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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.

  • FBR empowered to use third-party information for identifying tax dodgers: MTEF

    FBR empowered to use third-party information for identifying tax dodgers: MTEF

    ISLAMABAD: Federal Board of Revenue (FBR) has been empowered for using third-party information to identify tax dodgers.

    The Medium-Term Economic Framework (MTEF), which was launched on Monday by the Finance Minister Asad Umar, the government had promulgated a law so as to allow FBR to access third-party data bases.

    The MTEF pointed out building data analytics capacity to utilize available information. “This involves identifying and identifying and pursuing individuals falling outside the tax net through the use of third-party information on consumption patterns utilizing data from income, income tax returns and expenditure data from various sources such as travel, bank account, car ownership, property ownership, children studying abroad, children studying in expensive schools etc.”

    Since FBR does not have adequate capacity to utilize these data using latest techniques available, it would be necessary to collaborate with researchers and experts to develop efficient and effective analytical tools.

    The government has evolved measures to strengthening tax enforcement and tax audits

    The framework said that tax enforcement has remained one of the weakest areas of tax administration.

    The government intends to overcome this shortcoming by building enforcement capabilities within FBR through staff training and an intensive use of information technology.

    In this regard, priority is being given to putting in place a track-and-trace system and strengthening the risk-based tax audits.

    The government also planned harmonizing the tax codes. The MTEF said that the government is well aware that some tax issues (e.g. non-harmonized sales tax rates across tiers of government, taxation of real estate, etc.) adds to the cost of doing business by requiring multiple tax returns to be filed in a single tax year.

    While working with the provincial governments in the National Finance Commission (NFC) framework, the federal government intends to harmonize the tax code and integrate tax processes through digitization and process automation.

    In addition, it intends to establish a mechanism to fast-track resolution of tax disputes, thus reducing compliance cost.

    This will reduce the cost of doing business to some extent and make it harder for taxpayers to play the tax administrations off against each other to evade taxes.

    An NFC sub-group has already been tasked with formulating recommendations to simplify payment of taxes to enhance ease of doing business in taxation area.

  • Active taxpayers list shows 1.88 million return filers

    Active taxpayers list shows 1.88 million return filers

    KARACHI: The number of active taxpayers has surged to 1.88 million for the tax year 2018 as of April 07, 2019, according to an official document released on Monday. This marks a significant increase from the previous year, reflecting a growing compliance among taxpayers in Pakistan.

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  • Sales Tax Act 1990: buyer, seller jointly responsible for unpaid tax

    Sales Tax Act 1990: buyer, seller jointly responsible for unpaid tax

    KARACHI: Where an amount of tax unpaid in supply chain then registered buyer and seller are both responsible for paying to national exchequer.

    According to updated Sales Tax Act, 1990 issued by Federal Board of Revenue (FBR), the Section 8A explained joint and several liability regarding unpaid tax.

    Section 8A: Joint and several liability of registered persons in supply chain where tax unpaid.

    Where a registered person receiving a taxable supply from another registered person is in the knowledge or has reasonable grounds to suspect that some or all of the tax payable in respect of that supply or any previous or subsequent supply of the goods supplied would go unpaid, of which the burden to prove shall be on the department such person as well as the person making the taxable supply shall be jointly and severally liable for payment of such unpaid amount of tax:

    Provided that the Board may by notification in the official gazette, exempt any transaction or transactions from the provisions of this section.

    Section 8B: Adjustable input tax.

    Sub-Section (1): Notwithstanding anything contained in this Act, in relation to a tax period, a registered person shall not be allowed to adjust input tax in excess of ninety per cent of the output tax for that tax period:

    Provided that the restriction on the adjustment of input tax in excess of ninety percent of the output tax, shall not apply in case of fixed assets or Capital goods:

    Provided further that the Board may by notification in the official Gazette, exclude any person or class of persons from the purview of sub-section (1).

    Sub-Section (2): A registered person, subject to sub-section (1), may be allowed adjustment or refund] of input tax not allowed under sub-section (1) subject to the following conditions, namely:

    (i) in the case of registered persons, whose accounts are subject to audit under the Companies Ordinance, 1984, upon furnishing a statement along with annual audited accounts, duly certified by the auditors, showing value additions less than the limit prescribed under sub-section (1) above; or

    (ii) in case of other registered persons, subject to the conditions and restrictions as may be specified by the Board by notification in the official Gazette.

    Sub-Section (3): The adjustment or refund of input tax mentioned in sub-sections (2), if any, shall be made on yearly basis in the second month following the end of the financial year of the registered person.

    Sub-Section (4): Notwithstanding anything contained in sub-sections (1) and (2), the Board may, by notification in the official Gazette, prescribe any other limit of input tax adjustment for any person or class of persons.

    Sub-Section (5): Any auditor found guilty of misconduct in furnishing the certificate mentioned in sub-section (2) shall be referred to the Council for disciplinary action under section 20D of Chartered Accountants, Ordinance, 1961 (X of 1961).

  • 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.

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  • 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.