Compulsory ST registration: Treating lawyer as retailer wrong application of law: FTO

ISLAMABAD: Federal Tax Ombudsman (FTO) has declared that the compulsory sales tax registration of a professional lawyer as ‘retailer’ was based on wrong application of law, reflecting maladministration under FTO Ordinance.

Muhammad Azhar Siddique, a renowned constitutional lawyer unearthed the tax scam in the FBR system regarding compulsory registration under the Sales Tax Act, 1990 and then de-registration overnight without any involvement and consent of the taxpayer.

Sources told this correspondent that the FTO, on a complaint lodged by Azhar Siddique, has declared that the compulsory registration of a professional lawyer by the Federal Board of Revenue (FBR) under the Sales Tax Act 1990 was based on wrong application of law.

The complaint was pleaded by a Lahore-based lawyer, Waheed Shahzad Butt, before the FTO wherein after exhaustive investigation and deliberations the electronic fiscal crime in the shape of sales tax registration was unearthed due to lawful intervention by the forum of FTO.

Earlier, FTO has observed the said compulsory registration of a professional lawyer under the Sales Tax Act, 1990 is equivalent to administrative excesses, incompetence and inefficiency in discharge of duties by compulsory registration of the complainant, without scrutinizing the facts, tantamount to maladministration under FTO Ordinance.

FTO order states, “Evidently, the compulsory registration of a professional lawyer under the Act by the Department was based on wrong application of law. Even otherwise, under Rule 175 of the Pakistan Legal Practitioners & Bar Councils Rules, 1976, a lawyer is not allowed to join or carry on any other profession, business, service or vocation. Although, allegation of misuse of CNIC could not be established; however, compulsory registration of the complainant in the instant case, in view of the legal and factual position discussed supra, reflects a decision, which is contrary to law/ rules based on irrelevant grounds, thus, maladministration of the department is evident.

The department treated the professional advocate as a retailer. The tax department utilized the turnover declared by the Complainant in his return of income but failed to notice that his tax profile mentioned his principal activity as “Service/ Service Provider/ Lawyer/ Advocate/ Legal Services”, whereas no transaction was declared under the column opening stock, net purchases and closing stock, which establishes that no activity with reference to sale/ supply of goods was involved and, thus, action of compulsory registration was not justified. Administrative excesses, incompetence, ineptitude, inefficiency in discharge of duties by compulsory registration of the Complainant, without scrutinizing the facts, tantamount to maladministration, in terms of Section 2(3) (i) (a) and (ii) of the FTO Ordinance, FTO ordered.

Copyright Business Recorder, 2022