SSGC in Gridlock: Sales Tax Return Woes Disrupt Supply Chain

SSGC in Gridlock: Sales Tax Return Woes Disrupt Supply Chain

Karachi, July 2, 2024 – Sui Southern Gas Company Limited (SSGC), a major gas utility company in Pakistan, is facing a bureaucratic nightmare due to an anomaly in a recent tax regulation. This anomaly has thrown SSGC’s sales tax return for April 2024 into disarray, creating a ripple effect that is disrupting the entire supply chain.

The SSGC in a letter dated June 27, 2024 addressed to Member IR Operations, the company urged early resolution to the issues.

The issue stems from SRO 350(I)/2024, a recent statutory regulatory order (SRO) that modifies the Sales Tax Rules, 2006. This SRO dictates that a buyer’s sales tax return for a tax period is considered provisional until the corresponding seller files their return. If the seller fails to file by the deadline, the buyer’s provisional return automatically finalizes, deleting the input tax entries for purchases from that seller.

However, SSGC has identified an anomaly. Even if the seller eventually files a valid return and pays any recalculated tax amount, the system still disallows input tax to the buyer. This creates a double jeopardy situation, potentially collapsing the supply chain.

SSGC has diligently uploaded its purchase data and filed its April 2024 return on time. However, due to some vendors’ delays in filing their May 2024 returns, SSGC’s return is stuck in “provisional” status. This prevents SSGC from editing entries, specifically deleting debit notes from vendors who haven’t filed yet.

Further complicating matters, one of SSGC’s vendors, M/s. Jillani Engineering Company, is inactive on the tax portal. This inactivity triggers an additional tax liability of Rs 66,816, which SSGC paid promptly. Despite this payment, the system throws another error when SSGC tries to submit the return. It appears the system doesn’t allow modifications to Annexure-F, a crucial section of the return, in provisional returns.

The consequences of this bureaucratic tangle are far-reaching. SSGC, as a utility company, serves over 30,000 customers who rely on claiming input tax adjustments from SSGC’s invoices. Due to the provisional status of SSGC’s return, these customers are unable to claim input tax on their April gas bills. This ultimately hinders their ability to file their own sales tax returns on time.

SSGC has approached the Federal Board of Revenue (FBR) to intervene. They have requested the FBR to:

• Allow them to edit their provisional return and remove the problematic debit notes.

• Enable buyers to reclaim input tax even if the seller’s return is finalized after the deadline.

• Change the status of their return to “submitted” before June 2024 to ease the burden on their customers.

• Recalculate the values in Annexure-F to reflect zero tax liability due to the anomaly.

A swift resolution from the FBR is critical to prevent further disruption in the supply chain. SSGC and its customers are caught in a bureaucratic maze, and a timely intervention is necessary to ensure smooth functioning of the entire system.