The Federal Board of Revenue (FBR) recently highlighted the importance of complying with tax regulations and the consequences of falling under the “non-active taxpayer” status. This article aims to provide a clear understanding of Rule 12A of the Sales Tax Rules, 2006, and its implications for businesses.
What is a Active Taxpayer?
An “active taxpayer” in this context is a registered person who does not:
- Face blacklisting or suspension: Their registration is valid and active.
- Miss tax return deadlines: They file income tax returns and other required tax statements on time (within two consecutive tax periods).
- Skip filing income tax returns: They fulfill their obligation to file Income Tax returns as per the Income Tax Ordinance.
- Neglect withholding tax statements: They submit quarterly or annual withholding tax statements as mandated by the Income Tax Ordinance.
Fails to meet above conditions and the tax payer will be non-active taxpayer
What are the consequences?
Non-active taxpayers face significant restrictions, including:
- Inability to import or export goods: They cannot file Goods Declarations for import or export, effectively barring them from international trade.
- Issuing sales tax invoices: Non-active taxpayers cannot issue sales tax invoices, making their transactions ineligible for tax deductions.
- Claiming input tax or refunds: They are barred from claiming input tax or any refunds on taxes paid on purchases.
- Loss of concessions: Any benefits or concessions offered under the Sales Tax Act or related rules become inaccessible.
- Purchasing restrictions: No person, including government entities and public organizations, can purchase goods or services from a non-active taxpayer.
- Limited input tax credit: For registered buyers, claiming input tax credit on invoices issued by a non-active taxpayer is impossible. A warning message will be displayed during filing, and no credit will be admissible.
Avoiding Non-Active Status:
To maintain active taxpayer status and avoid these restrictions, businesses must:
- File their sales tax returns regularly and on time.
- Pay all taxes due in full and within the prescribed deadlines.
- Maintain proper records of their sales and purchases.
- Renew their registration with the FBR annually.
Remember:
Operating as a non-active taxpayer can significantly hinder your business operations and expose you to potential legal repercussions. By understanding the rules and meeting your tax obligations, you can ensure smooth business operations and contribute to a transparent tax system.
