Mohsin Siddiqui (Chief Reporter)
The Federal Board of Revenue (FBR) has issued a crucial clarification addressing several problems related to sales tax return filing faced by the business community under the contentious SRO 350(I)/2024. This move aims to resolve four key issues and ensure smoother compliance with the new regulations.
The FBR’s clarification targets four primary concerns related to the sales tax return filing under SRO 350(I)/2024. These include:
Auto-deletion of Purchase Invoices Non-filing of Returns by SNGPL/SSGCL Non-submission of Provisional Sales Tax Returns Return Filing by Distributors, Wholesalers, or Retailers One of the significant issues addressed is the auto-deletion of purchase invoices. According to the new rules, the sales tax return submitted by a buyer is treated as provisional until the respective seller files their return for the same tax period. If the seller fails to file, the system automatically deletes the purchase invoices from Annexure “A” issued by the non-filer supplier. This auto-deletion impacts the buyer’s sales tax liability, as the un-submitted purchase invoices are removed from Annex-A, reducing the value of purchases and input tax adjustment in Annexure F.
The FBR clarified that this mechanism is not a flaw but a necessary measure to prevent fake input tax creation and transmission. The system’s auto-deletion feature and the re-computed liability remain in place even if the supplier files their return after the last day of the month.
The second major issue pertains to the non-filing of returns by Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL). Invoices issued by these companies often cause returns to be held provisional. To address this, the FBR’s Operations Wing relaxed the second proviso to rule 18(3) of the Sales Tax Rules, 2006, introduced by SRO 350(I)/2024. This relaxation ensures that returns are not held provisional solely due to the non-filing of returns by SNGPL and SSGCL, and it applies retrospectively.
Another issue involves the non-submission of provisional sales tax returns due to a negative figure in Annexure-F, resulting from the auto-deletion of purchase invoices and input tax. The FBR explained that the consumption in Annexure-F is filled out manually by the registered person. Therefore, they requested that Annexure-F be made editable to allow for the input of changed consumption figures after the auto-deletion of purchase invoices and input tax.
The final issue addressed concerns the return filing by distributors, wholesalers, or retailers dealing with third schedule items. The business community had objected to the new provision inserted under rule 18(3) of the Rules through SRO 350(I)/2024, dated March 7, 2024. After the amendment, the sales tax return submitted by a buyer is treated as provisional until the respective seller files their return for the same tax period.
To resolve this, the FBR requested that registered persons’ returns for a tax period, claiming input tax on invoices issued by a manufacturer of third schedule items, should not be held provisional merely because the manufacturer has not filed their return for the same tax period. This relaxation applies to the second proviso to rule 18(1) of the Sales Tax Rules, 2006. However, the condition of the said proviso remains applicable concerning invoices issued by registered persons other than the manufacturer.
