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.