'Section 40-B not misused to check Sales Tax evasion'

ISLAMABAD (February 16 2004): The Central Board of Revenue (CBR) has not yet exercised option under Section 40-B of the Sales Tax Act, 1990 to depute sales tax officials at the manufacturing premises of any suspected unit.

Sources told Business Recorder here on Sunday that Section 40-B was introduced in Budget 2003-04 to depute tax officials at the manufacturing units to effectively check tax evasion.

The apprehensions of the business community proved wrong, as the CBR has yet not exercised this provision of law.

The CBR is very much cautious in exercising section 40-B and does not permit collectors to use these powers until it is extremely necessary for detection of tax evasion.

Over eight months of the current financial year have passed and effective sales tax monitoring mechanism, compliance by non-filers and audit have helped the officials to enhance revenue instead of using section 40-B.

This proves that CBR is committed to taking the trade bodies/associations concerned into confidence before exercising this section. Recently, All Pakistan Sizing Industries Association (Apsia) team met tax authorities and expressed satisfaction over the issue of section 40-B. The CBR assured the Association that this power would only be excised in exceptional cases of tax fraud/evasion with concurrence of the association concerned.

However, sources admitted that it has effectively worked as a deterrent prior to deputation of tax officials at the units.

They said that section 40-B had been misunderstood by certain industrial units as it could only be exercised conditionally. Thus, it would leave no room for its misuse.

Moreover, its insertion was made to check the underreporting of turnover and evasion of sales tax by manufacturers.

It is to prevent the abuse of facility of self-assessment or tax fraud, that the Collector of Sales Tax have been empowered to post officer of sales tax for physical monitoring of production/supplies of goods for a limited period only in selected cases wherein there is sufficient reasons to believe that prima face a registered person is involved in tax fraud/evasion, the clarification added.

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