KARACHI: Pakistan Business Council (PBC) has suggested to omitting the condition of disallowing input tax adjustment where tax unpaid by supplier.
In its tax proposals for budget 2019/2020, the PBC said that according to Section 8(1)(ca) of Sales Tax Act, 1990, input sales tax is not allowed where tax unpaid by supplier.
“A taxpayer is not entitled to claim input tax paid on the goods (or services) in respect of which sales tax has not been deposited in the government treasury by the respective suppliers.
The PBC said that this provision needs to be omitted especially after the implantation of the STRIVe system.
Giving rationale to the proposal, it said that the matter was challenged in the Lahore High Court (LHC), in a petition W.P.No.3515/2012 filed by D.G Khan Cement Company Limited.
LHC permitted relief and declared the provision as unconstitutional.
“With the implementation of the STRIVe system this is redundant,” the PBC said.
The PBC further said that based on the Doctrine of Revenue Neutrality and plethora of judgments of superior courts, it is now a settled principal of law that if any liability for short paid tax is subsequently discharged, then the same cannot be recovered from the taxpayer again.
However, unfortunately, such provision is not part of the Sales Tax Act, 1990.
It proposed that Sub-Section 4B should be inserted in Section 11 of the Sales Tax Act with the purpose of introducing “doctrine of revenue neutrality”.
It is a settled principal of law that if any liability for short paid tax is subsequently discharged, then the same cannot be recovered from the taxpayer again.
Proposed insertion in Section 11 of the Sales Tax Act 1990:
“(4B) Where at the time of recovery of sales tax under sub-section (1), (2), (3), or (4) and (4A), it is established that the sales tax that was required to be paid has been meanwhile been paid by that person or recovered from the supply chain, no recovery shall be made from the person who had failed pay the sales tax or had paid short-amount of sales tax.”