Karachi, December 29, 2024 – The Federal Board of Revenue (FBR) has been granted the authority to recover short-paid sales tax amounts without issuing prior notice to the taxpayer. This authority is enshrined in Section 11A of the Sales Tax Act, 1990, which allows the FBR to act swiftly in cases of underpayment.
Under Section 11A, the FBR is empowered to recover short-paid tax amounts directly from registered taxpayers who pay less than the tax due as declared in their returns. The provision enables the FBR to take recovery measures without the requirement of issuing a prior show-cause notice. These measures may include halting the removal of goods from the taxpayer’s business premises and attaching the taxpayer’s business bank accounts. The recovery process also incorporates the application of a default surcharge on the short-paid amount.
This authority, however, comes with certain stipulations. While the FBR can proceed without prior notice for recovery, it cannot impose penalties under Section 33 of the Sales Tax Act unless a show-cause notice is issued to the taxpayer. Additionally, the recovery actions are without prejudice to any other legal measures outlined in Section 48 of the Act or the related rules.
The introduction of this provision underscores the FBR’s focus on ensuring tax compliance and addressing revenue shortfalls. It is designed to deter deliberate underpayment by taxpayers and provide the FBR with a mechanism to act decisively in recovering dues. However, it also raises concerns about the potential impact on businesses, particularly small and medium enterprises (SMEs), which may inadvertently underpay taxes due to errors or misunderstandings.
Tax experts suggest that while the provision strengthens the FBR’s enforcement capabilities, it should be exercised with caution to avoid undue hardship on businesses. Clear guidelines and safeguards are essential to ensure that legitimate taxpayers are not unfairly targeted. The balance between strict enforcement and taxpayer facilitation remains a critical challenge for the FBR as it seeks to boost revenue collection in an increasingly complex economic environment.
