The Federal Board of Revenue (FBR) has restored all kinds of sales tax audit, including post-refund audit, desk audit, and field audit, with the condition to take prior permission of the Board before visiting business premises or manufacturing units for physical verification of data by sales tax officials.
Under the new audit policy, the FBR has empowered the Directorate General of Intelligence and Investigation to conduct audit of registered taxpayers, including businessmen, after taking approval of the board. The FBR has also ordered collectors to conduct audit under the Sales Tax Special Procedure (Withholding) Rules, 2007 to verify whether the government departments/autonomous bodies (withholding tax agents) have deducted 3 percent of total 15 percent payable sales tax involved in transactions of supplies made to these departments.
Sources told Business Recorder on Tuesday that FBR Sales Tax Wing has communicated an effective sales tax audit policy to the collectors of sales tax for immediate compliance. All types of audit have been restored for compliance by the Collectorates with immediate effect. Following are the salient features of the new sales tax audit strategy, issued to the collectors of sales tax:
Firstly, the FBR has decided to reactivate sales tax audit, which should be conducted in accordance with the law. Secondly, it shall be ensured by the collectors that no harassment is caused to the taxpayers during the audit proceedings.
Thirdly, no visit by audit staff to the premises of the registered persons would be made without permission by the Board. Fourthly, selection of audit should be systematic in such a way that it should be objective and parametric so that those who select cases for audit do not conduct audit themselves.
Fifthly, audit may also be entrusted to the chartered accountant firms on selective basis. Sixthly, Directorate General of Intelligence and Investigation shall conduct sales tax audit after getting approval from the Board.
Seventh, Directorate General of Inspection and Internal Audit should be strengthened to support the field formations in conducting regular audit. Eighth, issue focused audit like that of sales tax withheld under SRO 660(I)/2007 be also conducted systematically. Ninth, collectors should give top priority to desk-audit to detect non-filers and non-functional registered persons.
Tenth, collectors should also re-activate post-refund audit. Eleventh, collectors should closely monitor the on-going audit exercise in the field formations. Twelve, except in cases of tax fraud prosecution may not be restored to as it drag both the department and the taxpayer into protracted litigation besides, harassment to the taxpayers, FBR instructions added.