FBR slaps extra sales tax up to 17% on unregistered persons

FBR slaps extra sales tax up to 17% on unregistered persons

In a move to enhance tax compliance, the Federal Board of Revenue (FBR) has imposed an additional sales tax of up to 17% on unregistered industrial and commercial connection holders of electricity and gas utilities.

This measure, introduced through SRO 1222(I)/2021 issued on Friday, targets consumers who are neither registered for sales tax nor listed on the Active Taxpayers List (ATL).

The SRO outlines the levy of tax on the total billed amount, excluding federal taxes, in addition to the tax payable under Sub-Section (1) of Section 3 of the Sales Tax Act, 1990. The extra tax is applicable to individuals or entities with industrial or commercial connections who do not possess sales tax registration numbers or do not appear on the ATL maintained by the FBR.

The rates for the extra sales tax are detailed as follows:

For Industrial Connection Holders:

• Tax Rate: 17%

For Commercial Connection Holders:

• 5% tax on monthly billed amounts up to Rs10,000

• 7% tax on amounts between Rs10,001 to Rs20,000

• 10% tax on amounts between Rs20,001 to Rs30,000

• 12% tax on amounts between Rs30,001 to Rs40,000

• 15% tax on amounts between Rs40,001 to Rs50,000

• 17% tax on monthly billed amounts exceeding Rs50,000

The FBR has introduced these rates to encourage registration for sales tax and inclusion in the ATL, ensuring that businesses and individuals contribute their fair share to tax revenues.

Additionally, the FBR issued SRO 1223(I)/2021, which excludes certain sectors from the application of the extra sales tax. The tax will not be applicable to supplies made by the steel sector and the edible sector, providing relief to these specific industries.

The move by the FBR is aimed at broadening the tax base and promoting tax compliance. By incentivizing registration for sales tax and inclusion in the ATL, the FBR seeks to create a more transparent and accountable tax environment. It also addresses the issue of tax evasion and aims to ensure that all sectors contribute proportionately to the national tax revenues.

The exclusion of certain sectors from the extra sales tax underscores a nuanced approach, taking into consideration the unique circumstances of specific industries. This targeted approach aligns with the FBR’s goal of fostering a business-friendly environment while maintaining the overall integrity of the tax system.

As the new regulations come into effect, businesses and individuals falling within the specified categories are advised to review their tax compliance status and take necessary steps to avoid the imposition of the additional sales tax. The FBR continues its efforts to create a fair and equitable taxation system that promotes economic growth and sustainability.