ST recovery from cellular companies: FBR to carry out internal inquiry against tax officials

The Federal Board of Revenue (FBR) will carry out an internal inquiry against the tax officials, who failed to collect/recover sales tax on the interconnection charges from telecom companies prior to 2010 and strict action would be taken against involved tax officials.
Sources told Business Recorder here on Sunday that the sales tax was applicable on the interconnection charges of the cellular companies for the last many years and it was the responsibility of the then sales tax officials to collect such amount of sales tax from the concerned companies. However, it was a very serious act of omission committed by the then tax officials and detailed investigating would be conducted in this regard. At present, under the Section 65 of the Sales Tax Act 1990 empowers the FBR to exempt sales tax which was not charged in the past. It is also the requirement of general sales tax order issued under Section 65 of the Sales Tax Act that before allowing exemption of sales tax responsibility on the negligence tax officials has to be fixed. However, there is no justification for not charging sales tax which is applicable on the connection charges of the telecom companies. In the presence of the relevant provisions of the Law, it was part of the job of these sales tax officials to charge the relevant amount of sales tax from the concerned companies in the past. This is a serious case of negligence on the part of the tax officials and a full-fledged investigation is being conducted to fix responsibility on the tax officials, who deliberately ignored to charge sales tax on interaction charges in the past. The FBR is legally empowered to recover sales up to last five years under section 36 (1) of the Sales Tax Act, 1990, sources maintained.
According to sources, if the sales tax on interconnection charges was applicable prior to 2010, why the same has not been collected by the then tax officials? In this regard, an inquiry would be required to ascertain reasons behind committing such action in the past. Even the Sales Tax Act allows the tax officials to exempt sales tax which was not charged in the past. This does not mean that the tax officials start ignoring collection of sales tax for the last many years. The FBR will recover the sales tax from the companies under the relevant provisions of the law and cases would be vigorously pursued in courts. In 2010, the matter went to the courts and FBR will ensure to expedite cases in courts to ensure timely recovery of the unpaid amount of tax.