Preventing Passing on of excess sales tax to consumers in Pakistan has been outlined through Section 3B of Sales Tax Act, 1990.
Federal Board of Revenue (FBR) has recently issued updated Sales Tax Act, 1990 which is applicable for tax year 2024.
In a significant move to ensure compliance with taxation laws and protect consumers’ interests, the Federal Government of Pakistan is actively pursuing the collection of excess sales tax under Section 3B of the Sales Tax Act, 1990. The provision, aimed at preventing the undue burden on consumers, outlines the obligations of individuals or entities that have collected taxes beyond the prescribed limits.
Section 3B of the Sales Tax Act, 1990, explicitly addresses the responsibility of any person who has collected or collects any tax or charge, either due to a misapprehension of the tax provisions or any other reason. If the tax or charge collected is not payable as per the law or is in excess of the actual amount owed, and if the incidence of this excess tax has been passed on to the consumer, the responsible party is obligated to remit the surplus amount to the Federal Government.
This legal provision aims to prevent the passing on of undue financial burdens to consumers by holding accountable those who have mistakenly or intentionally collected excessive taxes. The focus is on ensuring fairness in the taxation system and protecting the rights of consumers.
According to the Sales Tax Act, any amount payable to the Federal Government under Section 3B(1) is considered an arrear of tax or charge under the Act. This categorization grants the Federal Government the authority to recover the excess amount promptly. Importantly, the Act stipulates that any claim for a refund in relation to the excess amount collected shall not be admissible to the registered person. This means that those responsible for the collection of excessive taxes cannot seek a refund, and any such claim will not be entertained by the courts.
The Act further empowers the Federal Government by stating that the amount payable under Section 3B(1) shall be recoverable notwithstanding anything contained in any other law or judgment of a court, including the Supreme Court and High Courts. This provision emphasizes the supremacy of the Sales Tax Act in matters related to the collection of excess taxes.
Moreover, Section 3B(3) places the burden of proof on the person collecting the tax or charge, requiring them to demonstrate whether the incidence of the tax or charge has been passed on to the consumer. This provision adds an additional layer of accountability and transparency to the taxation process, ensuring that those collecting taxes are responsible for providing evidence regarding the impact on end consumers.
The Federal Government’s active pursuit of the collection of excess sales tax under Section 3B reflects its commitment to enforcing tax laws, promoting fairness in the business environment, and safeguarding the rights of consumers. This initiative is expected to contribute to a more transparent and accountable tax system in Pakistan.