Sales Tax Registration & Compliance All you Need to Know

Understanding sales tax registration and compliance is essential for any business operating in Pakistan. This article provides a comprehensive guide, outlining the registration process, ongoing obligations, and filing procedures.

Sales Tax Registration Requirements:

• FBR Credentials: A valid login ID and password obtained from the Federal Board of Revenue (FBR) are mandatory.
• Business Identification: A color copy of the CNIC for the owner(s), directors, or partners is required.
• Business Details: Provide a copy of your business letterhead, along with details of your business activity and its starting date.
• Office Location: Submit a rent agreement or ownership documents for your business premises. Proof of occupancy is crucial.
• Utility Verification: Attach a copy of your latest paid electricity bill for the office premises.
• Financial Documentation: Provide a bank maintenance certificate from your business bank account.
• For GST Registration (Optional): For businesses seeking Goods and Services Tax (GST) registration specifically with FBR, GPS-tagged photos of the electricity meter and office premises are required.

Additional Documents for Non-Sole Proprietors:

• Company or AOP Registration: If your business is a company or an Association of Persons (AOP), submit incorporation/registration certificates.
• Internal Governance Documents: Provide a copy of your Memorandum and Articles of Association.
• Authorization: An authorization letter from the principal officer is required for companies and AOPs.

Responsibilities of a Registered Sales Taxpayer:

• Tax Collection and Deposit: Registered businesses are responsible for charging, collecting, and depositing sales tax on every invoice they raise.
• Monthly Sales Tax Returns: Filing accurate and timely monthly sales tax returns is mandatory.
• Record Keeping: Properly maintain detailed sales records as per tax regulations.

Sales Tax Invoice Requirements:

Issuing a tax invoice is essential at the time of selling goods or rendering services. These invoices must include:

• Supplier Information: Name and address of your business.
• Tax Number: Your valid sales tax registration number.
• Customer Details: Name and address of the customer.
• Invoice Details: Date of issuance, unique invoice number, and description of goods/services provided.
• Value Breakdown: Clearly state the value of goods/services excluding tax, sales tax amount, and total value inclusive of tax.

Sales Tax Return Filing:

Sales tax returns are typically submitted on a monthly basis. Here are key dates to remember:

• Annexure C Submission: Submit Annexure C (a document summarizing sales and purchases) by the 10th of every month.
• Sales Tax Challan Submission: Pay any sales tax owed through a challan (payment slip) by the 15th of every month.
• Sales Tax Return Filing Deadline: Submit your completed sales tax return by the 18th of every month.

Penalties for Non-Compliance:

Failing to meet filing deadlines can lead to penalties.

• Late Filing: A penalty of Rs. 10,000 applies for late filing. A reduced penalty of Rs. 200 applies if the return is filed within ten days of the due date.
• Late Payment: Penalties for late tax payments are higher. You could be liable for a penalty of Rs. 10,000 or 5% of the tax owed (whichever is higher). If the tax is paid within ten days of the due date, a penalty of Rs. 500 per day of default applies.

Documents Required for Sales Tax Return Filing:

• Sales & Purchase Invoices: Copies of all sales and purchase invoices for the period.
• Withholding Tax Records: Details of any withholding tax deducted by a withholding agent.
• Export/Import Documents: Goods and Delivery notes (GDs), debit & credit notes (if applicable) for exporters/importers.
• Freelancer Income: Total export receipts for freelancers.
• Additional Information: Provide any other information requested by your designated tax consultant.

Nil Returns:

Even if your business didn’t perform any taxable activity in a particular month, you are still obligated to file a “Nil” return by the due date.

Sales Returns and Credit Notes:

In case of returned goods or services, you’ll need to issue a credit note and declare it in the relevant annexure of your sales tax return.

Consequences of Non-Compliance:

Failing to file returns or comply with tax regulations can lead to penalties, suspension of your business operations, and even blacklisting.