The Federal Board of Revenue (FBR) has launched recovered proceedings against units which failed to deduct and deposit 1/5th sales tax in the exchequer. The FBR has recently issued instructions to the Chief Commissioners of the Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) on Thursday on the monitoring of sales tax withholding tax for the tax period from April 2015 to June 2015 under SRO 660(1)/2007 dated 30-06-2007 and SRO 98(1)/2013 dated 14-02-2013, read with Sales Tax Special Procedure (Withholding) Rules, 2007, to recover any short deduction from sales tax withholding agent.
Tax expert told Business Recorder on Thursday that sales tax withholding @ 1/5th of the sales tax is required to be withheld on taxable purchases under Sales Tax Special Procedure Rules 2007. These rules have recently been modified as well and sales tax withholding is now required to be done at the time of purchases. The exclusion from sales tax withholding from papers, plastic product and steel product were also withdrawn, which resulted in expansion of its scope.
The sales tax withholding is used to curb the phenomena of fake and flying invoices as well as the Federal Board of Revenue also enables to collect the substantial net amount of value addition immediately on purchases. Supplies of electrical energy, natural gas, petroleum products, telecommunication services, petroleum products supplied by OMCs and refineries, goods falling in the third schedule and supplies by commercial importers who pays value addition sales tax at Customs stage are exclude from the scope of sales tax withholding.
The FBR in continuation to its earlier instructions along with list of made short deduction of 1/5th amount of sales tax withholding during the period July 2014 to March 2015, has issued fresh instructions to check appropriate payment of sales tax withholding for subsequent periods. All the chief commissioners are requested to generate a list of the units from April 2015 to June 2015 to check correct deduction of 1/5th of the sales tax withholding and analyse data in order to recover the short deduction of the sales tax withholding if any from these units on priority.
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