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Procedure for working out minimum sales tax liability of non-filers

ISLAMABAD (December 07 2003): The government has issued new procedure meant for determination of minimum tax liability of registered persons not filing sales tax returns.

The CBR issued 'Sales Tax General Order (STGO) 5/2003' here on Saturday to effectively deal with such non-filers.

Official sources said that the procedure has been devised in such a way that the non-filers would not feel any difficulty in facing tax officials engaged in determination of tax liability, which will attract business community to file returns regularly.

In the new procedure, the CBR has also included a provision to withdraw show-cause notice in case where registered person shows willingness to file return.

Meanwhile, chartered accountant firms and tax consultants opined that a balanced approach has been adopted by the sales tax department for determination of minimum tax liability notified through STGO 5/2003.

According to the notification, the minimum tax liability of the registered person would not be less than the highest amount of tax paid by the registered person in any of the previous 12 months.

In case tax paid in the previous 12 months is Nil, the minimum tax liability shall be calculated on the basis of monthly average of the sales declared by the registered person to the income tax department for the last assessment year.

In case minimum tax liability cannot be determined in the manner given above, it shall be determined by taking into account three or more of the following factors, including location of business; type of business (ie retail etc); item produced/supplied or service provided; number of persons employed; capital invested in the business; amount of utility bills ie phones, electricity, gas and water; and production capacity of machinery installed.

The CBR would withdraw the notice of minimum tax liability determination in case where the registered person pays the due amount of sales tax for the month along with additional tax and penalty under section 33(1) of the Sales Tax Act, 1990, within one month of the determination.

However, in case the registered person does not pay the amount of sales tax determined for the tax period, the tax liability determined will be recovered under section 48 of the Sales Tax Act, 1990, without issuance of show-cause notice.

Moreover, the determination and/or payment of minimum tax liability for a tax period shall not be the final tax liability and the registered person shall be liable to discharge actual liability which may be determined at a later stage through audit.

Following is the text of the SALES TAX GENERAL ORDER NO. 05/2003 issued here on Saturday:

Subject: DETERMINATION OF MINIMUM TAX LIABILITY.

Consequent upon the addition of section 11(5) in the Sales Tax Act, 1990, the Central Board of Revenue is pleased to specify the following conditions to determine minimum tax liability of a registered person who fails to file a return:

(i) the minimum tax liability of the registered person shall not be less than the highest amount of tax paid by the registered person in any of the previous twelve months.

(ii) In case tax paid in the previous twelve months is Nil, the minimum tax liability shall be calculated on the basis of monthly average of the sales declared by the registered person to the income tax department for the last assessment year.

(iii) In case minimum tax liability cannot be determined in the manner given above, it shall be determined taking into account three or more of the following factors:

(a) Location of business;

(b) Type of business (ie retail etc);

(c) Item produced / supplied or service provided;

(d) Number of persons employed;

(e) Capital employed in the business;

(f) Amount of utility bills ie phones, electricity, gas and water;

(g) Production capacity of machinery installed;

2. If the registered person pays the due amount of sales tax for the month along with additional tax and penalty under section 33(1) of the Sales Tax Act, 1990, within one month of the determination made as above, the notice of minimum tax liability determination will be considered to have been withdrawn. In case the registered person does not pay the amount of sales tax determined for the tax period, the tax liability determined will be recovered under section 48 of the Sales Tax Act, 1990 without issuance of Show-Cause Notice.

3. Determination and / or payment of minimum tax liability for a tax period shall not be the final tax liability and the registered person shall be liable to discharge actual liability which may accrue or determined at a later stage through audit.

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