FBR detects discrepancies in sales tax/federal excise returns

The Computerised Risk-Based Evaluation of Sales Tax (CREST) of the Federal Board of Revenue (FBR) has detected discrepancies in sales and purchase data declared by some taxpayers in sales tax/federal excise returns.
Sources told Business Recorder on Monday that the CREST Team headed by Collector Sales Tax Regional Tax Office (RTO), Lahore Shafqat Mahmood recently informed the tax authorities about the processing and verification of sales tax returns by the system. The presentation on the CREST highlighted the verification process of the system. It is a web-based system, which captures and conduct analysis of sales tax returns on real time basis.
The CREST system has found that sales and purchases of some registered taxpayers are not matching, which needs further verification of the data. The data of supplies made to certain registered units needs to be checked.
The CREST analysis further identified that the imports and exports data maintained by the Pakistan Revenue Automation Limited (PRAL) is not matching with the declarations made by some taxpayers in the sales tax returns. The authenticity of the customs data needs to be checked and PRAL should give priority to cleansing of data for proper cross matching between different departments.
It was informed that CREST has started assessment and processing of sales tax returns to identify returns, where cross matching of declared information could not be done effectively. In the first stage, cross matching of data has been conducted on the basis of returns filed for 2007-2008 and onwards. Later, the department would provide opportunity to the taxpayer to submit information for cross matching of data.
FBR has also provided ample technical resources to the CREST team for proper IT consecutively and functioning of the system, sources added. When contacted tax experts, pointed out that importers are engaged in filing of Goods Declarations (GDs), electronically for clearance of imported consignments. Similarly, business companies and other entities are filing sales tax returns electronically as well.
If taxpayers are filing returns/declarations through the electronic system, it is not clear that why there is discrepancy in the sales tax and customs database. There should be less discrepancy in the sales tax and customs data due to electronic filing of returns. In electronic system there are minimum chances of error due to elimination of manual processes.
One of the possibilities is that certain sales tax registered units might had declared only relevant export data for claiming refund or input tax adjustment on the sales tax return. This specific import/export data might not be cross matched with the actual declarations made on the GDs at the import stage, experts added.
It is worth mentioning that the authenticity of the taxpayer's data available under the system is being checked to ensure implementation of 100 percent error free sales tax verification system. The system would mainly deal with the monitoring/analysis of sales tax returns, refunds, invoices etc, exposing sectors issuing excessive refund invoices against actual less GST payments.
The Sales Tax wing of FBR developed the "CREST" software with following objectives: Firstly, development of a transparent voluntary compliance system to remove the irritants that hurdle the complaints. Secondly, fully automated setup to minimise the human interference through this system.
Thirdly, it would provide tax gap analysis to indicate areas of revenue leakage. Fourthly, it would act as a valuable tool to monitor the performance of machinery and Fifth, the system would provide an air of transparency and efficiency to entire taxation system.
The basic algorithm of CREST is monitoring of declarations made in Sales Tax Return with available data of third party to have 360-angle review. For this purpose, the CREST utilises data of return, registration, import export invoices, summaries and utilities.
The registered person shall be given a chance to explain any discrepancy. It will be put in queue in case and on the degree of discrepancy. The system shall also show average benchmark in different sectors on the basis of taxpayer's declaration. The person showing transaction well below such marks will be liable to audit. System doesn't have any room to select any case on presumptive basis.
The CREST shall record the performance of all officers and through alerts will remind the next in command if the assigned task is not performed within specified time frame. All officers shall be assigned access only to areas of their specified job. Officers falling below their performance may lose special allowance or double pay package.