ISLAMABAD: The Federal Board of Revenue (FBR) will issue uniform sales tax, income tax and federal excise recovery rules in budget (2024-25) under the policy of harmonisation of taxes.
Sources told Business Recorder that when a liability of tax arises in accordance with the provisions of the Sales Tax Act, 1990, 30 days’ time is allowed under Rule 71(1) of the Sales Tax Rules, 2006 to the taxpayer to settle the aforementioned liability.
Afterwards, liability becomes recoverable and enforceable upon the expiration of the aforementioned 30 days’ period, provided that no restraining order against the recovery thereof has been issued by the Commissioner IR (Appeals) or any other competent judicial authority. It is further stated that the legal procedure for recovery in Rule 60(3) is similar under the Federal Excise Rules of 2005.
According to sources, the FBR has already issued clear directives to its field formations, on the issue of recovery procedure, to proceed only as per law.
Sources stated that directions have been issued to the field formations, from time to time, not to proceed for recovery of tax when restraining/stay order has been issued by any forum of appeal. In this regard, multiple recovery procedures have already been issued to the IR Field Formations which clearly stipulate not to proceed for recovery in the presence of any restraining order.
By virtue of latest recovery procedure vide C.NO.6(25)S(IR-Operations)/2019-Pt-2/20144-R, dated Feb 7, 2024 related to Income Tax demands issued to all field formations, it has been categorically stated that no recovery proceedings shall be undertaken when there is an order restraining the recovery of tax by any court of law.
Moreover, it has been directed that even after the vacation of restraining/stay order, recovery may only be affected after issuance of notice to the taxpayer.
If the restraining/stay order is received after the initiation of recovery measures under any provisions of the Income Tax Ordinance, 2001 no further action shall betaken for the recovery of tax. It is reiterated, that in the recovery procedure if, and when the duration of such a restraining/stay order expires, then a fresh recovery notice under Section 138(1) of the Income Tax Ordinance, 2001 shall be issued giving the taxpayers at least seven days’ time to make payment of tax or obtain a fresh stay order, before resorting to any further recovery measures. Thereafter, recovery measures under Section 140 of the Income Tax Ordinance, 2001 shall only be undertaken after approval of the committee comprising of senior Commissioners IR and headed by the Chief Commissioner IR.
However, so far as recovery procedure for Sales Tax and Federal Excise Duty (FED) is concerned, the FBR has issued another Circular No.1 dated Feb 7, 2024 keeping in view the provisions of the Sales Tax Act, 1990 and Federal Excise Act, 2005. It is pertinent to state here that under Sales Tax Act, 1990 and Federal Excise Act, 2005, there is no corresponding provision similar to Section 138 of the Income Tax Ordinance,
2001 and thus, issuance of recovery notice pari materia to notice under Section 138(1) of the Income Tax Ordinance, 2001 could not be made for giving the taxpayers at least seven days’ time to make payment of tax.
However, in order to harmonise recovery procedure of three Inland Revenue Tax Laws, administrative instructions have been issued to the IR Field Formations that in case of confirmation of an order by an appellate forum in the cases involving Sales Tax and Federal Excise, at least seven days’ time may be given before initiation of recovery proceedings.
In view of the above, it is respectfully submitted that FBR lays great emphasis on abiding by the directions issued by the courts and other Adjudicatory Forums and has never advocated for the recovery of tax in the presence of any restraining stay order issued by any court of law.
Moreover, by issuing such instructions, it is ensuring that taxpayers have sufficient time to seek legal relief from a concerned appellate forum.
In response to the court’s observation concerning delay of recovery till decision by one independent forum, it is stated that although, Commissioner Inland Revenue (Appeals) is an income tax authority in terms of Section 207(1)(d) of the Income Tax Ordinance, 2001 and is appointed and assigned jurisdiction by the Board under Sections 208 and 209 respectively, but its judicial independence has been ensured by the legislature by barring the Board to interfere, sources added.
Copyright Business Recorder, 2024
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