The Federal Board of Revenue (FBR) has intensified efforts to curb unauthorized practices in the realm of sales tax by implementing penalties for the unauthorized issuance of sales tax invoices.
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FBR, Pakistan’s national tax collecting agency, plays a crucial role in the country’s economy. Pakistan Revenue is committed to providing readers with the latest updates and developments regarding FBR activities.
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Penalty for non issuance of sales tax invoice
Section 33(2) of the Sales Tax Act, 1990 has imposed a penalty on taxpayers for non issuance of sales tax invoice to buyers of goods or services.
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Penalty for failure in filing sales tax return
The Federal Board of Revenue (FBR) has introduced penalty for failure to file sales tax returns within the stipulated timeframe under Section 33(1) of the Sales Tax Act, 1990.
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FBR should continue revision in property valuation: SBP
KARACHI: The Federal Board of Revenue (FBR) should ensure continuity in the revision of immovable property valuation in order to remove disparity in property values and market rates.
The State Bank of Pakistan (SBP) in its annual report 2020/2021 on State of Pakistan’s Economy released a day earlier said there was a need to expand revenue by aligning the property values with market prices.
In this regard, FBR has revised the valuation of immovable property rates in July 2019 for various cities. “There is a need to ensure continuity in this exercise to remove the disparity between the property values and market rates,” the SBP said.
The issues of widening fiscal imbalance and declining tax-to-GDP ratio Pakistan, the government has initiated tax policy reforms in past few years. These efforts were further streamlined under the IMF-Extended Fund Facility (EFF) program in 2019/2020.
In overall terms, the ongoing tax policy reforms in the country, like the elimination of preferential general sales tax rates, phasing out income tax exemptions, using third party data sources, etc., are in line with the best practices identified in the literature. However, there is a need to widen the scope of these efforts to ensure a sustained increase in tax base,.
Corporate incomes tax reforms. To improve the base for direct taxes, Pakistan introduced wide-ranging reforms in CIT in March 2021. These included: (i) withdrawal of tax exemptions on 36 categories; (ii) reversal of reduced tax rates to normal rates on various categories; and (iii) conversion of investment and income tax exemptions to tax credits, for instance, persons engaged in coal mining, start-ups certified by Pakistan Software Export Board, export of computer software or IT exports etc. These measures are likely to add around Rs 140 billion in the overall FBR taxes in 2021/2022. To give further support to revenues, excess profit taxes may be imposed on selected sectors on the basis of profitability.
Personal income taxes: PITs in Pakistan are collected through progressive rates on various income slabs. The tax rates on salaried and non-salaried individuals were also increased in FY20 and were kept unchanged in 2020/2021. The revenue in this category may be propped up by increasing the tax rates on the highest slabs or by the introduction of a temporary surcharge.
Consumption taxes: FBR has introduced various reforms aiming at Simplification of GST, and elimination of preferential rates including (i) replacing GST zero-rating regime on five export-oriented sectors (textile, leather, carpets, sports goods, and surgical goods) with normal tax rates in 2019/2020; (ii) eliminating preferential GST rates for sectors like sugar and steel in 2019/2020; (iii) extending GST to e-commerce sales transactions through Finance Act 2021. This step was taken after the surge in sales through e-commerce platforms during the lockdowns. Although currently, the contribution of this head in the total collection is negligible, this is expected to grow with expanding size of digital transactions. The tax base can be further enhanced by curtailing exemptions and improving tax design. Specifically, the tax incentives given during Covid can be gradually rolled back once the economic recovery takes hold.
Capital income taxes: To minimize tax evasion, FBR has initiated the use of third-party data sources through Maloomat Tax-Ray from September 2020. This system collects third-party information (such as banks) for individuals’ assets and withholding deductions, which help in determining accurate tax liabilities. Moreover, it also facilitates the tax-payer in evaluating the accurate tax liability while filing the tax returns.
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FBR authorized to appoint special panels for tax audit
Section 32A of Sales Tax Act, 1990 authorized the Federal Board of Revenue (FBR) to appoint special panels for conducting sales tax audit.
The Federal Board of Revenue (FBR) issued the Sales Tax Act, 1990 updated up to June 30, 2021. The Act incorporated amendments brought through Finance Act, 2021.
Following is the text of section 32A of the Sales Tax Act, 1990:
32A. Audit by Special Audit Panels. (1) The Board may appoint as many special audit panels as may be necessary, comprising two or more members from the following, –
(a) an officer or officers of Inland Revenue;
(b) a firm of chartered accountants as defined under the Chartered Accountants Ordinance, 1961 (X of 1961);
(c) a firm of cost and management accountants as defined under the Cost and Management Accountants Act, 1966 (XIV of 1966); or
(d) any other person as directed by the Board, to conduct audit of a registered person or persons, including audit of refund claims and forensic audit and the scope of such audit shall be determined by the Board or the Commissioner Inland Revenue on a case-to-case basis. In addition, the Board may, where it considers appropriate, also get such audit conducted jointly with similar audits being conducted by provincial administrations of sales tax on services.
(2) Notwithstanding that records of a registered person have been audited by an officer appointed under section 30, the Board or a Commissioner may direct special audit panel appointed under sub-section (1) to audit the records of any registered person.
(3) Every member of special audit panel appointed under sub-section (1), shall have the powers of an officer of Inland Revenue under sections 25, 37 and 38.
(4) Each special audit panel shall be headed by a chairman who shall be an officer of Inland Revenue.
(5) If any one member of the special audit panel, other than the chairman, is absent from conducting an audit, the proceedings of the audit may continue and the audit conducted by the special audit panel shall not be invalid or be called in question merely on the ground of such absence.
(6) The Board may prescribe rules in respect of constitution, procedure and working of special audit panel.
(Disclaimer: The text of above section is only for information. Team PkRevenue.com makes all efforts to provide the correct version of the text. However, the team PkRevenue.com is not responsible for any error or omission.)
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Powers, delegation of powers by Inland Revenue officials
Section 31 and Section 32 of the Sales Tax Act, 1990 have defined the powers of Inland Revenue officials and delegation of powers by the officials.
The Federal Board of Revenue (FBR) issued the Sales Tax Act, 1990 updated up to June 30, 2021. The Act incorporated amendments brought through Finance Act, 2021.
Following is the text of section 31 and Section 32 of the Sales Tax Act, 1990:
31. Powers.– An officer of Inland Revenue appointed under section 30 shall exercise such powers and discharge such duties as are conferred or imposed on him under this Act; and he shall also be competent to exercise all powers and discharge all duties conferred or imposed upon any officer subordinate to him:
Provided that, notwithstanding anything contained in this Act or the rules, the Board may, by general or special order, impose such limitations or conditions on the exercise of such powers and discharge of such duties as it deems fit.
32. Delegation of powers.– (1) The Board or the Chief Commissioner, with the approval of the Board, may, by order and subject to such limitations or conditions as may be specified therein, empower by name or designation –
(a) any Additional Commissioner Inland Revenue or Deputy Commissioner Inland Revenue to exercise any of the powers of a Commissioner Inland Revenue under this Act; and
(b) any Deputy Commissioner Inland Revenue or Assistant Commissioner Inland Revenue to exercise any of the powers of an Additional Commissioner Inland Revenue under this Act;
(c) any Assistant Commissioner Inland Revenue to exercise any of the powers of a Deputy Commissioner Inland Revenue under this Act; and
(d) any other officer of Inland Revenue to exercise any of the powers of an Assistant Commissioner Inland Revenue under this Act.
(2) Omitted
(3) The officer to whom any powers are delegated under this section shall not further delegate such powers.
(Disclaimer: The text of above section is only for information. Team PkRevenue.com makes all efforts to provide the correct version of the text. However, the team PkRevenue.com is not responsible for any error or omission.)
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PM Imran launches tax monitoring ‘track, trace’ system
ISLAMABAD: Prime Minister Imran Khan on Tuesday launched the online monitoring of supply and production of various items in order to plug revenue leakages.
Taxes vital for country’s economic stability and survival, the prime minister hoped and said that the use of technology will help check tax-pilferage and take revenue collection to the tune of Rs 8000 billion per annum.
“Our biggest issue is that we have to take loans to run the country. Countries cannot be run without taxes. We have our stability at stake,” the prime minister added.
The Federal Board of Revenue (FBR) has introduced the first-ever track and trace system in the country.
The prime minister congratulated the Advisor of Finance Shaukat Tarin, FBR, and other relevant institutions for introducing the technology-based system for which the efforts were being done since 2008.
The Prime Minister said that the introduction of the track and trace system was a big and positive achievement, which will have a far-reaching impact.
According to details, the FBR’s track and trace system will ensure electronic monitoring of the production and sale of important sectors like tobacco, fertilizer, sugar, and cement.
With the electronic monitoring of goods’ movement from production to the use of consumers, the track and trace system besides increasing the country’s revenue will also help ensure transparency and check the pilferage of taxes.
After the implementation of the track and trace system in the tobacco sector, the FBR was now going to introduce this system in the sugar sector, which will follow the implementation of electric monitoring of other sectors as well.
Under the new system, no sugar bag can be taken out from the production site, factory or manufacturing plant without a stamp and individual identity mark. The FBR was also planning to implement the new system in the beverages and petroleum sectors.
The Prime Minister said that with a reasonable tax-to-GDP ratio in the West and highest in Scandinavian countries, Pakistan could not promote the tax culture due to different reasons including the aristocratic lifestyle of the ruling elite in the past, which shattered the confidence of taxpayers in governments.
The practice of not paying due taxes was continuing since the colonial era, when people used to think that their hard-earned money was being taken out by the foreign rulers and they were not being provided basic facilities, he remarked.
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Powers and functions of directorates
The Sales Tax Act, 1990, under Section 30E, provides clarity on the powers and functions of Directorates and their officers.
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Formation of Directorates under Sales Tax Act
Section 30B to 30DDD of Sales Tax Act, 1990 has explained formation of Directorates under Sales Tax Act, 1990.
The Federal Board of Revenue (FBR) issued the Sales Tax Act, 1990 updated up to June 30, 2021. The Act incorporated amendments brought through Finance Act, 2021.
Following is the text of section 30B to 30DDD of the Sales Tax Act, 1990:
30B. Directorate General Internal Audit.– The Directorate General Internal Audit shall consist of a Director General and as many Directors, Additional Directors, Deputy Directors and Assistant Directors and such other officers as the Board, may by notification in the official Gazette, appoint.
30C. Directorate General of Training and Research.–The Directorate General of Training and Research shall consist of a Director General and as many Directors, Additional Directors, Deputy Directors and Assistant Directors and such other officers as the Board, may by notification in the official Gazette, appoint.
30D. Directorate General of Valuation.–The Directorate General of Valuation shall consist of a Director General and as many Directors, Additional Directors, Deputy Directors and Assistant Directors and such other officers as the Board, may by notification in the official Gazette, appoint.
30DD. Directorate of Post Clearance Audit.– The Directorate of Post clearance Audit shall consist of a Director and as many Additional Directors, Deputy Directors, Assistant Directors and such other officers as the Board may, by notification in the official Gazette, appoint.
30DDD. Directorate General of Input Output Co-efficient Organization.- The Directorate General of Input Output Coefficient Organization (IOCO)-Inland Revenue shall consist of a Director General and as many Directors, Additional Directors, Deputy Directors, Assistant Directors and such other officers as the Board may, by notification in the official Gazette, appoint.
(Disclaimer: The text of above section is only for information. Team PkRevenue.com makes all efforts to provide the correct version of the text. However, the team PkRevenue.com is not responsible for any error or omission.)
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Pakistan allows sales tax exemption on Afghan fruits
The Federal Board of Revenue (FBR) in Pakistan issued a sales tax notification, SRO 1501(I)/2021, on Monday, formalizing the government’s decision to exempt the sales tax on the import of most Afghan fruits.
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