ISLAMABAD (February 25 2008): The Federal Board of Revenue (FBR) has decided to cancel the sales tax registration of all habitual non-filers of sales tax returns through strict enforcement of the law. At present, a registered person not filing sales tax returns for six months past is liable to de-registration, but the law is not being practically enforced.
Now, amended sales tax law would be notified to ensure de-registration all non-filers. Sources told Business Recorder on Sunday that the board has constituted a committee comprising STBM Director Shafqat Mahmood and Lahore Sales tax Collector Rukshinda Yasmeen to study the existing de-registration rules and suggest amendment to cancel the registration of consecutive non-filers. The procedure would be streamlined under the revised rules. The audit of registered units is compulsory but it is impossible to conduct audit of units not filing sales tax returns.
The de-registered, non-filers would not be able to enjoy the following facilities under the Sales Tax Act, 1990: First, the main disadvantage is that the non-filer would be not be in a position to obtain input tax adjustment or credit of refund.
Second, the registered supplies would not buy goods from the un-registered person, as the non-filer could not issue sales tax invoice. Third, the de-registered unit could not make supplies to the government departments, semi-government departments and corporations.
Fourth, if the government has inked contracts with some foreign firm, the de-registered unit could not make supplies to such foreign investor or international projects in Pakistan. The investors could not purchase goods from the de-registered firm. The board had directed the collectors of sales tax to invoke section 11A of the Sales Tax Act, 1990 for initiating action against the short-filers of sales tax.
FBR Chairman Abdullah Yusuf has called upon the collectors to come out with solid recommendations to deal with the issues like non-filing, short-filing and nil-filing. He said that non-filers and short-filers have to be dealt in accordance with the existing legal provisions, and added that instant action was required to be taken against the short-filers. It is worth mentioning that the collectors are empowered to impose an embargo on the short-filers of sales tax.
In view of FBR directive, the collectors would have to invoke provisions of section 11A of the Sales Tax Act, 1990 against the short-filers and defaulting units. Under the embargo, tax officials could seize the business activity of the defaulters, block imports and freeze bank accounts of short-filers.
Under section 11A of the Sales Tax Act, 1990, where a registered person pays the amount of tax less than the tax due as indicated in his return, the short paid amount of tax along with default surcharge shall be recovered from him.