ISLAMABAD, June 21, 2024 — In a significant move to streamline tax administration and compliance, the Federal Board of Revenue (FBR) officials have been granted the authority to make best judgement assessments in sales tax cases.
This development is part of the Finance Bill 2024, which proposes amendments to the Sales Tax Act, 1990, empowering FBR officials to determine tax liabilities more effectively.
The best judgement assessment concept, already present under the Income Tax Ordinance, 2001, is now set to be introduced under the Sales Tax Act. Tax experts from A. F. Ferguson & Co. have indicated that this method will enhance the FBR’s ability to address non-compliance and ensure accurate tax collection.
Under the proposed amendments, best judgement assessment will apply in specific scenarios. Firstly, if an individual fails to submit a sales tax return in response to a notice, and secondly, if they fail to produce the necessary accounts, records, or documents requested under sections 25, 25AB, or 38A of the Act. In such cases, after issuing a show cause notice, FBR officials can assess the tax payable or refundable based on any available information and material to the best of their judgement.
The proposed mechanism includes provisions for rectifying non-compliance. If a best judgement assessment has been made due to the failure to submit a return, and the individual subsequently files the return along with the due tax payment, the show cause notice or assessment order will be nullified. This ensures that taxpayers have an opportunity to correct their omissions and comply with their obligations without facing undue penalties.
Furthermore, in determining a person’s liability under the best judgement assessment, FBR officials will follow prescribed conditions to ascertain the minimum tax liability applicable to the individual. This approach aims to standardize the assessment process and ensure fairness and transparency.
The introduction of best judgement assessment is expected to enhance the FBR’s capability to enforce compliance and reduce instances of tax evasion. By equipping officials with the authority to make informed assessments based on available data, the FBR can address discrepancies more effectively and ensure that all taxpayers fulfill their obligations.
The Finance Bill 2024 reflects the government’s commitment to strengthening the tax system and improving revenue collection. As these changes take effect, it will be crucial for taxpayers to maintain accurate records and respond promptly to FBR notices to avoid assessments based on best judgement.
Tax professionals and businesses are advised to stay informed about these developments and ensure compliance with the new regulations to mitigate potential risks and penalties. The FBR’s enhanced powers signify a proactive step towards a more robust and efficient tax administration in Pakistan.