ST short-filers will be barred to file returns

SOHAIL SARFRAZ

ISLAMABAD: Around 300 big registered units including large taxpayers in sugar and cement sectors are indulged in short-filing of sales tax returns, who would not be allowed by the Federal Board of Revenue (FBR)  to file returns in January 2013 till they liquidate all outstanding sales tax.

It is learnt here on Sunday that the short-filers of sales tax would not be permitted to file sales tax returns till they clear all their past dues. A newly developed electronic system of the FBR would bar such short-filers from filing of monthly sales tax returns. These short-filers have collected/deducted sales tax from general public and end-consumers but not deposited the same in the national exchequer. They can only file sales tax returns after liquidating all their outstanding dues.

In one of the meetings, FBR Chairman Ali Arshad Hakim, well familiar with the Value Added Tax (VAT) principles, was surprised to know that quite a few large taxpayers are indulged in short-filing of returns. There are quite a number of large taxpayers who are filing the returns but not paying the due amount of sales tax. One such taxpayer engaged in the business of aerated water as well as sugar has even not bothered to file the monthly sales tax return.

Now onward no return would be accepted if any person has not paid the due tax as per his own return declarations. Short-filers would not be able to file sales tax returns under the new system. Short-filing was one of the distortions which got birth in the system as no such provision exists in countries where the VAT is being practice. The beneficiaries of this unholy practice were mainly in sugar, car manufacturing units, cement factories, and one main paper manufacturing unit of Lahore, they added.

Sources further stated that the Computerized Risk-based Evaluation of Sales Tax (CREST) software has electronically issued notices to 1200 registered persons on the basis of discrepancies detected in their returns/statements. The CREST has generated the discrepancy reports and issued electronic notices to these persons. A lot of them, showing serious discrepancies in returns, have not yet responded to notices.

It is further learnt that people are declaring their registration status as ‘distributor’ and claimed exemptions from the restriction of 90 percent input tax credit under section 8A of the Sales Tax Act. However, their registration data indicated that they did not get themselves registered as ‘distributors’ and as such they have to pay 10 percent input credit of output tax which they did not pay. The system is in the process of again electronically sending reminders before suspending their registration status, sources said.

It is significant to note that the registered persons, who responded to the electronic notices, agreed with the discrepancy reports generated by CREST and requested for revising of returns through payment of non-paid tax. The system analysts are examining the data critically and responses received in order to develop a holistic solution instead of any peace meal or ad-hoc arrangement.

The 15 days notices have been served on those units who have not responded as per standing general order 3 of 2010. These non-compliant units would be declared as non-operative against the ‘Active Taxpayer List’ under standing general order 3 of 2010. The units not on ‘Active Taxpayer List’ would not be able to obtain benefit of SRO.283 for paying reduced rate of 5 percent sales tax on purchase and sales. Consequently, those receiving supplies from non-operative units will not be entitled to any input credit and they will not be able to make any imports and exports.

Within the supply chain, the number of those who have done transactions with the said 1200 units is running into thousands. These units are also now in the windscreen of the system and it is in their interest to check the ‘Active Taxpayer List’ with whom they intend to conduct business and trade, sources added.