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ISLAMABAD: The Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to rectify errors in the sales tax and federal excise duty (FED) return form and amend it for the taxpayers to accurately claim refunds/adjustments.

In this regard, the FTO issued an order here on Friday.

According to the FTO’s directions to the FBR, the Member Information Technology and Pakistan Revenue Automation Limited (PRAL) to make necessary amendments in sales tax return form and add a calculation field for difference between paid amount and payable amount as “Excess Payment” in the last empty column of return. The excess payment if any, shall be available for adjustment in the subsequent tax period.

BTB registration: 210,437 unregistered persons respond to FBR notices

The complaint was filed in terms of Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance) against non-provision in the sales tax return to take care of the excess amount of sales tax paid inadvertently.

Briefly, as per the complainant, this is a general grievance regarding taxpayers’ right. It has been observed that if any sales tax payment is paid in excess of the liability determined in the sales tax return; the excess amount is not shown as a refundable amount in the same return (similar to what happens in the income tax return).

Keeping on the same track, the excess payment is not shown as an adjustment in the subsequent period. Furthermore, there is no mechanism to correct the CPR amount if any excess amount is paid.

The FBR responded that since the remedy is already available under the law for the filing of refund of such overpayment, if any, giving an option of claiming excessive tax paid amount in return not only harm the spirit of the law but also would open a window to the potential fraudsters to misuse the option by adjustment of amount paid/deposited in other fields i.e. as arrears, penalties, default surcharge etc in the subsequent months.

Besides, no such cases have been reported by field formations where excessive payment has been made. Keeping in view the above, it is requested that the proposal of the complainant may not be entertained and the complaint may be rejected.

The policy wing of Inland Revenue, the FBR has taken a contradictory position. The prevalent sales tax and federal excise online return form has the following four parts; (a) Credits arising from imports and domestic purchases; (b) Debts on account of sales and exports; (c) Calculation of liabilities and excess credit; and (d) Payments and refunds.

The IT system automatically calculates tax payment liabilities in part (c) of return after adjustment of available credit in part (a) as per rules and regulations. Present return form provides a breakup of Input Tax Credit in the form of adjustment against output tax liability, excess amount available for carry forward against unconsumed stocks and credit part available for refund against export/zero rate consumption.

However, as per the complainant, there are instances of inadvertent excess payment when a taxpayer makes payment in the bank through CPR in a process to settle the tax liability calculated by the automated system but meanwhile, the tax liability in the system is reduced either due to extra credit availability on account of compliance by his suppliers or buyers (ATL inclusion).

Whereas, the return form will not show this excess payment neither the CPR amount paid can be changed or sub-divided. Hence, this amount will not be available to adjust or claim. Thus, the taxpayer will be helpless even to prove and claim a refund under Section 66 as overpaid inadvertence or error or misconstruction case.

The FBR’s failure to develop a system which should facilitate the common taxpayers in making tax compliance is tantamount to maladministration as defined in Section 2(3)(i)(b) of the FTO Ordinance, 2000, the FTO added.

Copyright Business Recorder, 2023

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