The Federal Value-Added Tax (VAT) Act 2010 has introduced a new Third Schedule to specify penalties and punishments for the registered taxpayers, who would violate VAT rules and regulations from July 1, 2010. According to the Third Schedule of the Federal VAT Act, the board would impose penalty of Rs 5,000, or three percent of the amount of tax involved, whichever is higher, on failure to issue tax invoice.
In case of failure to obtain registration or non-compliance of compulsory registration, penalty would be Rs 10,000 or five percent of the tax involved whichever is higher provided that in case of non-compliance of compulsory registration, the minimum penalty shall be Rs 100,000.
Late filing or non filing of VAT return would be liable to penalty of Rs 5,000 provided that if a return is not filed within fifteen days of the due date, a penalty of Rs 100 for each day of default shall be paid.
The penalty of Rs 5,000 would be charged in case of failure to notify change of address or increase in business capacity of material nature in the particulars of registration.
In case of failure to deposit tax, penalty would be Rs 10,000 or five percent of the amount of tax involved, whichever is higher provided that if the amount of tax or any part thereof is paid within fifteen days from the due date, penalty of five hundred rupees for each day of default shall be paid. If the amount of tax due is not paid even after the expiry of a period of sixty days of issuance of the notice for such a payment by a competent officer of Inland Revenue, the defaulter shall, further be liable, upon conviction by a Special Judge, to imprisonment for a term which may extend to three years, or with fine not exceeding the amount of tax involved, or with both.
No penalty shall be payable if any miscalculation is made for the first time during a year. The non-maintenance or defective maintenance of records would be liable to penalty of Rs 10,000 or five percent of the amount of tax involved, whichever is higher.
The penalty of Rs 10,000 would be imposed in cases of failure to furnish any information required under VAT Act or the rules made thereunder. The penalty would also be imposed on any person who submits a false or forged document to Board; destroys, alters, mutilates or falsifies the records including a tax invoice or makes false statements, false declaration, false representation, false personification, gives any false information or issues or uses a document which is forged or false. The penalty would be Rs 25,000 or 100 percent of the amount of tax involved, whichever is higher provided that such person shall further be liable, upon conviction by a Special Judge, to imprisonment for a term which may extend to five years, or with fine not exceeding the loss of tax involved, or with both.
The penalty regime would be applicable for denying or obstructing the access of any officer of Inland Revenue to the business premises, registered office or to any other place where records are kept, or otherwise refusing access to the stocks, accounts or records or fails to present the same when required by such officer. In such cases, penalty would be Rs 25,000 or one hundred percent of the amount of tax involved, whichever is higher provided that such person shall further be liable, upon conviction by a Special Judge, to imprisonment for a term which may extend to three years, or with fine not exceeding the amount of tax involved, or with both.
In case of committing, causing to commit or attempting to commit tax fraud, or abetting or conniving in committing of tax fraud, penalty would be Rs 5,000 or one hundred percent of the amount of tax involved, whichever is higher provided that such person shall further be liable, upon conviction by a Special Judge, to imprisonment for a term which may extend to five years, or with fine not exceeding the loss of tax involved, or with both.
In cases of violation of any embargo placed on removal of goods in connection with recovery of tax, penalty would be Rs 25,000 or ten percent of the amount of tax involved, whichever is higher provided that such person shall further be liable, upon conviction by a Special Judge, to imprisonment for a term which may extend to one year, or with fine not exceeding the loss of tax involved, or with both.
For obstructing the officer of Inland Revenue in the performance of his official duties, penalty would be Rs 25,000 or one hundred percent of the amount of tax involved, whichever is higher, provided that such person shall further be liable upon conviction by a Special Judge to imprisonment for a term which may extend to one year or with fine not exceeding Rs 50,000 or with both. In case of failure to fulfil any of the conditions, limitations or restrictions specified or prescribed in a notification issued under any of the provisions of this Act, penalty would be Rs 5,000 or three percent of the amount of tax involved, whichever is higher. In cases of obtaining repayment, drawback, adjustment or refund on the basis of fake, untrue or incorrect documents, penalty would be Rs 50,000 or fifty percent of the amount of tax involved provided that such person shall further be liable, upon conviction by a Special Judge, to imprisonment which may extend to five years or with fine not exceeding Rs 100,000 or with both.
The contravention of any of the provisions of this Act for which no specific penalty has been provided in this Act, penalty of Rs 10,000 or three percent of the amount of tax involved, whichever is higher would be applicable. In case of repetition of an offence for which a penalty is provided under this Act, penalty would be twice the amount of penalty provided under the Act for such offence. Under relevant see section 89 (1) of the Federal VAT Act, a person who commits an offence described in column (2) of the Third Schedule of this Act shall, in addition to and not in derogation of any punishment to which the person may be liable under any other law, be liable to pay the penalty mentioned against that offence. The imposition of any penalty or fine under this section shall not affect the liability for tax or default surcharge, of a person on whom such penalty or fine has been imposed, VAT Act added.