Sales Tax Suspension: What It Means
If a registered person fails to file their sales tax returns for three consecutive months, their sales tax account is suspended. The suspension can also occur due to other reasons, such as non-payment of tax, discrepancies in returns, or non-provision of documents requested by the tax authorities.
Implications of Sales Tax Suspension
A suspended sales tax account can have severe implications, such as:
- No Input Tax Adjustment: A suspended person cannot adjust the input tax, which means that they cannot claim the tax paid on their purchases.
- No Refund of Tax: A suspended person cannot claim any refund of tax, even if they are eligible for it.
- No Tax Adjustment or Refund on Invoices: If invoices are issued by a suspended taxpayer, the recipient of the invoice cannot adjust the tax on their purchases or claim a refund on it.
- Show Cause Notice: The commissioner will issue a show cause notice to the suspended person within seven days of the suspension of their account.
- Opportunity of Being Heard: The taxpayer will be given a chance to explain their position within fifteen days of receiving the show cause notice.
- Invalid Suspension: If the commissioner fails to send the notice of the order of suspension within seven days, the suspension is invalid.
How to Restore Your Suspended Sales Tax Account
If your sales tax account has been suspended, you can restore it by following these steps:
- Payment of Outstanding Dues: Clear all outstanding dues, including any penalties or fines that may have been imposed.
- Filing of Returns: File all overdue sales tax returns for the period in which your account was suspended.
- Application for Restoration: Apply for the restoration of your sales tax account to the relevant Regional Tax Office (RTO). The RTO will conduct an audit and may order the removal of suspension if they find everything in order.
- Other Competent Authority: If the RTO does not order the removal of suspension, you may approach other competent authorities, such as the Appellate Authority, Court, or Federal Tax Ombudsman (FTO), to seek relief.
Avoiding Sales Tax Account Suspension
It is important for businesses to take measures to avoid sales tax account suspension. One of the most important steps is to ensure timely filing of sales tax returns. Businesses should file their returns on a regular basis, ideally on a monthly basis. This will help to avoid suspension of their sales tax account.
In addition, businesses should ensure that they maintain accurate records of all their sales and purchases. This will enable them to file accurate sales tax returns and avoid errors which can lead to suspension of their sales tax account.
In conclusion, businesses in Pakistan should take the issue of sales tax account suspension seriously. The consequences of a suspended sales tax account can be severe and can have a negative impact on business operations. It is important for businesses to file their sales tax returns on time, maintain accurate records, and take all necessary measures to avoid suspension of their sales tax account. By doing so, they can ensure that their business operations run smoothly and efficiently.