Karachi, December 13, 2023 – Federal Board of Revenue (FBR) has updated rules regarding procedure for sales tax de-registration.
The FBR has introduced updated rules for the cancellation of sales tax registration, bringing clarity and efficiency to the process. These changes are outlined in the amended Sales Tax Rules, 2006, applicable for the tax year 2024. The notification includes a detailed procedure under Rule 11, specifying the steps to be followed for de-registration.
Rule 11: De-registration:
According to the updated rules, every registered person who ceases business operations, has supplies exempt from tax, or decides to unregister, must apply to the Commissioner Inland Revenue having jurisdiction. This application, submitted in Form STR-3, prompts the Commissioner to issue an order of de-registration or cancellation of registration. The effective date of de-registration is specified, ensuring that the process is completed not later than ninety days from the date of application or the date when all outstanding dues are cleared, whichever is later. The de-registration is then executed through the computerized system.
In cases where audit proceedings or inquiries have been initiated consequent upon the de-registration application, the Commissioner is obligated to complete the proceedings within ninety days from the application date. The registered person is directed to settle any outstanding liability identified during the audit by filing a final return under section 28. However, the de-registration cannot proceed unless the applicant provides records for the purpose of audit or inquiry.
A noteworthy addition is Sub-rule (2A), which suspends the obligation of the registered person to file monthly sales tax returns under section 26 of the Act from the date of application until the de-registration is finalized or the application is rejected.
If the Commissioner intends to conduct an audit or inquiry to determine the applicant’s liability, Sub-rule (2B) outlines the process. The Commissioner is required to request the necessary records in writing, and upon receipt of complete records, the computerized system automatically de-registers the applicant after ninety days, subject to provisions in Sub-rule (4).
In the case of a registered person failing to file tax returns for six consecutive months, Sub-rule (3) empowers the Commissioner to issue a de-registration order after providing a written notice and an opportunity to be heard. The computerized system is then initiated to de-register the person accordingly.
Importantly, Sub-rule (4) clarifies that the obligations and liabilities of a person whose registration is canceled under Sub-rule (1) remain unaffected. This applies to the period during which the person conducted business as a registered entity, ensuring that past obligations are not discharged by the cancellation of registration.
These updated rules aim to create a transparent and systematic procedure for the cancellation of sales tax registration, promoting compliance and accountability within the business community.
