ISLAMABAD, June 7: The government proposes higher penalties for repeated offences and empowers sales tax officers to obtain third party information regarding any tax fraud from the fiscal year 2006-07.

Through an amendment in the section 33 of the Sales Tax Act, 1990, higher penalties were proposed to differential between an occasional and a habitual defaulter. Tax officials termed the decision in line with international best practices.

Another new section of 38B has been introduced in the sales tax act to enable the sales tax officers to obtain third party information in the cases other than the cases of tax fraud. However, the powers of sales tax officers were withdrawn to search the premises of a registered person without warrant. Searches can now be made only after obtaining a search warrant from the magistrate.

The government has proposed a fine of Rs25,000 for non-submission as penalty for non-submission of the summary of sale and purchase invoices to verify input tax adjustments and refunds claimed by the taxpayers to the sales tax department.

Through the Finance Bill, legal provisions incorporated in the sales tax law to introduce the concept of joint and several liability of all partners in the supply chain countering the ‘missing trader fraud’ to secure the government revenue. With the amendment, all partners in the supply chain would be jointly and severally liable in case the tax due on any stage of supply is not deposited.

Through amendments in the law, the government disallowed input tax credit/refund in case the tax is not deposited; a time limit if 90 days fixed for filing of revised return with the prior approval of collector; incorporated sales tax accounts in the list of records to be maintained by a registered person; included financial and operating leases in the definition of supply; the CBR was empowered to fix the value of imported goods for sales tax purposes; and abolished the provisions regarding voluntary registration of person making exempt supplies

The government introduces a new section 50A in the sales tax law to introduce the use of computerised system. The present drive for automation initiated by the CBR includes introduction of a comprehensive computerised system for complete automation of business processes. The amendment is aimed at empowering the CBR to make rules for regulating the use of computerised system by the taxpayers, amending the sales tax law to initiate proceedings in cases of deliberate short filing, without giving show-cause notice.

Since there was no effective mechanism in the sales tax law to recover the legitimate revenue deliberately short paid by taxpayers, the measure is aimed at empowering the department to proceed against such deliberate short filers without show-cause notice.1