FBR Broadens Scope of Sales Tax Suspension for Registered Individuals

The Federal Board of Revenue (FBR) has broadened the reach of sales tax suspension affecting registered individuals.

Following revisions to the Sales Tax Rules 2006, the FBR has clarified the conditions that may lead to the suspension of sales tax registration. Suspension may be enacted if there is a denial of access to inspect business premises as outlined under Sections 40B and 40C of the Sales Tax Act.

Furthermore, suspension can occur if records requested as per sections 25 and 37 are not furnished.

Key Restrictions Imposed by FBR on ST-Registered Persons

Suspension may also be triggered by disproportionate business activity where the turnover is five times greater than the combined declared capital and liabilities. Further reasons include transactions conducted with suspended individuals, purchases from or sales to suspended individuals exceeding 10% of total purchases/supplies (or surpassing Rs50 million, whichever is higher), failure to submit sales tax returns, non-filing for three successive months, ‘null’ (zero activity) filing for six consecutive months, and discovery of tax fraud as defined under Section 2(37).

A tax expert noted that the revocation of suspension must be processed within 30 days of the FBR receiving the taxpayer’s response to the suspension notice.

The term ‘tax fraud’ is now explicitly connected to clause (37) of Section 2 of the Sales Tax Act, 1990.