PkRevenue.com – The Institute of Chartered Accountants of Pakistan (ICAP) has called on tax authorities to address the existing glitches in the process of adding or amending business bank accounts.
In its proposals for the upcoming 2024-25 budget, the ICAP emphasized the need for streamlined procedures to enhance compliance and efficiency for businesses.
Under Section 73(1) of the Sales Tax Act, 1990, it is mandated that payments against invoices must be made directly from the buyer’s bank account to the supplier’s bank account. However, the ICAP noted that in today’s digital age, numerous transactions occur via online marketplaces and payment gateways that collect and transfer money on behalf of suppliers. Consequently, buyers making payments through these intermediaries are currently unable to claim input tax credits, as the payments are not directly transferred to the supplier’s account.
To resolve this issue, the ICAP proposed an amendment to Section 73(1) of the Sales Tax Act, suggesting the inclusion of the following proviso:
“Provided that if the buyer purchased goods through an online marketplace and made payment directly into the account of the online marketplace and/or payment gateways on behalf of the supplier, it shall be treated as if the buyer has made payment directly into the bank account of the supplier.”
Additionally, the ICAP highlighted issues related to the definition and declaration of Business Bank Accounts. The current explanation under Section 73 defines a Business Bank Account as an account used by a registered person and declared to the Commissioner via Form STR-1 or through changes in the registration database. However, the Form STR-1 is not available online, as the e-FBR website redirects users to the IRIS portal, which is used for filing Income Tax and Sales Tax returns. Changes in particulars are thus submitted through Form “181,” which pertains to Income Tax and is not covered under the Sales Tax Act.
To address this discrepancy, the ICAP proposed that the reference to Form STR-1 in Section 73 be replaced with Form “181 (Form of Registration).” Moreover, the title of this form should be updated to “181-73 – Form of Registration/Modification (Income Tax, Sales Tax, and FED)” to reflect its broader applicability.
The ICAP underscored the rationale behind these proposals, noting that many technology-driven businesses face difficulties due to buyers’ reluctance to make payments through online marketplaces or payment gateways, resulting in the disallowance of input tax claims. The proposed changes aim to remove these obstacles, thereby facilitating smoother operations and compliance for businesses.
The ICAP’s recommendations, if implemented, are expected to significantly ease the challenges faced by businesses in managing their tax-related banking procedures, fostering a more conducive environment for growth and innovation.
