Finance Act 2024 Limits FBR in Issuing Assessment Notices

Finance Act 2024 Limits FBR in Issuing Assessment Notices

Karachi, July 9, 2024 – The Finance Act 2024 has introduced significant changes, imposing limitations on the Federal Board of Revenue (FBR) regarding the issuance of assessment notices. This move aims to streamline tax processes and provide clarity to taxpayers.

The act has added a new Section 11G to the Sales Tax Act of 1990, establishing a defined timeframe for issuing and processing show cause notices and assessment orders.

Key Provisions of Section 11G

Section 11G, titled “Limitation for Assessment,” sets forth specific guidelines:

1. Issuance of Show Cause Notices: Notices under Sections 11D to 11F must be issued within five years from the end of the financial year in which the relevant date occurs.

2. Issuance of Assessment Orders: Orders under Sections 11D, 11E, and 11F must be issued within 120 days from the issuance of a show cause notice. This period can be extended by the Commissioner for up to 90 days, provided the reasons for the extension are documented.

3. Exclusions from the Time Limit: The specified period excludes the time during which proceedings are adjourned due to stay orders, Alternative Dispute Resolution (ADR) proceedings, or adjournments requested by the taxpayer, up to a maximum of 60 days.

Defining the Relevant Date

The term “relevant date” is crucial in determining the timelines for assessment. It refers to:

• The date of payment of sales tax or charge under Section 6.

• The date of payment for goods or services subject to tax withholding under subsection (7) of Section 3.

• The date of erroneous refund of sales tax or charge.

Implications for Taxpayers and the FBR

The introduction of these limitations is expected to bring greater certainty and predictability to the tax assessment process. Taxpayers will benefit from knowing the specific timelines within which the FBR must act, reducing the prolonged uncertainty often associated with tax assessments. For the FBR, these provisions necessitate a more efficient and timely handling of tax matters.

The Finance Act 2024 represents a significant step towards improving the tax administration system in Pakistan. By setting clear deadlines and conditions for issuing assessment notices, the act aims to enhance transparency and efficiency in tax collection, benefitting both taxpayers and the FBR.