Section 21 of the Sales Tax Act, 1990, provides detailed guidelines for de-registration, blocking, and suspension of taxpayer registration. It is a vital mechanism used by the Federal Board of Revenue (FBR) to address tax evasion and ensure compliance. Here’s an expanded overview:
1. De-registration
The FBR or an authorized officer has the authority to de-register individuals or groups not required to be registered under the Act. This ensures that only eligible and active businesses remain part of the sales tax network.
2. Suspension for Tax Fraud
If the Commissioner has evidence that a registered person is involved in issuing fake invoices or committing tax fraud, they can suspend or block that individual. This decision is taken following a set procedure prescribed by the FBR and is officially notified in the Gazette.
3. Effects of Suspension
During the suspension period, invoices issued by the taxpayer are invalid for sales tax refunds or input tax credits. If the taxpayer is blocked, any refund or credit claims based on their invoices, whether issued before or after blocking, are automatically rejected. However, the law ensures fairness by allowing the taxpayer to present their case before a final decision is made.
4. Actions Against Suspicious Activity
If the FBR, Commissioner, or an authorized officer suspects a taxpayer of fraudulent activities, such as issuing fake invoices, claiming fraudulent refunds, or not conducting actual business, they can take the following actions:
• Block refunds or input tax adjustments.
• Initiate further investigation and appropriate legal proceedings.
5. Review of Orders
The Chief Commissioner can review and modify suspension or blocking orders after examining the records and conducting necessary inquiries. Importantly, no order can be finalized without giving the taxpayer an opportunity to be heard, ensuring due process.
Summary
Section 21 serves as a critical tool for maintaining transparency and deterring fraudulent activities in Pakistan’s tax system. It balances stringent action against tax evasion with safeguards for taxpayers’ rights, emphasizing accountability and fairness in the tax administration process.