Some field officers of Federal Board of Revenue (FBR) have started recovery proceedings including embargo ie, stoppage of removal of goods from business premises under section 11A of the Sales Tax Act, 1990 and attachment of bank accounts by using SRO.98(I)/2013 as an enforcement tool against taxpayers.
Sources told Business Recorder here on Sunday that under SRO 98(I)/2013 dated February 14, 2013, companies are obliged to deduct sales tax. The purpose behind issuance of SRO 98(I)/2013 was to collect sales tax at source, however, some field officers treat it as a tool to harass taxpayers under the garb of achieving budgetary targets.
When contacted, a Lahore-based tax lawyer, Waheed Shahzad Butt, said that apart from filing regular monthly sales tax returns, every withholding agent as defined under SRO 660(1)2007 was required to withhold sales tax. The sales tax so withheld shall be deposited by the withholding agent in government treasury and the same shall be reported to FBR by such withholding agent through Monthly Sales Tax Return for Withholding Agents required to be submitted electronically through eFBR web-portal.
Contrary to the factual position and without considering/examining the electronically submitted sales tax returns and sales tax withholding agents returns, blind recovery notices have been issued and harsh methods have been adopted by some field officers, based on SRO 98(I)/2013, not only creating serious problems for the business community.
In this regard, Waheed Shahzad Butt of Tax Resolution Services Company has written a letter to the Member Inland Revenue, requesting him to issue instructions to the filed formations not to harass the compliant taxpayers under the garb of SRO 98(I)/2013.
The representation of tax lawyer stated that no doubt FBR mainly relies on withholding tax for collection of taxes and share of withholding taxes in the overall budget target is quite significant. The field officers are not directly involved in direct tax collection because around 90 percent of the budget target of RTOs has been met through withholding taxes. If policymakers compare the contribution of the field officers in the budgetary targets from other than WHT sources, with the operating expenditures incurred on the tax departments, it may lead to an alarming conclusion on their cost-benefit ratios.
Under SRO 98(I)/2013 dated February 14, 2013, all companies and registered exporters are obliged to deduct sales tax on purchases. The purpose behind issuance of SRO 98(I)/2013 was to broaden the documentation and collect sales tax at source by enhancing the scope of withholding agents, however, some field officers treat it as a tool to harass the taxpayers.
FBR introduced withholding sales tax concept from 01.07.2007 vide SRO 660(1)2007 dated 30.06.2007 by promulgating Sales Tax Special Procedures (Withholding) Rules, 2007. Vide SRO 98(1)/2013 w.e.f 14.02.2013 all companies and exporters shall be subjected to 20 percent of withholding tax of the applicable rate of sales tax (at present 16 percent) on all purchases made.
Apart from filing regular monthly sales tax returns under Sales Tax Act, 1990, every withholding agent as defined under SRO 660(1)2007 is required to withhold sales tax from payments made against purchases. The sales tax so withheld shall be deposited by the withholding agent in government treasury and the same shall be reported to FBR by such withholding agent vide a specified Monthly Sales Tax Return for Withholding Agents required to be submitted electronically through eFBR web-portal.
Without considering/examining the electronically submitted sales tax returns and sales tax return for withholding agents, blind recovery notices have been issued and harsh methods have been adopted by some field officers, based on SRO 98(I)/2013, creating serious problems for the business community.
Some filed officers of different RTOs especially officers representing RTO Gujranwala started void recovery proceedings including stoppage of removal of goods from business premises u/s 11A of the Sales Tax Act, 1990 and attachment of bank accounts to blindly implement the SRO 98(I)/2013 and Sales Tax Special Procedure Withholding Rules, 2007, he said. In the presence of hard ground realities and practical challenges faced by the taxpayer community in transmitting the sales tax returns and sales tax withholding agent monthly returns through eFBR web portal electronically, it is requested that:
FBR should depute a team of professionals for practical demonstration, covering sales tax regular returns and sales tax withholding agent returns, to the field formations to avoid untoward situation because it appears most of IR officers are unaware that sales tax withholding agent data is also available on eFBR web-portal of all registered taxpayers; issue strict instructions to the filed formations to examine the sales tax withholding agent returns before initiating recovery proceedings under the garb of SRO 98(I)/2013; Misconduct proceedings may be initiated against the filed formations responsible for void recovery proceedings, Waheed added.