The Federal Board of Revenue (FBR) has clarified that the Sales Tax Act, 1990, mandates registered persons to maintain specific records of their business activities at their premises for a duration specified by the FBR. This requirement aims to ensure transparency, facilitate tax compliance, and streamline audits.
Legal Framework for Record Maintenance
The obligations for maintaining records are detailed in Section 22 of the Sales Tax Act, 1990. The section specifies the nature and scope of records to be maintained by registered persons, outlining both the type of information and the format in which it should be kept.
Details of Records to Be Maintained
1. Records of Supplies Made:
Registered persons must document the description, quantity, and value of goods supplied. These records must include the recipient’s name and address, along with the amount of tax charged.
2. Records of Goods Purchased:
Purchases must be recorded with details such as description, quantity, value, supplier’s name, address, and registration number, along with the amount of tax paid.
3. Records of Imports:
All imported goods must be documented with their description, quantity, value, and the tax paid on such imports.
4. Zero-rated and Exempt Supplies:
Separate records should be maintained for supplies that are zero-rated or exempt from tax.
5. Double-entry Sales Tax Accounts:
Maintaining proper double-entry sales tax accounts is a legal requirement.
6. Additional Documentation:
Registered persons must retain invoices, credit and debit notes, bank statements, inventory records, utility bills, salary and labor records, cash books, rental and lease agreements, sale-purchase agreements, gate passes (inward and outward), and transport receipts.
7. Electronic Records:
An electronic version of all the aforementioned records must also be maintained to ensure quick and efficient access.
8. Additional Records as Specified by the Board:
The FBR may, through notifications, require additional records for specific purposes or business categories.
Board’s Powers for Record Maintenance
The FBR holds the authority to:
• Specify the use of business bank accounts exclusively for purchase and sale transactions.
• Mandate the use of approved electronic fiscal cash registers.
• Prescribe software for electronic record maintenance, sales tax return filing, and refund claims.
Audit and Compliance
Businesses subject to audit under the Companies Ordinance, 1984, are required to submit their annual audited accounts to the FBR. These accounts must be accompanied by a certificate from auditors verifying the payment of due taxes.
Significance of Record Maintenance
The maintenance of comprehensive and accurate records ensures compliance with tax laws and mitigates potential disputes during audits. It also facilitates efficient tax administration by enabling the FBR to verify tax liabilities seamlessly. Businesses that adhere to these requirements contribute to greater transparency in Pakistan’s tax system, fostering trust and efficiency.
In summary, the record-keeping provisions under the Sales Tax Act, 1990, form a cornerstone of Pakistan’s tax compliance framework, ensuring businesses operate within the legal bounds while supporting effective tax collection.
