Section 33(2) of the Sales Tax Act, 1990 has imposed a penalty on taxpayers for non issuance of sales tax invoice to buyers of goods or services.
In a bid to reinforce compliance with sales tax regulations, the Federal Board of Revenue (FBR) has introduced a stringent penalty regime for individuals failing to issue sales tax invoices as required by Section 23 of the Sales Tax Act, 1990. According to the latest amendment under Section 33(2), such individuals will now face a penalty of Rs5,000 or three percent of the amount of tax involved, whichever is higher. The amendment, incorporated through the Finance Act, 2021, reflects the FBR’s commitment to streamlining tax processes and curbing potential revenue leakage.
Section 33(2) of the Sales Tax Act, 1990, outlines the new penalty provision as follows:
33. Offences and Penalties – Whoever commits any offence shall, in addition to and not in derogation of any punishment to which he may be liable under any other law, be liable to the penalty mentioned against that offence:
2. Any person who fails to issue an invoice when required under this Act. Such person shall pay a penalty of five thousand rupees or three per cent of the amount of the tax involved, whichever is higher.
This amendment directly targets individuals or entities that neglect their obligation to issue invoices as mandated by the Sales Tax Act, 1990. Invoices play a pivotal role in maintaining transparency in financial transactions, aiding not only tax authorities but also contributing to a fair and accountable business environment.
The dual nature of the penalty, allowing for either a flat Rs5,000 or three percent of the tax amount involved, emphasizes the severity of the offense and aims to act as a deterrent. The flexibility in the penalty structure ensures that penalties are commensurate with the scale of the non-compliance, reflecting a commitment to fairness and proportionality in enforcement.
The amendment aligns with the global trend of tax authorities adopting more stringent measures to address potential revenue leakage and enhance compliance. By focusing on the issuance of invoices, the FBR seeks to fortify its ability to track and verify transactions, ultimately contributing to a more robust tax administration.
While the amendment is welcomed as a proactive step to ensure tax compliance, concerns have been raised about the potential burden on smaller businesses. Critics argue that a percentage-based penalty may disproportionately impact smaller enterprises, urging the need for careful consideration of the diverse nature of businesses.
Section 33(2) in the Sales Tax Act, 1990 reflects the FBR’s determination to tighten the reins on tax compliance. The imposition of a penalty for failure to issue sales tax invoices underscores the importance of transparent and accurate documentation in financial transactions. As these amendments take effect, it will be imperative for the FBR to communicate clearly with businesses, providing guidance and support to facilitate compliance while ensuring a fair and balanced approach to taxation.
