Karachi, September 16, 2024 – The Federal Board of Revenue (FBR) has officially issued a Standard Operating Procedure (SOP) for the disposal of condonation of time limit cases, aiming to streamline and clarify the process for taxpayers and tax officials alike.
The SOP, which falls under Section 74 of the Sales Tax Act, 1990, is outlined in Sales Tax Circular No. 05 of 2024 / IR Operations, and provides a comprehensive framework to address the condonation of time in cases where taxpayers fail to meet statutory deadlines.
This procedural update marks a significant step forward in tax administration and is expected to improve the handling of condonation requests in a transparent and efficient manner. The FBR’s latest move emphasizes its ongoing commitment to facilitating compliance while ensuring that taxpayers have a fair process to follow.
Key Details of the SOP
The new procedure is applicable to all registered persons who seek an extension of the time period due to delays in fulfilling their tax obligations. According to the FBR, taxpayers must now apply directly to the Commissioner Inland Revenue (IR) who holds jurisdiction over their cases. The application must be submitted with the grounds for the delay, in accordance with SRO.1444(1)/2024 dated September 12, 2024.
The application process involves a structured format for the Commissioner-IR to assess the case thoroughly. The Commissioner-IR must consider the provided grounds for condonation and, where necessary, call for additional information. In cases where condonation exceeds three years, the Commissioner-IR is required to submit a categorical recommendation to the FBR in the following format:
1. Brief Facts of the Case: A comprehensive overview of the case, including the section for which condonation is sought and the date on which the application was received.
2. Previous Applications: Whether the taxpayer has previously submitted a condonation request and the decision taken by the field formation.
3. Genuineness of Reasons: Evaluation of the authenticity of the reasons provided by the taxpayer for the delay.
4. Revenue Impact: A detailed breakdown of the revenue impact, including the amount involved, especially in cases of registered and unregistered persons.
5. System or Technical Glitches: Any involvement of system errors or glitches, with supporting documents.
6. Transaction Involvement: Whether the condonation involves a transaction of a de-registered or blocked taxpayer.
7. Adjustment or Refund: Whether the taxpayer has already claimed a refund or adjustment, and detailed information regarding it.
8. Supplier Information: Verification of whether the supplier discharged the due sales tax on supply, especially in cases involving the power sector, and whether both the buyer and supplier are listed on the Active Taxpayers List (ATL).
9. Banking Transactions: Verification of payment to suppliers through the banking channel as required under Section 73 of the Sales Tax Act, particularly in cases related to the power sector and provincial revenue authorities.
10. Period to be Condoned: The exact number of days for which the registered person seeks condonation.
11. Commissioner’s Recommendation: A final recommendation with supporting reasons provided by the Commissioner-IR.
12. Supporting Documents: The application must be accompanied by all relevant documents such as the original return, annexures, and any other supporting evidence.
Timelines and Communication
Once the Commissioner-IR has evaluated the case, the recommendation must be forwarded to the FBR within 15 working days. This timeline is applicable unless further information is requested from the applicant, in which case the 15-day period begins from the date of receiving the requested information.
After the FBR receives the Commissioner-IR’s recommendation, it will review the case and issue a final decision—either an approval or a rejection. Both the Commissioner-IR and the taxpayer will be notified of the outcome.
Impact of the SOP on Taxpayers
This SOP provides a clear and standardized framework for both taxpayers and tax officials, which is expected to reduce ambiguity in handling condonation cases. The FBR’s approach emphasizes transparency, with specific documentation requirements and defined timelines, ensuring that taxpayers have clarity about the status of their applications.
Moreover, the focus on critical areas such as revenue impact, authenticity of reasons, and adherence to procedural details reinforces the FBR’s commitment to maintaining accountability within the tax system. By offering taxpayers the opportunity to provide a justified explanation for their delay, the SOP reflects a balanced approach to enforcement and compliance.
This step towards procedural clarity and administrative efficiency highlights the FBR’s continued efforts to foster a more compliant and taxpayer-friendly environment.
Conclusion
The issuance of the Sales Tax Circular No. 05 of 2024 / IR Operations signifies a crucial advancement in Pakistan’s tax administration. The FBR’s new SOP for the disposal of condonation of time limit cases is a significant measure in creating a more structured, fair, and transparent system. Taxpayers now have a clear path to follow, ensuring that their condonation applications are processed efficiently and in accordance with the law.
