Non-active taxpayers: FBR urged to keep application of further tax in abeyance

KARACHI: The Karachi Tax Bar Association (KTBA) has requested the Federal Board of Revenue (FBR) to keep the application of further tax onto persons other than active taxpayers in abeyance till the relevant issues are resolved.

In a letter sent to the chairman of FBR, the KTBA said that under the Finance Act, 2022, further tax at 3 percent under section 3(1)(A) of the Sales Tax Act, 1990 was only required to be charged and paid on taxable supplies made to a person, who is liable to be registered under the Sales Tax Act, 1990 but had not obtained a Sales Tax Registration Number (STRN).

It said that the Finance Act, 2022 has broadened the scope of applicability of further tax on supplies made to registered persons who are not active taxpayers, adding that the said change in law has brought about various practical issues and hindrances in its implementation.

It said that this condition has created quite a hassle for them to check and verify the particulars of each customer at the time of filing of sales tax return and in various cases, there are hundreds of customers to whom thousands of invoices are issued. Therefore, it is requested the FBR enable a similar feature to the past where the board as its own identifies whether the registered person is active or not for the ease of taxpayers.

Furthermore, the KTBA said that it was practically impossible for a Registered Person (RP) to be aware of the fact whether its customer has filed the return of income by the due date, and quarterly/ annual withholding tax statements under section 165 of the Ordinance.

In addition, for an RP to achieve active taxpayer status for sales tax, he needs to file quarterly/ annual withholding tax statements under section 165 of the Ordinance. Interestingly, there is no option on the IRIS portal which may reflect the filing status of the quarterly/ annual withholding tax statements under section 165 of the Ordinance of an RP and it is a major impediment based on which a person could not determine the active taxpayer status of its customers.

It said that active taxpayer status reflection on the online verification portal for sales returns is based on the filing of monthly sales tax returns irrespective of the fact that these are filed by the due dates or not. This does not align with the condition provided in the definition of an active taxpayer in the Act.

Moreover, the online portal does not have any option to check the status of the person on any given specific date rather it reflects the status at the given time. Therefore, if a person wants to verify the status of their customer on any given date, he is unable to check the same from the online portal. It may be noted that for income tax purposes, the active taxpayer status of a person could be checked on any given specific date.

Further, the active taxpayer status is updated on the FBR Portal on a real-time basis, and therefore, it is difficult to track the status of any customer from the date of issuance of the invoice to the declaration of such invoice.

Therefore, it is requested that similarly, a likewise option may be given to check the active taxpayer status of a person for sales tax as well.

Keeping the above problems being faced by the taxpayers in view, KTBA has requested the board to keep the application of further tax onto persons other than active taxpayers in abeyance till the relevant issues are resolved.