Those already registered with sales tax department: Balance sheet filing requirement relaxed

ISLAMABAD: The Federal Board of Revenue (FBR) has relaxed a major requirement of filing balance sheets of assets and liabilities for individuals, Association of Persons (AoPs), and single-member companies, who are already registered with the sales tax department.

According to the details, a leading Karachi-based sales tax expert Arshad Shehzad informed that the Federal Board of Revenue has implemented stringent conditions for new sales tax registration. These conditions were introduced last month through amendments in the sales tax registration rules of 2006 vide SRO350(I)/2024 dated April 7, 2024.

These amendments aim to restrict various activities and transactions that may lead to tax fraud. Arshad stated that the Federal Board of Revenue (FBR) recently introduced stringent conditions for new sales tax registration in order to reduce the risk of tax fraud.

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These amendments have placed restrictions on various activities and transactions aimed at reducing the risk of tax fraud.

The FBR uncovered significant tax fraud involving the issuance of fake and false invoices by unscrupulous individuals to circumvent the electronic system’s checks and balances. In order to address the loopholes identified through this case study, the board has come up with more stringent conditions last month, Arshad maintained.

One of the new conditions was mandatory filing of balance sheet for obtaining fresh registration by an individual, partnership firm or a single member private limited company. Interestingly, this condition was also made applicable to already registered persons falling above a certain class, who were required to comply with this condition within 30 days of introducing the law.

Unfortunately, many registered persons were unaware of this requirement as no prior notice, intimation, or information session was held by the board.

As a result, after Eid Holidays, when existing registered persons attempted to file their sales tax return or annex ‘C,’ they were unable to proceed since this condition was not complied with, and a chaotic position emerged among the trade, Arshad explained.

However, after serious representation of tax bars, trade bodies, and various business forums, the board has relaxed the condition and lifted the check from the electronic filing. This may enable a large number of genuine businesses to file their monthly sales tax returns.

According to notification SRO581 dated April 18th, 2024, the board has partially relaxed the condition of filing a balance sheet of assets and liabilities for individuals, A.O.P, and single-member companies for already registered persons.

Arshad Shehzad suggested that the tax board should maintain a fair balance between tax compliance and simplification, and avoid unnecessary compliances, limitations, and conditions as much as possible. He believes that the FBR is already equipped with various legal provisions that allow them to access any necessary information, record, or physical verification from registered persons. Audits and assessments are conducted regularly.

Given such statutory powers, it is difficult to understand why electronic barriers should be put in place for regular filing monthly statement. In his opinion, this approach is not taxpayer-friendly and may be counterproductive in broadening the already narrowed tax base.

Top sales tax expert added that the FBR has introduced new measures to combat tax fraud, which includes mandatory filing of balance sheets for obtaining fresh registration by an individual, partnership firm, or single-member private limited company.

Although the condition was also made applicable to already registered persons falling above a certain class, the board has now relaxed the condition partially to enable genuine businesses to file their monthly sales tax returns. Nonetheless, it is important for the FBR to maintain a balance between tax compliance and simplification and avoid unnecessary compliance, limitations, and conditions to make it more taxpayer-friendly, he added.

Copyright Business Recorder, 2024