FBR Clarifies Controversial Sales Tax Regulation (SRO 350): Addressing Taxpayer Concerns
The Federal Board of Revenue (FBR) has issued a new Statutory Regulatory Order (SRO) 350(I)/2024, which introduces changes to the Sales Tax Rules, 2006. These changes primarily affect small businesses with only one owner/member (individuals, associations, or single-shareholder companies) who are not manufacturers.
Key Points of Clarification:
- Automatic Invoice Deletion: The FBR clarifies that automatic deletion of purchase invoices and input tax after a supplier misses the filing deadline is an intentional feature to prevent fake input tax claims. This deletion, even if the supplier files later, is considered to be working correctly.
- Provisional Returns due to SNGPL/SSGCL: The FBR acknowledges a relaxation already implemented on June 4th, 2024, which allows filing confirmed returns (not provisional) despite outstanding returns from Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL) for the same month. This relaxation is proposed to be applied retrospectively.
- Negative Figures in Annexure F: To address negative input tax figures caused by invoice deletion, the FBR proposes making Annexure F editable after the system removes invoices. This will allow registered persons to adjust consumption figures manually.
- Provisional Returns for Third-Schedule Items: For distributors, wholesalers, and retailers dealing with third-schedule items (tax collected from end consumer), the FBR proposes a relaxation. These businesses could potentially file provisional returns claiming input tax on invoices from manufacturers (of third-schedule items) even if the manufacturer hasn’t filed yet. This relaxation wouldn’t apply to invoices from other registered persons.
- FBR Clarification document can be accesses here: FBR Clarification on SRO 350
Here’s a breakdown of the key changes:
New Registration Requirements:
- You will need to submit a balance sheet showing your business capital and corresponding assets (e.g., bank accounts, partner contributions with percentages).
- This information will be uploaded electronically to the IRIS system, used for sales tax registration and filing.
- Existing businesses with only one owner/member who haven’t fulfilled this requirement will need to do so within 30 days. Otherwise, they won’t be able to file returns electronically without Commissioner approval.
Biometric Verification:
- Every individual, member of an association, or director of a single-shareholder company will need to visit a National Database and Registration Authority (NADRA) e-Sahulat Centre for biometric verification annually in July.
- Failure to do so will restrict electronic return filing, requiring Commissioner authorization through IRIS.
Return Scrutiny based on Business Capital:
- The FBR will compare your declared sales tax with your business capital. If the sales are five times more than the capital, your electronic return filing may require Commissioner approval through IRIS.
Impact on Buyers:
- If you purchase from a seller who fails to file their sales tax return, your provisional return (filed electronically) might be impacted.
- IRIS may remove those invoices and corresponding input tax credit from your return, potentially increasing your sales tax liability.
Changes for Sellers:
- If you file your return with sales tax payment by the due date, your buyer’s provisional return with your invoice and input tax credit will be accepted by IRIS.
Overall, these changes aim to improve tax compliance and reduce potential misuse of the system by small businesses.
(Latest Update)
Lahore High Court Orders Unblocking of Blocked Tax Returns
A recent order issued by the Lahore High Court has directed the immediate unblocking of tax returns that were previously blocked due to the stringent provisions of SRO 350. This development comes as a relief for many taxpayers who faced difficulties in filing their returns due to the supplier’s non-compliance.
The Lahore High Court Intervention
The Lahore High Court has intervened in this matter by issuing an order to unblock all previously blocked tax returns. This decision is based on the argument that the prolonged blocking of returns negatively impacts taxpayers and businesses.
The court’s order is likely to have a significant impact on the tax filing process, as it provides relief to taxpayers who were affected by the stringent provisions of SRO 350. However, it remains to be seen how the FBR will implement this decision and whether any additional measures will be introduced to address the issue of fake invoices.
Next Steps
Taxpayers whose returns were previously blocked should monitor the FBR’s website and announcements for further updates. It is recommended to consult with a tax professional for guidance on the specific implications of this development for your business.
Frequently Asked Questions:
- FBR Issues Clarification Despite SRO 350 Postponement
- SRO 582 Expands Balance Sheet Requirement for Sales Tax
- How to File Balance Sheet for Sales Tax Registered Business?
- Who Needs to Submit a Balance Sheet with Sales Tax Return?
Are the small businesses all thieves and big one all “Haji Sahiban”
Depends
SRO 350 Suspended or not?
FBR Issues Clarification on Balance Sheet Submission for Businesses (Despite SRO 350 Postponement)
EXTERMELY FOOL PERSONS ARE APPOINTED ON SECRETERY LEVEL. THIS WILL BE LOSS OF 18% TAX ALREADY COLLECTING. Mian Shahbaz Sharif in his 1st speech was informed to the nation, that in every department of govt., 10 persons are needed, while 60 are appointed inspite of 10 persons. Those 50 are unnecessary burdon on govt., revenue and collection. Also such fools are issuing THIS TYPE OF SRO.350(i)2024. To much can be written if necessay.