In a bid to streamline tax compliance and enhance transparency, the Federal Board of Revenue (FBR) has re-emphasized the statutory requirement for taxpayers to retain records for a period of six years.
This obligation is outlined in Section 24 of the Sales Tax Act, 1990, and serves as a crucial aspect of maintaining accurate financial documentation.
The FBR recently issued the updated Sales Tax Act, 1990, effective up to June 30, 2021, incorporating amendments introduced through the Finance Act, 2021. Section 24 of the Sales Tax Act, 1990 outlines the specific provisions related to the retention of records and documents by taxpayers.
According to the text of Section 24:
“Retention of record and documents for Six years.– A person, who is required to maintain any record or documents under this Act, 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.”
This stipulation is aimed at ensuring that taxpayers maintain a comprehensive record of financial transactions and other relevant documents for an extended period. By requiring a six-year retention period, the FBR aims to facilitate effective auditing processes, investigations, and assessments.
The obligation extends to any person who is mandated to maintain records or documents under the Sales Tax Act, 1990. The retention period spans six years beyond the conclusion of the tax period to which the records pertain. Moreover, the requirement persists until the final resolution of any proceedings, including but not limited to assessments, appeals, revisions, references, petitions, and proceedings before an Alternative Dispute Resolution Committee.
This provision aligns with international best practices and aims to enhance the FBR’s ability to verify compliance, investigate potential irregularities, and ensure the accuracy of financial reporting. Timely access to historical records is critical for the FBR to make informed decisions during the various stages of tax-related proceedings.
Taxpayers are strongly advised to adhere to the stipulations outlined in Section 24 of the Sales Tax Act, 1990, to avoid any non-compliance issues and facilitate smooth interactions with the tax authorities. The FBR continues to emphasize the importance of maintaining accurate and complete records as an integral part of fostering a culture of tax transparency and accountability.
