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Tag: Federal Board of Revenue

The Federal Board of Revenue is Pakistan’s apex tax agency, overseeing tax collection and policies. Pakistan Revenue is committed to providing timely updates on the Federal Board of Revenue to its readers.

  • Sales Tax Act 1990: tax credit not allowed under various conditions

    Sales Tax Act 1990: tax credit not allowed under various conditions

    KARACHI: A registered sales tax person is not allowed to entitle to reclaim or deduct input tax paid on various activities of manufacturing / supplies.

    The Section 8 of updated Sales Tax Act, 1990 issued by Federal Board of Revenue (FBR) explained where tax credit is not allowed.

    Section 8: Tax credit not allowed

    Sub-Section (1): Notwithstanding anything contained in this Act, a registered person shall not be entitled to reclaim or deduct input tax paid on –

    (a) the goods or services used or to be used for any purpose other for taxable supplies made or to be made by him;

    (b) any other goods or services which the Federal Government may, by a notification in the official Gazette, specify;

    (c)] the goods under sub-section (5) of section 3:

    (ca) the goods or services in respect of which sales tax has not been deposited in the Government treasury by the respective supplier;

    (caa) purchases, in respect of which a discrepancy is indicated by CREST or input tax of which is not verifiable in the supply chain;

    (d) fake invoices;

    (e) purchases made by such registered person, in case he fails to furnish the information required by the Board through a notification issued under sub-section (5) of section;

    (f) goods and services not related to the taxable supplies made by the registered person.

    (g) goods and services acquired for personal or non-business consumption;

    (h) goods used in, or permanently attached to, immoveable property, such as building and construction materials, paints, electrical and sanitary fittings, pipes, wires and cables, but excluding pre-fabricated buildings and such goods acquired for sale or re-sale or for direct use in the production or manufacture of taxable goods;

    (i) vehicles falling in Chapter 87 of the First Schedule to the Customs Act, 1969 (IV of 1969), parts of such vehicles, electrical and gas appliances, furniture furnishings, office equipment (excluding electronic cash registers), but excluding such goods acquired for sale or re-sale;

    (j) services in respect of which input tax adjustment is barred under the respective provincial sales tax law;

    (k) import or purchase of agricultural machinery or equipment subject to sales tax at the rate of 7 percent under Eighth Schedule to this Act;

    (l) from the date to be notified by the Board, such goods and services which, at the time of filing of return by the buyer, have not been declared by the supplier in his return or he has not paid amount of tax due as indicated in his return; and

    (m) import of scrap of compressors falling under PCT heading 7204.4940.

    Sub-Section (2): If a registered person deals in taxable and non-taxable supplies, he can reclaim only such proportion of the input tax as is attributable to taxable supplies in such manner as may be specified by the Board.

    Sub-Section (3): No person other than a registered person shall make any deduction or reclaim input tax in respect of taxable supplies made or to be made by him.

    Sub-Section (4): omitted

    Sub-Section (5): Notwithstanding anything contained in any other law for the time being in force or any decision of any Court, for the purposes of this section, no input tax credit shall be allowed to the persons who paid fixed tax under any provisions of this Act as it existed at any time prior to the first day of December, 1998.

    Sub-Section (6): Notwithstanding anything contained in any other law for the time being in force or any provision of this Act, the Federal Government may, by notification in the official Gazette, specify any goods or class of goods which a registered person cannot supply to any person who is not registered under this Act.

    Sub-Section (7): Omitted.

  • FBR issues notices to 350 Sindh bureaucrats for non-filing

    FBR issues notices to 350 Sindh bureaucrats for non-filing

    KARACHI: Federal Board of Revenue (FBR) has issued notices to 350 senior bureaucrats of Sindh government for non-filing of income tax returns.

    The notices have been issued by Regional Tax Office (RTO) –II Karachi on identification of expenditures through various sources by those provincial government officers.

    The FBR sources said that these government officers had never filed their annual income tax returns and asset declarations with the income tax departments.

    They said that the expenditures details had been obtained through their air travels, banking transactions, purchase of property purchase etc.

    The information of those provincial government officers were obtained from their salary disbursements.

    They said that the tax department would first enforce income tax returns and then would initiate proceedings of concealment.

    The sources said that besides taking action against bureaucrats of Sindh government the RTO –II Karachi was also taking action against 3,000 more salary persons in the private sector to bring them into tax net.

    The sources said that many of these salary persons had never filed income tax returns despite having taxable income as well as other source of income.

  • Sales Tax Act 1990: deduction of input tax by registered persons

    Sales Tax Act 1990: deduction of input tax by registered persons

    KARACHI: A sales tax registered person is allowed to deduct input tax against output tax for determination of taxable supplies made during a period.

    According to updated Sales Tax Act 1990 issued by Federal Board of Revenue (FBR), Section 7 explained the procedure of deduction of input tax by sales tax registered persons.

    Section 7: Determination of tax liability.

    Sub-Section (1): Subject to the provisions of section 8 and, for the purpose of determining his tax liability in respect of taxable supplies made during a tax period, a registered person shall, subject to the provisions of section 73, be entitled to deduct input tax paid or payable during the tax period for the purpose of taxable supplies made, or to be made, by him from the output tax excluding the amount of further tax under sub-section (1A) of section 3 that is due from him in respect of that tax period and to make such other adjustments as are specified in Section 9:

    Provided that where a registered person did not deduct input tax within the relevant period, he may claim such tax in the return for any of the six succeeding tax periods.

    Sub-Section (2): A registered person shall not be entitled to deduct input tax from output tax unless,-

    (i) in case of a claim for input tax in respect of a taxable supply made, he holds a tax invoice in his name and bearing his registration number in respect of such supply for which a return is furnished:

    Provided that from the date to be notified by the Board in this respect, in addition to above, if the supplier has not declared such supply in his return or he has not paid amount of tax due as indicated in his return;

    (ii) in case of goods imported into Pakistan, he holds bill of entry or goods declaration in his name and showing his sales tax registration number, duly cleared by the customs under section 79, section 81 or section 104 of the Customs Act, 1969 (IV of 1969);

    (iii) in case of goods purchased in auction, he holds a treasury challan, in his name and bearing his registration number, showing payment of sales tax;

    Sub-Section (3): Notwithstanding anything in sub-sections (1) and (2), the Federal Government may, by a special order, subject to such conditions, limitations or restrictions as may be specified therein allow a registered person to deduct input tax paid by him from the output tax determined or to be determined as due from him under this Act.

    Sub-Section (4): Notwithstanding anything contained in this Act or rules made there under, the Federal Government may, by notification in the official Gazette, subject to such conditions, limitations or restrictions as may be specified therein, allow a registered person or class of persons to deduct such amount of input tax from the output tax as may be specified in the said notification.

  • Increase in refund claims by registered persons selected for audit

    Increase in refund claims by registered persons selected for audit

    KARACHI: Federal Board of Revenue (FBR) has selected sales tax audit of those sales tax registered persons whose refund claims increased in a month over the corresponding month last year.

    According to risk parameters for selection of audit under Audit Policy 2018, the FBR selected audit cases through computerized balloting of those registered persons whose refund claim increase during a month over the corresponding month last year.

    The FBR also randomly selected those cases where decline in value of supplies as compared to corresponding months of previous year.

    Besides consistent increase in input tax/output tax ratio over corresponding months of previous three years were also selected through random balloting.

    Other risk parameters are included:

    Decrease in taxable supplies to total supplies ratio as compared to corresponding months of previous year.

    Difference in declared value of sales as compared to declared turnover in Income Tax Return.

    Persons declaring reduced rate sales.

    Manufactures showing inadequate value addition.

    Declared sales are less than imports

    Decrease in payment of tax as compared to corresponding months of previous year.

    Increase in refund claimed as compared to corresponding months of previous year.

    Unclaimed purchase to declared purchases ratio is high.

    Utilities to sales ratio is high.

    Discrepancy identified by CREST.

  • Sales Tax Act 1990: rate in force to apply at time of supply

    Sales Tax Act 1990: rate in force to apply at time of supply

    KARACHI: Any change in the rate of sales tax shall apply at the time of supply or clearance of imported goods, as clarified by Section 5 of the Sales Tax Act, 1990, updated by the Federal Board of Revenue (FBR). This section outlines the specific rules for applying sales tax when rates are adjusted and provides detailed guidelines for taxable supplies and imports.

    (more…)
  • FBR excludes salary persons from audit selection

    FBR excludes salary persons from audit selection

    ISLAMABAD: Federal Board of Revenue (FBR) on Thursday issued Audit Policy 2018 and excluded salary persons from selection of audit.

    The following exclusions have been identified and approved by the Board under relevant rules where selection for audit by the Board is not required.

    Income Tax

    i. All cases already selected for audit by the Commissioners Inland Revenue or Director I&I (IR) under section 177 of the Income Tax Ordinance for any of the preceding three Tax Years i.e 2014, 2015, 2016

    ii. All cases already selected for audit under section 214D of the Income Tax Ordinance, 2001, for any of the preceding three Tax Years i.e 2014, 2015, 2016

    iii. All cases where income chargeable to tax under the head salary exceeds 50% of taxable income, except cases having business income. Directors of companies do not qualify for this exclusion.

    iv. All cases where entire income is covered under Final Tax Regime (FTR)

    Sales Tax

    All cases already selected under section 25 and 38 of Sales Tax Act, 1990 by the Commissioner Inland Revenue or Director I&I (IR) for tax periods corresponding to the accounting period adopted for the purpose of return of income under the Income Tax Ordinance, 2001 for Tax Year 2016

    Provided that where only a part of the said accounting period had been audited already, the relevant authority may select the remaining period for audit.

    ii. All cases already selected for audit under section 72B through computer ballot held under Taxpayers’ Audit Policy, 2017

    iii. All cases of Steel Melters and Steel Re-rollers who are paying sales tax under the Sales Tax Special Procedure Rules, 2007.

    iv. Federal, Provincial and Local Government Departments.

    Federal Excise

    i. All cases already selected under section 46 of the Federal Excise Act, 2005 by the Commissioner Inland Revenue or Director I&I (IR) for tax periods corresponding to the accounting period adopted for the purpose of return of income under the Income Tax Ordinance, 2001 for tax year 2016.

    Provided that where only a part of the said accounting period had been audited already, the relevant authority may select the remaining period for audit.

    ii. All cases already selected for audit under section 42B through computer ballot held under Taxpayers’ Audit Policy, 2017

    iii. Federal, Provincial and Local Government Department.

  • FBR selects 14,164 audit cases through computerized balloting

    FBR selects 14,164 audit cases through computerized balloting

    ISLAMABAD: Federal Board of Revenue (FBR) on Thursday selected total 14,164 audit cases through computerized balloting in income tax, sales tax and federal excise duty cases.

    The FBR selected 10,982 audit cases under Section 214C of Income Tax Ordinance, 2001.

    The revenue body selected around 3,126 sales tax cases under Section 72B of Sales Tax Act, 1990.

    Further, 56 cases have been selected under Section 42B of Federal Excise Act, 2005.

  • Sales Tax Act 1990: zero rating on export, supply of goods

    Sales Tax Act 1990: zero rating on export, supply of goods

    KARACHI: The sales tax laws have allowed zero rating of sales tax on exports or supply of goods.

    According to updated Sales Tax Act, 1990 issued by Federal Board of Revenue (FBR), the Section 4 of the Act explained the zero rating.

    Section 4: Zero rating

    Notwithstanding the provisions of section 3 except those of sub-section (1A), the following goods shall be charged to tax at the rate of zero per cent:

    (a) goods exported, or the goods specified in the Fifth Schedule;

    (b) supply of stores and provisions for consumption aboard a conveyance proceeding to a destination outside Pakistan as specified in section 24 of the Customs Act, 1969 (IV of 1969);

    (c) such other goods as the Federal Government may, by notification in the Gazette, specify:

    Provided that nothing in this section shall apply in respect of a supply of goods which –

    (i) are exported, but have been or are intended to be re-imported into Pakistan; or

    (ii) have been entered for export under Section 131 of the Customs Act, 1969 (IV of 1969), but are not exported; or

    (iii) have been exported to a country specified by the Federal Government, by Notification in the official Gazette:

    Provided further that the Federal Government may by a notification in the official Gazette, restrict the amount of credit for input tax actually paid and claimed by a person making a zero-rated supply of goods otherwise chargeable to sales tax.

    (d) such other goods as may be specified by the Federal Board of Revenue through a general order as are supplied to a registered person or class of registered persons engaged in the manufacture and supply of goods supplied at reduced rate of sales tax.

  • FBR to conduct balloting for audit selection

    FBR to conduct balloting for audit selection

    ISLAMABAD: Federal Board of Revenue (FBR) to conduct balloting for selection of audit cases on Thursday, April 04, 2019.

    The balloting will be conducting for audit selection of income tax returns filed for tax year 2017.

    Around 1.84 million tax returns were filed for the tax year 2017 by salary persons, business individuals, Association of Persons and corporate entities.

    The audit selection would be made in income tax, sales tax and federal excise duty.

    The FBR conduct balloting to select audit cases under Section 214C of Income Tax Ordinance, 2001.

  • FBR extends suspension period of two customs officers

    FBR extends suspension period of two customs officers

    ISLAMABAD: Federal Board of Revenue (FBR) has extended in suspension period of two customs officers posted in Karachi for further three months.

    In a notification issued on Wednesday, the FBR extended the suspension period of Sultan Aurangzeb, Principal Officer (BS-17), Model Customs Collectorate of Port Muhammad Qasim, Karachi for a period of three months effective from March 31, 2019.

    The FBR suspended Sultan Aurangzeb on December 31, 2019 while taking disciplinary action against the officer.

    In another notification, the FBR extended in suspension period of Muhammad Sarfaraz Hayat, Preventive Officer (BS-16), Model Customs Collectorate of Preventive, Karachi for a period of three months effective from March 31, 2019.

    The FBR suspended Muhammad Sarfaraz Hayat on December 31, 2019 while taking disciplinary action against the officer.