ST returns to 21 cos paid on behalf of non-residents: FBR directs PRAL to allow input tax adjustment

ISLAMABAD: The Federal Board of Revenue (FBR) has directed Pakistan Revenue Automation Limited (PRAL) to remove the check to allow input tax adjustment in the sales tax returns to 21 companies paid on behalf of the non-residents.

This is subject to the condition that such tax payment of these 21 corporate entities (petitioners) is electronically verified by the system.

According to the decision communicated by the FBR to the Director General Information Technology FBR as well as PRAL, refer to the Sindh High Court interim order dated February 6, 2025 whereby it was stated that the adjustment of sales on services rendered by non-residents was carried out in return on online system of FBR but the court has observed that at present the adjustment “appears to be unjustifiably denying such claims”.

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Hearing has been adjourned till March 6, 2025 apparently to bring the online system in line with law, FBR letter said.

The FBR’s directive stated that the matter is of allowing such input tax in return. The relevant tax authorities can interpret its admissibility or otherwise under the provisions of Sales Tax Act, 1990 as well as the Judgment of the Apex Court to determine the vires of such levy by a Provincial Legislature.

In the meantime, it is, therefore, requested that PRAL may remove the check to allow input tax adjustment in the sales tax return to the petitioners paid on behalf of the non-resident if such tax payment is electronically verified by the system, the FBR added.

Copyright Business Recorder, 2025