ISLAMABAD: The Federal Board of Revenue (FBR) has reiterated the legal authority granted under Section 11A of the Sales Tax Act, 1990, regarding the recovery of short paid tax amounts without issuing any prior notice. This provision remains an essential tool for tax enforcement, especially in cases where taxpayers underreport their liabilities.
As per the updated version of the Sales Tax Act, 1990—amended through the Finance Act, 2021 and valid up to June 30, 2021—Section 11A empowers the FBR to act immediately in cases where a registered person has paid less tax than what is due, based on the return they submitted. In such cases, the short paid amount, along with any applicable default surcharge, is considered recoverable without the need for a formal show cause notice.
The law states that if any registered taxpayer has short paid the tax, FBR authorities can take action by halting the removal of goods from the person’s business premises and attaching business bank accounts. This enforcement mechanism ensures that tax dues are collected efficiently and swiftly, even in cases where the taxpayer may have knowingly or unknowingly short paid the correct amount.
The objective behind this provision is to curb tax evasion and strengthen revenue collection, especially when delays in initiating legal proceedings might otherwise allow the taxpayer to move assets or conceal income. The section underscores that while the short paid tax can be recovered without notice, any penalty under Section 33 of the Act will only be applied if a show cause notice is issued.
By incorporating this clause, the FBR aims to enhance compliance and deter taxpayers from underreporting their taxable transactions. Businesses are, therefore, advised to ensure that all taxes are accurately calculated and fully paid to avoid being flagged for short paid amounts.
It is important for taxpayers to understand the seriousness of short paid returns. Not only can recovery be made without warning, but it also puts the taxpayer at risk of further scrutiny and legal consequences if the issue is not resolved.