Finance Act 2024 Unveils Best Judgement Assessment for ST

Finance Act 2024 Unveils Best Judgement Assessment for ST

Karachi, July 7, 2024 – The Finance Act, 2024 has introduced significant changes to the best judgement assessment process under sales tax laws in Pakistan. A new section, 11D, has been added to the Sales Tax (ST) Act, 1990, aiming to streamline and strengthen tax compliance.

The newly inserted section 11D addresses situations where taxpayers fail to comply with certain requirements. Specifically, it allows officers of Inland Revenue, not below the rank of Assistant Commissioner, to make an assessment of tax payable or refund due based on available information and their best judgement.

Key Provisions of Section 11D:

1. Non-Submission of Sales Tax Return:

o If a person fails to submit a sales tax return in response to a notice under sub-section (2A) of section 26, the officer of Inland Revenue may proceed with a best judgement assessment.

2. Failure to Produce Required Documents:

o When a person fails to present necessary accounts, documents, and records as required under sections 25 or 38A, the officer of Inland Revenue is authorized to assess the tax based on available information and best judgement.

3. Notice to Show Cause:

o Before making a best judgement assessment, the taxpayer will be issued a notice to show cause. This allows the taxpayer an opportunity to provide the necessary documents or explanations.

4. Disallowance of Input Tax:

o The officer of Inland Revenue may disallow or reduce a registered person’s input tax on goods if they fail to provide invoices or other records supporting their claim.

5. Abatement of Assessment:

o If the taxpayer submits the return within sixty days of the issuance of the assessment order, along with the tax payable, default surcharge, and penalty, the notice to show cause and the assessment order shall be nullified.

6. Determination of Minimum Tax Liability:

o In cases where the Federal Board of Revenue (FBR) has set conditions for determining minimum tax liability for non-filers, the officer of Inland Revenue shall determine the tax liability according to those conditions.

These changes are designed to enhance the efficiency of tax collection and ensure greater compliance among taxpayers. By empowering Inland Revenue officers to conduct assessments based on best judgement, the government aims to curb tax evasion and improve the overall tax administration system.

The introduction of section 11D underscores the government’s commitment to strengthening the tax infrastructure and ensuring that all taxpayers adhere to their obligations under the Sales Tax Act, 1990.