Karachi, August 5, 2024 – In a decisive move to combat tax evasion and bolster revenue integrity, the Federal Board of Revenue (FBR) has significantly broadened the definition of sales tax fraud.
Announced through Circular No. 3 of Sales Tax on Monday, the updated guidelines under the Finance Act, 2024, bring numerous acts and omissions into the ambit of tax fraud.
The newly defined parameters are aimed at tightening controls and ensuring that all forms of tax evasion are addressed effectively. According to the FBR, the revised definition now encompasses a wide range of fraudulent activities, reflecting a more comprehensive approach to curbing tax malpractices.
Under the updated regulations, the definition of tax fraud includes:
• Suppression of Taxable Sales/Receipts: Deliberately not reporting or underreporting sales or receipts to evade tax liabilities.
• False Claims of Input Tax Credit: Illegitimately claiming tax credits for inputs not genuinely received or used.
• Uninvoiced Supply of Taxable Goods: Providing taxable goods without issuing a tax invoice, undermining tax collection mechanisms.
• Issuance of False Tax Invoices: Issuing invoices without actual goods supply to wrongfully claim input tax credits or refunds.
• Evasion through Undue Input Tax Credit: Engaging in practices to wrongfully obtain tax credits or refunds by other means.
• Delayed Tax Deposits: Failing to deposit collected taxes within three months of the due payment date.
• Creation of False Records: Generating or using fake financial records or documents to evade taxes or claim inadmissible refunds, using various methods.
• Tampering with Evidence: Altering or destroying documents and evidence necessary for tax compliance.
• Dealing with Confiscatable Goods: Handling goods that are subject to confiscation under tax laws.
• Unregistered Taxable Supplies: Making taxable supplies without appropriate sales tax registration.
• Intentional Tax Losses: Engaging in actions specifically designed to cause a loss of tax revenue.
The FBR has made it clear that these acts or omissions will be deemed intentional unless the accused can prove otherwise. This shift places the burden of proof on individuals to demonstrate that their actions were not intended to commit tax fraud.
The expanded definition reflects the FBR’s commitment to a more rigorous enforcement of tax laws and is expected to enhance the agency’s ability to detect and penalize fraudulent activities. By addressing a broader spectrum of tax fraud scenarios, the FBR aims to protect public revenue and ensure a fair tax system.
The enhanced measures are part of the FBR’s broader strategy to modernize tax administration and address persistent issues of evasion and non-compliance. As these changes take effect, businesses and individuals alike will need to adapt to the stricter regulatory environment and ensure that their tax practices are fully compliant with the new standards.