Condition of CNIC number applicable only if purchases made from Sales Tax registered persons: FBR

ISLAMABAD: The Federal Board of Revenue (FBR) on Monday clarified that the amendment regarding provision of National Identity Card (CNIC) number at the time of purchases had been made in the Sales Tax Act, 1990 (Section 23) and not in any other taxation statute.

This clearly means that this provision was only applicable if purchases were made from a 'Sales Tax Registered person', the FBR said in a circular issued on Monday.

It added that at present there were only 41,484 sales tax registered persons who were actually paying some tax with their returns and this provision requires that if a purchase was made from a sales tax registered person, then 'CNIC' number of the 'Buyer' was to be provided in limited situations, as explained in the following paragraphs.

Provision of CNIC number allows sales to unregistered persons also.

The law further provides this condition will not apply if the value of purchases is below Rs.50, 000 in case sale is being made to an 'Ordinary Consumer'. The term 'Ordinary Consumer' is well defined. It means purchases for own non-business use by the end consumer.

In order to further safeguard businesses operating in a reasonable manner the law specifically provides that "if it is subsequently proved that CNIC provided by the purchaser was not correct, liability of loss or penalty shall not arise against the seller in case of sale made in good faith."

This provision has inter alia been placed for 'business to business' transactions and few transaction in a value higher than Rs.50,000 by limited number of end consumers and that too from sales tax registered person only and also to avoid unverifiable, non-genuine, fake and fictitious business buyers which results in huge sales tax loss in the value chain. This is all the more necessary now onwards as Export Oriented Sectors which were zero rated will now be eligible for refunds. FBR is fully committed for automated expeditious release of refunds.

There is no intention to place any hurdle in business transaction or to use this provision for any harassment accordingly for this purpose, it is further clarified,

As stated earlier no action will be taken against the sellers if any error or incorrectness is identified subsequently provided the transaction has been made in good faith.

The meaning and operation of law with reference to the term good faith is well settled. However, in order to provide further assurance in this regard following policy guidelines are laid down.

No action under this provision will be undertaken without the approval of Chief Commissioner of the jurisdiction. Furthermore, where the incidence exceeds Rs 5 million, the action will require further approval of member operation or director general (export oriented sector) or member (IR policy) as the case may be.

No action will be undertaken unless action has been undertaken against the person who has used non-genuine CNIC.

The FBR added that it is fully conversant of cultural constraints and traditions of the country.

Therefore, in case of purchase above Rs 50,000 by an ordinary consumer being a female, the CNIC of the husband or the father will be considered valid for the purpose.