In Pakistan, registered businesses are required to pay sales tax on their taxable supplies. Failure to pay the due tax or any part of it can result in the imposition of default surcharge. Default surcharge is a type of fine that is imposed by law and is calculated at a rate of 12% per annum of the amount of tax payable or the amount of refund claimed.
Default surcharge can be imposed in various situations such as when tax is not paid, partial amount of tax due is not paid, claimed a tax credit that was not due, claimed a refund that was not due, made an adjustment that was not applicable, or applied zero rate of tax wrongfully.
If fraudulent activity is involved, the rate of surcharge doubles to 24% per annum. However, the government can remove the surcharge by notification in official gazette.
The calculation of surcharge period for tax refunds begins from the time when the refund is received. For non-payment of tax due, the time of calculation of surcharge is the 16th day of the month after the default occurred.
Additionally, businesses in Pakistan should be aware that there is a penalty of Rs. 10,000 for non-filing of monthly sales tax returns, which is an increase from the previous penalty of Rs. 5,000.
In conclusion, default surcharge is a penalty imposed on registered businesses in Pakistan for non-payment or late payment of sales tax. It is important for businesses to ensure timely payment of taxes and file their returns on time to avoid the imposition of default surcharge and other penalties.