Restriction on sales tax audit

The government through seeking amendment in Section 25 of the Sales Tax Act, 1990 has put restriction on sales tax audit which now can only be done once in three years. Explaining this legal amendment of the Finance Bill 2018, Arshad Shehzad, a Karachi-based legal export has informed that mode and manner of conducting sale tax audits were provided under Section 25 of the Sales Tax Act, 1990.
He informed that all sales tax registered persons are required to maintain prescribed record which at the moment may be subjected to audit once a year. Now the government by virtue of seeking amendment has extended the time limit to three years, meaning if the audit of the sales tax payers is done then it could not be done till next three years.
The amendment is positive in nature and step forward to improve trust of the taxpayers. He informed that mode and manner of sales tax audits remained under dispute, and litigations on this subject were carried out before the courts. The Lahore High Court has recently passed a couple of judgments in which categorical observations were made upon selection criteria as well as mode and manner of the audits. He said after transition of electronic compliance and introduction of auto reporting of purchase, imports, and exports, PE-reporting of sales invoices, tax department is technically not dependant of conventional methodology of audits.
The discrepancies, deviations and irregularities can be observed through monitoring of sales tax returns and can be confronted immediately hence technically audits are not required in routine. The provision of investigation and enquiry in case of tax fraud/evasion u/s 38, however, remains intact, he concluded.