Units involved in tax fraud: FBR suggests new sections in ST Act for penal action

ISLAMABAD: The Federal Board of Revenue (FBR) has proposed separate sections in the Sales Tax Act for suspension of sales tax registration and blacklisting of the units involved in tax fraud.

Presently, section 21 of the Sales Tax Act deals with deregistration, blacklisting, and suspension of registration. The said section has been divided into sub-sections for separately dealing with the suspension and blacklisting of the registered persons.

In this regard, the FBR has proposed draft amendments to the Sales Tax Act, 1990 for simplification and harmonization through Finance Bill, 2024.

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The proposed section 21A (blacklisting) revealed that where the person who has been issued a notice does not submit relevant record; does not provide the required record; does not allow access to his business record or premises; or the offence of tax fraud is established against the person, the Deputy Commissioner, shall issue an appealable self-speaking order for blacklisting of the person, and shall proceed to take legal and penal action under the relevant provisions of the Sales Tax Act.

According to the proposed section “21 (suspension) under the Sales Tax Act, where the Deputy Commissioner, during the course of any proceedings suspects on the balance of probabilities, that a person registered for the purposes of sales tax is involved in tax fraud, he may in order to prevent the continuation of the suspected tax fraud and to stop the evasion of sales tax by such person or any other person, suspend the registration of such person without any prior notice and with the approval of the Commissioner.

The suspension of registration shall take place through a written order of the Deputy Commissioner to the person suspended, giving reasons for suspension, and endorsed to all Field Offices, the FBR‘s computer system, and the Customs Wing computer system for information and necessary action as per law. Where the buyers and suppliers of a person, whose registration is being suspended, belong to another Field Office, and these buyers/suppliers are also required to be suspended, the Commissioner shall intimate in writing the Chief Commissioner of the concerned Field Office in whose jurisdiction such buyers/suppliers fall, explaining the complete facts of the case and the reasons on the basis of which initiation of proceedings for suspension/blacklisting of the buyers/suppliers is recommended.

No input tax adjustment/refund shall be admissible to the suspended person during the currency of suspension. The person suspended shall not be authorized to issue tax invoices during the currency of the suspension period and no input tax adjustment/refund shall be allowed to any other person, on the strength of invoices if any issued by such suspended person during the period of his suspension.

The Deputy Commissioner shall, issue a show cause notice to the person, whose registration has been suspended, to afford an opportunity of hearing of fifteen days from the date of issuance of such notice. The show cause shall be issued within three days of the day the registration of the person has been suspended. Where the Deputy Commissioner has suspended the registration of a person, he shall also institute proceedings against such person in respect of the suspected tax fraud under the provisions of this Act in addition to the proceedings under this section.

Where the suspended person has complied with the notice and the Deputy Commissioner is satisfied that the person is not involved in tax fraud, he may issue the order for revoking the suspension of the person, draft law added.

Copyright Business Recorder, 2023