As per Section 24 of the Sales Tax Act, 1990, a person engaged in taxable supplies is mandated to preserve records and documents for a period of six years, effective from the end of the tax period to which such records or documents relate.
This retention period extends until the final decision in any proceedings, encompassing assessment, appeal, revision, reference, petition, and proceedings before an Alternative Dispute Resolution Committee, is concluded.
Section 24: Retention of Record and Documents for Six Years
The Sales Tax Act, 1990, under Section 24, clearly states:
“A person, who is required to maintain any record or documents under this Act, shall retain the record and documents for a period of Six years after the end of the tax period to which such record or documents relate or till such further period the final decision in any proceedings including proceedings for assessment, appeal, revision, reference, petition and any proceedings before an Alternative Dispute Resolution Committee is finalized.”
This provision is aimed at ensuring that individuals or entities involved in taxable supplies uphold a comprehensive record-keeping practice, contributing to transparency and compliance within the taxation system.
The legal framework for the retention of records was initially introduced through the Finance Act of 1996. At that time, sales tax registered individuals were obligated to maintain records for the past five years. However, through subsequent legislative changes introduced in the Finance Act of 2010, the time-frame for retaining records was extended to cover the past six years.
The extension in the retention period aligns with the evolving needs of tax administration, providing authorities with access to historical records for a more extended duration. This measure not only enhances the regulatory framework but also enables a more thorough examination of past transactions, assessments, and legal proceedings.
The emphasis on record retention serves multiple purposes, including facilitating audits, investigations, and assessments, as well as ensuring the integrity of the tax system. The six-year retention requirement underscores the significance of maintaining accurate and up-to-date records to support the tax compliance process.
As businesses and individuals navigate the complexities of taxation, adherence to the record retention requirements becomes paramount. The updated Sales Tax Act, 1990, provides clear guidelines for compliance, fostering a more accountable and transparent tax environment in Pakistan. It is expected that these measures will contribute to the efficiency and effectiveness of tax administration, ultimately supporting the broader goals of revenue generation and fiscal responsibility.
