.

2. Default Surcharge for Tax Fraud: In case of default due to tax fraud, the person responsible for the fraud shall pay a default surcharge at the rate of two per cent per month of the amount of tax evaded or the amount of refund fraudulently claimed. This charge is applicable until the entire liability, including the default surcharge, is settled.

Calculation of Default Surcharge:

1. Inadmissible Input Tax Credit or Refund: The period of default for inadmissible input tax credit or refund shall be reckoned from the date of adjustment or receipt of such credit or refund.

2. Non-Payment of Tax: In cases of non-payment of tax or part thereof, the period of default is calculated from the 16th day of the month following the due date of the tax period to the day preceding the actual payment date.

Important Clarification:

The section emphasizes that the tax due for the purpose of calculating default surcharge does not include the amount of penalty. This clarification provides clarity on the components considered while determining the default surcharge, ensuring a fair and transparent assessment.

Government’s Push for Compliance:

This move by the FBR reinforces the government’s commitment to promoting tax compliance and discouraging tax evasion. By establishing clear and fair default surcharge rates, the FBR aims to create a tax environment where businesses are incentivized to meet their tax obligations promptly.

Businesses and taxpayers are encouraged to familiarize themselves with the updated Sales Tax Act, 1990, and ensure timely compliance with the regulations to avoid incurring default surcharge. As part of ongoing efforts to streamline tax processes, the FBR remains dedicated to facilitating businesses while maintaining a robust and accountable tax collection system.