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Tag: Sales Tax Act 1990

  • Defaulting sales tax payment may liable to three-year jail

    Defaulting sales tax payment may liable to three-year jail

    ISLAMABAD: A person fails to pay sales tax within due date or to comply with recovery order is liable to certain fine and penalty under Sales Tax Act, 1990, officials in Federal Board of Revenue (FBR) said on Tuesday.

    Any person who fails to deposit the amount of tax due or any part thereof in the time or manner laid down under Sections 3, 6, 7 and 48 of this Act or rules or orders made there under:

    “Such person shall pay a penalty of ten thousand rupees or five per cent of the amount of the tax involved, whichever is higher:

    “Provided that, if the amount of tax or any part thereof is paid within ten days from the due date, the defaulter shall pay a penalty of five hundred rupees for each day of default:

    “Provided further that no penalty shall be imposed when any miscalculation is made for the first time during a year:

    “Provided further that if the amount of tax due is not paid even after the expiry of a period of sixty days of issuance of the notice for such payments by an officer of Inland Revenue, not below the rank of Assistant Commissioner Inland Revenue, the defaulter shall, further be liable, upon conviction by a Special Judge, to imprisonment for a term which may extend to three years, or with fine which may extend to amount equal to the amount of tax involved, or with both. “

  • Three years imprisonment for sales tax registration failure

    Three years imprisonment for sales tax registration failure

    ISLAMABAD: A person who makes taxable supplies but fails to get sales tax registration shall be liable to pay fine and penalties besides the person is also liable to imprisonment up to three years.

    Sources in the Federal Board of Revenue (FBR) said that the tax offices had launched operations to identify persons making taxable supplies but are not in the sales tax net.

    The sources said that under Sales Tax Act, 1990, any person who is required to apply for registration under the Act fails to make an application for registration before making taxable supplies:

    “Such person shall pay a penalty of Rs10,000 or five percent of the amount of tax involved, whichever is higher;

    “Provided that such person who is required to get himself registered under this Act, fails to get registered within sixty days of the commencement of taxable activity, he shall, further be liable, upon conviction by a Special Judge, to imprisonment for a term which may extend to three years, or with fine which may extend to an amount equal to amount of tax involved, or with both.”

    Section 14 of the Sales Tax Act, 1990 requires a person to get registration under this Act, who is making taxable services.

    Following is the tax of the Section 14:

    Section 14: Registration

    (1) Every person engaged in making taxable supplies in Pakistan, including zero-rated supplies, in the course or furtherance of any taxable activity carried on by him, falling in any of the following categories, if not already registered, is required to be registered under this Act, namely:-

    (a) a manufacturer who is not running a cottage industry;

    (b) a retailer who is liable to pay sales tax under the Act or rules made thereunder, excluding such retailer required to pay sales tax through his electricity bill under sub-section (9) of section 3;

    (c) an importer;

    (d) an exporter who intends to obtain sales tax refund against his zero-rated supplies;

    (e) a wholesaler, dealer or distributor; and

    (f) a person who is required, under any other Federal law or Provincial law, to be registered for the purpose of any duty or tax collected or paid as if it were a levy of sales tax to be collected under the Act.

    (2) Persons not engaged in making taxable supplies in Pakistan, if required to be registered for making imports or exports, or under any provisions of the Act, or any other Federal law, may apply for registration.

    (3) The registration under this Act shall be regulated in such manner as the Board may, by notification in the official Gazette, prescribe.

  • Sales tax recovery: movable, immovable property may be sold without attachment

    Sales tax recovery: movable, immovable property may be sold without attachment

    ISLAMABAD: Sales tax laws have given immense powers to officers of Inland Revenue and they can recover due sales tax by selling movable or immovable property without attachment.

    Sources in Federal Board of Revenue (FBR) told PkRevenue.com that under Section 48 of the Sales Tax Act, 1990 a mechanism for recovery of arrears of tax has been defined.

    For the purpose of recovery of tax, penalty or any other demand raised under this Sales Tax Act, 1990, the officer of Inland Revenue shall have the same powers which under the Code of Civil Procedure 1908 (V of 1908), a Civil Court has for the purpose of recovery of an amount due under a decree.

    They said that Section 48(1)(b)(c) clearly mentioned that tax officials may attach and sell or sell without attachment any movable or immovable property of the registered person from whom tax is due.

    The tax officers are also empowered to recover the sales tax amount from a person whose amount is stuck up with other tax authorities.

    “[The tax officers may] deduct the amount from any money owing to person from whom such amount is recoverable and which may be at the disposal or in the control of such officer or any officer of Income Tax, Customs or Central Excise Department,” according to the law.

    The officers of Inland Revenue can order any person who holds money of a person in default, besides the officers can also:

    “Stop removal of any goods from the business premises of such person till such time the amount of tax is paid or recovered in full;

    “require by a notice in writing any person to stop clearance of imported goods or manufactured goods or attach bank accounts;

    “seal the business premises till such time the amount of tax is paid or recovered in full;

    “recover such amount by attachment and sale of any movable or immovable property of the guarantor, person, company, bank or financial institution, where a guarantor or any other person, company, bank or financial institutions fail to make payment under such guarantee, bond or instrument.”

    Provided that the Commissioner Inland Revenue or any officer of Inland Revenue shall not issue notice under this section or the rules made thereunder for recovery of any tax due from a taxpayer if the said taxpayer has filed an appeal under section 45B in respect of the order under which the tax sought to be recovered has become payable and the appeal has not been decided by the Commissioner (Appeals), subject to the condition that ten per cent of the amount of tax due has been paid by the taxpayer.

    “If any arrears of tax, default surcharge, penalty or any other amount which is adjudged or payable by any person and which cannot be recovered in the manner prescribed above, the Board or any officer authorized by the Board, may, write off the arrears in the manner as may be prescribed by the Board, the FBR said.

  • FBR issues procedure for condonation of sales tax cases

    FBR issues procedure for condonation of sales tax cases

    ISLAMABAD: Federal Board of Revenue (FBR) on Monday issued procedure for condonation of time limit in sales tax cases.

    The FBR issued Sales Tax Circular No. 02 of 2020 for the purpose of disposal of requests for condonation of time limit, and directed field formation including LTOs, MTO, CTOs and RTOs to process the taxpayers’ requests for the condonation of time limit under Section 74 of Sales Tax Act, 1990 read with SRO 394(I)/2009 dated May 21, 2009.

    The FBR directed the field formation to follow the procedure:

    01. Whether any application for condotnation submitted by the taxpayer with field formation?

    If ‘yes’, decision taken thereon by the field formation.

    02. Genuineness/authenticity of the reasons narrated for condonation sought by the taxpayer.

    If ‘yes’, elaborate with details along with supporting document.

    03. Whether the reasons for delay in seeking condonation on the part of the taxpayer are cogent?

    If ‘yes’, elaborate with details along with supporting documents.

    04. Revenue impact (in case of registered person as well as other persons involved), if any.

    If ‘yes’, amount to be mentioned.

    05. Whether any system/technical glitch involved in the case?

    If ‘yes’, details of the system glitch along with supporting documents.

    06. Whether the condonation involved transaction of any closed, de-registered or any person whose registration has been blacklisted or suspended?

    If ‘yes’, then specify with reason.

    07. Whether the condonation involved adjustment/refund of amount which has already been claimed by taxpayer?

    Specify in detail.

    08. Whether supplier discharged due sales tax on supply after issuance of invoice and duly verified from Annex-C in the condonation cases of Power Sectors etc?

    If ‘yes’, specify the date and month of return in which the same has been incorporated.

    09. Both buyer and supplier are active on Active Taxpayers List (ATL).

    ‘Yes’/’No’

    10. Whether payment is made to supplier through banking channel as envisaged under Section 73 of the Act (In the case of Power Sector and provincial revenue authorities input)? In case, partial payment is made to supplier, balance payable to supplier with reason.

    ‘Yes’/’No’.

    The FBR said that the procedure for condonation cases shall become applicable with effect from September 21, 2020.

  • Withholding sales tax regime streamlined

    Withholding sales tax regime streamlined

    ISLAMABAD: Federal Board of Revenue (FBR) has streamlined sales tax withholding regime for compelling sales tax return filing and realizing full revenue on sale/purchase.

    The FBR issued Circular No. 01 dated August 06, 2020 to explain changes made to Sales Tax Act, 1990 through Finance Act, 2020.

    The FBR said that Eleventh Schedule provides for withholding agents to deduct tax at the time of purchase from both registered and unregistered persons.

    The categories of withholding agents include Federal and Provincial Government departments, companies, public sector organizations and autonomous bodies.

    However, it has been noticed that most of the registered suppliers whose tax has been withheld do not usually file their sales tax returns and resultantly, fail to pay their remaining amount of 4/5th tax in case 1/5th of the tax involved is withheld by the purchaser as aforementioned.

    To enforce returns by the such suppliers and payment of remaining tax involved, the whole concept of withholding has now been linked to the supplier (withholdee) being on the ATL list of the FBR or otherwise.

    The persons other than Active Taxpayers shall be given the same treatment as was previously accorded to unregistered persons i.e. government and public sector enterprises shall deduct whole of the tax involved in case of supplies made by persons other than those on ATL and the companies shall deduct 5 percent of gross value of supplies on supplies by such persons. This aims at promoting return filing and documentation culture in the country.

  • Reduced rate of withholding sales tax withdrawn for registered persons

    Reduced rate of withholding sales tax withdrawn for registered persons

    ISLAMABAD: A registered person, who is not an active taxpayer, may not avail benefit of reduced rate of withholding sales tax after amendment made through Finance Act, 2020.

    Sources in Federal Board of Revenue (FBR) said that amendments have been made to Eleventh Schedule of Sales Tax Act, 1990 through Finance Act, 2020 under which the active taxpayers would be eligible to avail reduced rate of withholding sales tax at the time of supplies.

    Prior to this amendment registered persons were enjoying the reduced rate at the time of supply but now the registered persons, if not active taxpayers, shall pay full amount of sales tax.

    According to the amendment the withholding agents including federal and provincial government departments; autonomous bodies; and public sector organizations; companies as defined in the Income Tax Ordinance, 2001 shall collect/deduct 1/5th of sales tax as shown on invoice from those persons, who are active taxpayers.

    Similarly, person registered, but no active taxpayer, as a wholesaler, dealer or distributor are required to pay full amount of sales tax instead of reduced rate.

    Prior to the amendment, the withholding agents including federal and provincial government departments; autonomous bodies; and public sector organizations; companies as defined in the Income Tax Ordinance, 2001 were required to collect/deduct 1/10th of sales tax as shown on invoice from person registered as a wholesaler, dealer or distributor.

    In serial No. 03 of the Schedule, the Federal and provincial government departments; autonomous bodies; and public sector organizations are required to collect/deduct whole of the tax involved or as applicable to supplies on the basis of gross value of supplies form person other than active taxpayer.

    Similarly in Serial No. 04, the companies as defined in the Income Tax Ordinance, 2001 are required to collect/deduct five percent of gross value of supplies from persons other than active taxpayers.

    In serial number 06 the registered persons purchasing cane molasses are required to collect/deduct whole of sales tax applicable from persons other than active taxpayers.

    Active Taxpayer has been defined under Sales Tax Act, 1990 as a registered person who does not fall in any of the following categories, namely:-

    (a) who is blacklisted or whose registration is suspended in terms of section 21;

    (b) fails to file the return under section 26 by the due date for two consecutive tax periods;

    (c) who fails to file an Income Tax return under section 114 or statement under section 115, of the Income Tax Ordinance, 2001(XLIX of 2001), by the due date; and

    (d) who fails to file quarterly or an annual withholding tax statement under section 165 of the Income Tax Ordinance, 2001.

  • Highlights of major changes to sales tax through Finance Bill 2020

    Highlights of major changes to sales tax through Finance Bill 2020

    ISLAMABAD: The government has proposed major changes to sales tax law through Finance Bill 2020 to be applicable from July 01, 2020.

    EY Ford Rhodes Chartered Accountants highlighted the major changes to Sales Tax Act, 1990 through Finance Bill, 2020:

    A person whose refunds or input tax adjustment is blocked will continue to be treated as an active taxpayer to facilitate buyers so as they claim input tax on purchases made from him/it.

    Value of electricity supplied by WAPDA and IPPs is streamlined with effect from 01 July 2019.

    Sales tax on supply of used vehicle is applicable only on value addition to the used vehicles purchased locally.

    Scope of sales tax withholding extended on acquisition of services.

    FBR is empowered to impose restrictions on wastage of materials vis-à-vis claim of input tax relating thereto.

    The restriction on claim of input tax has been extended to services where supplies were made to un- registered persons without mentioning of NTN or CNIC.

    Where a transactional value is less than Rs 100,000 a retailer is not required to mention CNIC or NTN of an un registered person.

    Commissioner may conduct audit proceedings electronically through video links or any other facility as prescribed by the FBR.

    Every registered person is required to submit a complete return i.e. along with all applicable Annexures in the manner prescribed by the FBR.

    Even after imposition of penalty, if a person does not integrate his business with the FBR system within two months, the business premises shall be sealed until he integrates such business.

    The CIR (Appeals) is now empowered to not admit any documentary material or evidence which was not produced before the Officer Inland Revenue without any plausible reason.

    Agencies including NADRA, FIA, provincial excise and taxation departments, utility companies etc. are now required to provide information to the FBR on real-time basis.

    Restriction on input tax as attributable to the prescribed excess supplies to unregistered persons has now been extended to every registered person. Previously, it was applicable only on registered manufacturers.

    Zero rate on supplies of raw materials, components and goods for further manufacturing in the Gwadar Free Zones and exports thereof is proposed to be re-introduced effective from 01 June 2020.

    Zero rate on supplies of locally manufactured plant and machinery to the manufacturers located in Gwadar Free Zone is proposed to be re-introduced effective from 01 June 2020.

    Exemption on import of goods for exclusive use within the Gwadar Free Zone or for making exports therefrom is proposed to be re-introduced effective from 01 June 2020.

    Exemptions from sales tax on import and supply of ships and all floating crafts etc. is proposed to be extended upto the year 2023.

    Dietetic foods for consumption of children suffering from inherent metabolic disorder is exempted subject to certain conditions.

    Supplies made from retail outlets which are integrated with the FBR’s computerized system will now be subject to reduce rate of 12 percent instead of 14 percent.

    Import or local supplies of smart phones value not exceeding USD 30 is subject to fixed sales tax rate of PKR 200.

    Rate of sales tax withholding applicable on purchases from unregistered persons has now been extended to registered persons who are not active taxpayers.

    Raw materials and intermediary goods imported by a manufacturer for in-house consumption are not subject to value addition tax of 3 percent at import stage.

  • IR officers empowered to modify orders

    IR officers empowered to modify orders

    ISLAMABAD: The Finance Bill 2020 has proposed to amend Sales Tax Act 1990 and empower tax authorities to modify orders.

    A new section 11C to the Act has been proposed through the bill, which is as follow:

    “11C. Power of tax authorities to modify orders, etc.– (1) Where a question of law has been decided by a High Court or the Appellate Tribunal in the case of a registered person, on or after first day of July, 1990, the Commissioner or an officer of Inland Revenue may, notwithstanding that he has preferred an appeal against the decision of the High Court or made an application for reference against the order of the Appellate Tribunal, as the case may be, follow the said decision in the case of the said taxpayer in so far as it applies to said question of law arising in any assessment pending before the Commissioner or an officer of Inland Revenue, until the decision of the High Court or of the Appellate Tribunal is reversed or modified.

    (2) In case the decision of High Court or the Appellate Tribunal, referred to in sub-section (1), is reversed or modified, the Commissioner or an officer of Inland Revenue may, notwithstanding the expiry of period of limitation prescribed for making any assessment or order, within a period of one year from the date of receipt of decision, modify the assessment or order in which the said decision was applied so that it conforms to the final decision.”

  • FBR may obtain sales tax record of past six-years

    FBR may obtain sales tax record of past six-years

    ISLAMABAD: Federal Board of Revenue (FBR) may ask certain taxpayers to provide past six years record of their sales for examination, sources said.

    The sources said that the tax offices may conduct audit of sales tax of many taxpayers in order to meet revenue collection target for current fiscal year.

    The sources said that under Sales Tax Act, 1990 taxpayers are required to retain past six years record.

    A person, who is required to maintain any record or documents under Sales Tax Act, 1990 shall retain the record and documents for a period of six years after the end of the tax period to which such record or documents relate or till such further period the final decision in any proceedings including proceedings for assessment, appeal, revision, reference, petition and any proceedings before an alternative Dispute Resolution Committee is finalized.

    The sources said that the tax officials have immense powers to access to record and documents of taxpayers.

    (1) A person who is required to maintain any record or documents under this Sales Tax Act, 1990 or any other law shall, as and when required by Commissioner, produce record or documents which are in his possession or control or in the possession or control of his agent; and where such record or documents have been kept on electronic data, he shall allow access to the officer of Inland Revenue authorized by the Commissioner and use of any machine on which such data is kept.

    (2) The officer of Inland Revenue authorized by the Commissioner, on the basis of the record, obtained under sub-section (1), may, once in a year, conduct audit:

    Provided that in case the Commissioner has information or sufficient evidence showing that such registered person is involved in tax fraud or evasion of tax, he may authorize an officer of Inland Revenue, not below the rank of Assistant Commissioner, to conduct an inquiry or investigation under section 38:

    Provided further that nothing in this sub-section, shall bar the officer of Inland Revenue from conducting audit of the records of the registered person if the same were earlier audited by the office of the Auditor-General of Pakistan.

    (3) After completion of Audit under this section or any other provision of this Act, the officer of Inland Revenue may, after obtaining the registered person’s explanation on all the issues raised in the audit shall pass an order under section (11).

    (5) Notwithstanding the penalties prescribed in section 33, if a registered person wishes to deposit the amount of tax short paid or amount of tax evaded along with default surcharge voluntarily, whenever it comes to his notice, before receipt of notice of audit, no penalty shall be recovered from him:

    Provided if a registered person wishes to deposit the amount of tax short paid or amount of tax evaded along with default surcharge during the audit, or at any time before issuance of show cause notice … he may deposit the evaded amount of tax, default surcharge under section 34, and twenty five per cent of the penalty payable under section 33:

    Provided further that if a registered person wishes to deposit the amount of tax short paid or amount of tax evaded along with default surcharge after issuance of show cause notice, he shall deposit the evaded amount of tax, default surcharge under section 34, and full amount of the penalty payable under section 33 and thereafter, the show cause notice, shall stand abated.

    Explanation.– For the purpose of sections 25, 38, 38A, 38B and 45A and for removal of doubt, it is declared that the powers of the Board, Commissioner or officer of Inland Revenue under these sections are independent of the powers of the Board under section 72B and nothing contained in section 72B restricts the powers of the Board, Commissioner or Officer of Inland revenue to have access to premises, stocks, accounts, records, etc. under these sections or to conduct audit under these sections.

  • Chartered accountants liable to penal action for issuing false tax certificate

    Chartered accountants liable to penal action for issuing false tax certificate

    KARACHI: Any auditor of professional accountancy firm is liable to penal action in case found guilty of misconduct in furnishing false tax certificate, sources in Federal Board of Revenue (FBR) said.

    Referring to Section 8B of Sales Tax Act, 1990, the sources said that tax authorities allowed input tax adjustment to a taxpayer on the basis of certificate issued by auditors of professional accountancy firms.

    “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,” according to Sales Tax Act, 1990.

    Section 20D of Chartered Accountants Ordinance, 1961 explains:

    “20-D. Orders by the Council if member found guilty.-(1) If, on receipt of the report under Section 20-B the Council is of opinion that the member of the Institute has been guilty of any professional misconduct specified in Schedule I, it may, after affording such member an opportunity of being heard, either personally or through counsel or another member of the Institute, make any of the following orders, namely:-

    (a) Reprimand or warn such member;

    (b) Impose such penalty as it may deem necessary not exceeding one thousand rupees; and

    (c) Remove the name of such member from the Register for a period not exceeding five years:

    Provided that, where it appears to the Council that the case is one in which the name of such member ought to be removed from the Register for a period exceeding five years or permanently, he shall not make any order but shall refer the case to the High Court with its recommendations thereon.

    (2) If the Council is of opinion that the member of the Institute is guilty of a professional misconduct specified in Schedule II, it shall refer the case to the High Court with its recommendations thereon.

    According to Section 8B of Sales Tax Act, 1990 taxpayers have not been allowed to adjust input tax except for some cases.

    Following is Section 8B of the Act:

    “8B. Adjustable input tax.– (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).

    (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.

    (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.

    (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.

    (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).

    (6) In case a Tier-1 retailer does not integrate his retail outlet in the manner as prescribed under sub-section (9A) of section 3, during a tax period or part thereof, the adjustable input tax for whole of that tax period shall be reduced by 15 percent.”