PTBA suggests reducing record retention time to five years under Sindh tax laws

KARACHI: Pakistan Tax Bar Association (PTBA) has submitted budget proposals 2019/2020 to Sindh Revenue Board (SRB) suggesting to reduce time limit for retaining records to 5 years from 10 years.

The apex tax bar said that under present legislation a taxpayer is required to retain records for a period of 10 years and show-cause notices may be issued within a period of 8 years from the date of relevant tax period.

This is in excess of the statute of limitation provided under the Sales Tax Act and Income Tax Ordinance. It will not only put excess burden on the taxpayer, but also disincentivizes the tax authorities from taking timely action.

It is therefore recommended that the time period for retention of records and assessment of tax should be reduced to five years.

This would save taxpayers from practical difficulties and unnecessary burden while pushing the tax authorities to take more timely action.

The PTBA also highlighted the issue that no input tax is allowed to be claimed on goods or services acquired prior to six months preceding the date of commencement of the provision of taxable services by a taxpayer.

Therefore it is recommended that such restriction should be eliminated.

Giving rationale to the suggestions, the PTBA said that any bar on admissibility of input tax borne by the taxpayer prior to six months preceding the commencement of provision of taxable services is against the basic principal of VAT. It is also not justifiable in case of a long term projects.

Regarding assessment order, the apex tad bar said that it can be amended by a tax officer on the basis of any subsequent information, etc.
“Such powers are arbitrary and unjust and may open the doors for harassment and corruption.”

The PTBA suggested that the taxpayer should first be confronted with a show-cause notice with substantial reasons and definite information/evidence(s) that warrant reopening or amending the assessment order.

“Further, the powers to amend any assessment order should only be vest with the Commissioner or Board only.”

This recommendation would introduce transparency in the tax system for revision of shut and close transactions and provide justice to the taxpayer.

The PTBA further pointed out that the tax officer is empowered to ask for any information from a taxpayer without specifying the reason or nature of the case being investigated by him.

Scope of Section 52(1) should be restricted to specific parties and transactions which are within the jurisdiction of Sindh and are specifically identified by the tax officer instead of fishing and roving enquiries.

This promotes equity and natural justice and avoids harassment and unnecessary proceedings.

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