FTO Restricts FBR from Imposing Penalties Due to Departmental Delays

ISLAMABAD: In a significant move, the Federal Tax Ombudsman (FTO) has prohibited the Federal Board of Revenue (FBR) from levying penalties on sales tax-registered individuals when sales tax returns are delayed due to the tax department’s own inefficiencies.

The FTO issued a comprehensive directive to the FBR on Tuesday regarding this matter.

The FTO has clarified to the FBR that neither the Sales Tax Act of 1990 nor the Sales Tax Rules of 2006 contain any legal provision that prevents a registered person from submitting a current-period sales tax return.

The FTO stated, “Denying permission to file sales tax returns violates the fundamental rights of registered individuals. Being placed on the inactive taxpayers’ list results in financial losses for taxpayers, as their suppliers will withhold payments.”

According to the FTO’s order, this investigation was self-initiated under Section 9(1) of the Federal Tax Ombudsman Ordinance, 2000.

This platform has received numerous complaints concerning delays by Commissioners Inland Revenue (CIRS) in granting permission to file sales tax returns, negatively impacting corporate sector operations. Investigation confirmed such delays.

The complaint’s details indicated that if a registered individual fails to file sales tax returns for six consecutive tax periods, they must obtain prior authorization from the relevant Commissioner-IR to file for the subsequent period.

Requests for permission are submitted electronically via the system, as per Section 26AB of the Sales Tax Act, 1990, and Rule 14(3) of Chapter II of the Sales Tax Rules, 2006.

The notice highlighted that registered individuals failing to file returns for six consecutive periods must seek permission from the Commissioner-IR to file a current-period return.

Furthermore, it was alleged that CIRS often neglect these requests, causing significant delays and hindering the ease of doing business.