Finance Act, 2024: Rs100M Penalty for Failure in ITGO Compliance

Finance Act, 2024: Rs100M Penalty for Failure in ITGO Compliance

Karachi, July 3, 2024 – The Finance Act, 2024, has introduced significant penalties for utility providers failing to comply with the Income Tax General Order (ITGO). The government has recommended a penalty of up to Rs 100 million for non-compliance.

According to sources within the Federal Board of Revenue (FBR), the penalty amount has been reduced from the initial proposal made through the Finance Bill 2024. Originally, the bill proposed penalties for individuals and entities failing to comply with ITGO requirements issued by the FBR. These requirements pertain to individuals not appearing on the active taxpayers’ list but who are still liable to file returns under the Income Tax Ordinance, 2001, within 15 days of the issuance of the ITGO.

Initially, the proposed penalty was Rs 100 million for the first default and Rs 200 million for each subsequent default. However, the Finance Act, 2024, has revised these amounts, reducing the financial burden while retaining the punitive measures to ensure compliance. The revised penalties are as follows:

• Rs 50 million for the first default

• Rs 100 million for each subsequent default

This change in penalty structure reflects the government’s approach to balance strict enforcement with a more pragmatic penalty framework. The revised penalties aim to enforce compliance without imposing excessively harsh financial penalties that could potentially disrupt utility services.

Furthermore, the Finance Act stipulates that the imposition of these penalties will be effective from a date notified by the FBR. This provision allows for a period of adjustment for utility providers to align their operations with the new compliance requirements.

The introduction of these penalties underscores the government’s commitment to enhancing tax compliance and broadening the tax base. By targeting utility providers, the FBR aims to ensure that all liable entities contribute to the national revenue as required by law. This move is part of broader efforts to improve tax administration and curb tax evasion.

Utility providers are now tasked with ensuring they have robust systems in place to comply with ITGO requirements promptly. The penalties serve as a deterrent against non-compliance and encourage timely submission of tax returns.

The FBR’s focus on compliance through the Finance Act, 2024, highlights the importance of maintaining an accurate and up-to-date taxpayer list. By enforcing these measures, the government seeks to create a fairer tax system where all eligible entities meet their tax obligations.

As the effective date approaches, utility providers are urged to review their compliance procedures and take necessary steps to avoid the hefty penalties outlined in the Finance Act, 2024.