Karachi, December 26, 2024 – The Federal Board of Revenue (FBR) has issued a detailed explanation regarding the joint and several liability of registered persons within the supply chain when taxes remain unpaid. This clarification is provided under Section 8A of the Sales Tax Act, 1990.
According to Section 8A, a registered person who receives a taxable supply from another registered person is considered jointly and severally liable for the unpaid tax in certain circumstances. Specifically, if the recipient of the supply knows or has reasonable grounds to suspect that some or all of the tax due on the supplied goods, or any previous or subsequent supply, will remain unpaid, both the recipient and the supplier are responsible for settling the unpaid tax. The burden of proof in these cases lies with the FBR, which must demonstrate that the unpaid tax is indeed owed.
The FBR further clarified that the joint and several liability applies not only to the immediate supplier and recipient but extends across the entire supply chain, potentially involving multiple parties. This provision ensures that the tax authorities can pursue any party in the supply chain when taxes remain unpaid, promoting greater accountability and compliance.
Additionally, the FBR retains the power to issue exemptions to specific transactions or classes of transactions under this provision. Through an official notification in the gazette, the FBR can exempt certain supplies from the joint and several liability rules outlined in Section 8A, offering some flexibility to businesses under specific conditions.
This clarification by the FBR is expected to provide better transparency and understanding for businesses operating within the supply chain, ensuring that all parties are aware of their responsibilities in relation to unpaid taxes. The FBR’s emphasis on accountability aims to reduce tax evasion and improve compliance across the board.
In conclusion, the FBR’s explanation on joint and several liability underscores the importance of vigilance within the supply chain and highlights the shared responsibility of registered persons for ensuring the full payment of taxes due.