Services acquired from non-residents: FBR issued notices for not allowing input tax adjustments

ISLAMABAD: Sindh High Court (SHC) has issued notices to the Federal Board of Revenue (FBR) for not allowing input tax adjustment on services acquired from non-resident persons.

The petitioner is a leading Karachi-based energy company and the respondents are FBR Member Inland Revenue (Operations), Large Taxpayer Office (LTO) Karachi and Pakistan Revenue Automation Limited (PRAL).

Under the interim arrangement, taxpayers have been allowed to claim adjustment of input tax withheld by them on the services provided by non-residents/ foreign entities.

‘Transfer to admin pool’: SHC suspends FBR notification

According to an order issued by the SHC, the counsel appearing on behalf of the Petitioners submitted that for some unknown reasons after issuance of SRO No.350 (I)/ 2024 dated 07.03.2024 by FBR under Section 50 of the Sales Tax Act, 1990, the petitioners are being deprived of or are restrained from claiming input tax withheld by them on the services provided by non-residents/ foreign entities. According to them, such input tax was always permitted to be claimed or deducted from the output tax, whereas, Sindh Revenue Board has also no objection in this regard. They further submitted that prior to March 07, 2024 the FBR also had no objection and the petitioners were claiming adjustment of such input.

They submitted that since March 2024, the petitioners are approaching FBR as due to sudden change in the e-portal of FBR, they were unable to claim such input tax; however, they received no response from them. They submitted that the maximum period for claiming adjustment of the input tax is six months and presently, their claim of input pertaining to March is about to expire; therefore, some ad-interim orders be passed in respect of the said input tax claim.

The court order said: Let comments be filed by the respondents, whereas Assistant Attorney General is directed to come prepared with instructions from FBR as to how and in what manner this sudden change has been made in the web-portal of FBR.

As an interim arrangement it is clarified that the petitioners have the right to claim adjustment of such input tax will be subject to outcome of these petitions, whereas, if the petitioners are finally successful, the limitation period of 6 months for claiming such adjustment shall stand extended accordingly, SHC order added.

Copyright Business Recorder, 2024