Thousands of sales tax de-registration applications are pending with the Federal Board of Revenue (FBR) due to strict audit requirements for leaving the sales tax registration system, it is learnt.
According to sources, a large number of sales tax de-registration applications are pending with the FBR under Sales Tax Rules for Registration, Compulsory Registration and De-Registration. The final audit is a mandatory requirement for every person seeking de-registration with the sales tax department. Resultantly, many dormant companies or those which have closed their businesses are reluctant to opt for deregistration. Likewise those who applied for de-registration are also unable to get out of the system due to complicating audit process. These units are still filing 'nil' and 'null' returns.
Sources said that in the past tax department has also compulsorily registered many units with the tax department but later these units stopped or closed their businesses. These units are appearing in numbers but actually have no contribution in revenue collection Therefore, thousands of units are filing 'nil' sales tax return or not filing returns due to delay in completion of audit by the tax department.
Sources said likewise many service providers have obtained sales tax registration, but after 18th amendment their jurisdiction is transferred to provinces. These service providers are also appearing in registration database but actually they have nothing to do with federal sales tax.
To a query whether sales tax de-registration and cancellation are same things, sources said that under rule 11 of the Sales Tax Rules, de-registration and cancellation of registration are entirely two different things. The registered persons have to follow a detailed procedure for obtaining de-registration certificates. Once a person is de-registered, his sales tax registration number (STRN) cannot be restored. In case of cancellation of registration by tax department, the proceedings can be initiated against the individual. The department can also re-activate the sales tax registration in cases of cancellation. Thus, cancellation of sales tax registration and de-registration process cannot be treated as same under the Sales Tax Rules. The de-registration application has been filed by the registered person whereas the cancellation of registration is being done by the tax department. Separate processes have been applied in two different legal situations under the sales tax law.
Thus, the department cannot give similar treatment to the de-registered persons or cancelled registrations.
The Local Registration Office, upon completion of any audit or inquiry which may have been initiated consequent to the application of the registered person for deregistration, shall direct the applicant to discharge any outstanding liability which may have been raised therein by filing a final return. If a registered person fails to file tax return for six consecutive months, the LRO may, without prejudice to any action that may be taken under any other provision of the Act, after issuing a notice in writing and after giving an opportunity of being heard to such person, recommend to the Board for cancellation of the registration after satisfying itself that no tax liability is outstanding against such person, they added.