ISLAMABAD: The Federal Board of Revenue (FBR) has approved a new tax audit policy for 2017 pertaining to tax year 2016.

Under the new policy, criteria for selection of cases for all taxes — income tax, sales tax, federal excise duty — for 2016 would be parametric. Balloting will be held shortly.

The major facilitation under the new policy would be that a taxpayer once selected through ballot will be exempted from audit for next consecutive two years under Section 214C of the Income Tax Ordinance 2001, under Section 72B of the Sales Tax Act 1990 and 42B of the Federal Excise Act 2005 respectively.

For implementing this decision, the base year would be 2015 for income tax and tax periods July 2014 to June 2015 for sales tax and federal excise duty, respectively.

The parameters for selection of cases for audit in the audit policy for all three federal taxes are different.

According to Section 214C (1A) of Income Tax Ordinance 2001, the FBR will keep the parameters confidential. The risk parameters determined for selection of audit cases under sales tax were determined by the FBR.

As per the parameters, decline in value of supplies is greater than 10pc over last year; consistent decrease in output tax/input tax ratio over last three years; decrease in ratio of taxable supplies to total supplies by 10pc or more as compared to previous year; non-filer, nil-filer or null-filer for more than 6 months in the year in case the registered person is showing any turnover in income tax return of the corresponding period.

The other parameters include manufacturers showing value addition of less than 10pc; where more than 30pc purchases are from “unregistered persons”; where more than 30pc sales are to “unregistered persons”; and increase in carry forward of input tax and reduction in sales by margin of 10pc.

For the audit of federal excise, FBR has approved several risk parameters.

These include decline in value of supplies is greater than 10pc over last year; consistent decrease in output tax/input tax ratio over last three years; decrease in proportion of taxable supplies to total supplies by 10pc as compared to previous year; non-filer, nil-filer or null-filer for more than 6 months in the year, in case the registered person is showing any turnover in income tax return of the corresponding period; manufacturers showing value addition of less than 10pc; where more than 30pc purchases are from unregistered persons; where more than 30pc sales are to unregistered persons; increase in carry forward of input tax and reduction in sales by margin of 10pc.

The audit policy can be accessed at www.fbr.gov.pk

Published in Dawn, April 11th, 2018