Tax dept barred from demanding post-dated cheque, bank certificate

LAHORE: The Sales Tax department has been barred from demanding a post-dated cheque accompanied by a bank certificate ensuring payment.

The competent authority ruled that this requirement imposes unreasonable restrictions on business activities. Also, it deprives individuals of utilizing their funds and contradicts the legislature’s intent.

The relevant forum held that banks can secure their interests through guarantees or maintaining accounts equal to the cheque sum, without restricting importers’ property rights.

According to the competent authority, Entry No.151 in 6th Schedule of the Sales Tax Act, 1990, the security which is demanded by the legislation is a post-dated cheque whereas the FBR/revenue department demands that this post-dated cheque should be accompanied with a banker certificate (Good for Payment).

In ordinary meaning, said the competent authority, cheque is a written order by the payer to a bank, where the payer maintains an account to pay a specified sum from his account. However, the cheque has been defined as a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.

Also, a cheque means a written order to a bank to pay the stated sum from the drawer’s account; the printed form on which a written order to a bank to pay the stated sum from the drawer’s account is written.

Copyright Business Recorder, 2024