Illegal adjustments of input tax detected

The Federal Board of Revenue (FBR) has detected that certain registered persons including some big companies falling within the jurisdiction of the Large Taxpayer Units (LTUs) are still claiming input tax adjustment on the basis of invoices not declared by their suppliers in the monthly sales tax returns/summary statements, reflecting serious violation of the Sales Tax Act, 1990.
Sources told Business Recorder here on Sunday that the FBR has expressed serious concerns over unlawful adjustment of input tax claimed by certain registered persons. The FBR has communicated the data of illegal adjustment to the field formations for matching of data with the record in the field formation.
According to sources, the registered persons are entitled to adjust their input tax in terms of the provisions of Section 7 of the Sales Tax Act, 1990 read with section 4 ibid. The automated scrutiny of the taxpayers by the FBR revealed that certain registered persons are claiming input tax adjustment on the basis of invoices not declared by the relevant suppliers in the monthly sales tax returns/summary of invoices available in the system which is contrary to the provisions of sales tax law and liable to be disallowed. In a bid to avoid any ambiguity and bring more clarity, the statement has been prepared taking into consideration the proviso to section 7(1) of the Sales Tax Act, 1990.
Sources said that the field formations have to verify the FBR's information from their own record and a single point audit report be generated for taking legal action against the claimants of illegal tax adjustment. It may be reiterated that the FBR's information pertaining to unlawful adjustment of input tax is extremely valuable in terms of its revenue potential which needs to be effectively utilised so that not only the lost revenue is recouped but also the tendency of claiming illegal input tax adjustments is discouraged and routed out for ever.
In addition to this information, live information regarding unlawful adjustment can also be retrieved by the field formations from FBR Tax-System. The FBR has also directed the field offices to prioritise the audit cases for verification of unlawful input tax adjustment based on certain parameters. For example, type of cases (Refund only, Input Adjustment only & carried Forward only, All) should be considered during audit. The sector in which such adjustments have been claimed would also be analysed for verification purposes.
The FBR has further stated that all audit activities under this head must be fed to the Tax Audit Management System (TAMS) and reports be generated on regular intervals at Commissioner's level to monitor the progress of unlawful input tax adjustment, sources added.