Tax authorities are all set to scrutinize customers’ sales invoices containing computerised national identity card (CNIC) details to hunt for potential taxpayers following expiry of relaxation of CNIC condition on transactions above Rs50,000 officials said.
Tax offices would scrutinise monthly sales tax returns submitted by registered taxpayers to check the compliance of information related to CNIC on purchases above Rs50,000.
A new provision to Section 23 of Sales Tax Act 1990 was inserted through Finance Act 2019, under which it was made mandatory for a sales tax registered person to obtain information of CNIC or NTN on sales above Rs50,000.
This condition was applicable from August 1, 2019 under the law.
The introduction of this provision caused panic amongst small traders and shopkeepers and they refused to comply until resolution of other tax issues.
FBR authorities and representatives of traders’ associations at a meeting on October 30, 2019 reached an agreement to resolve tax issues. It was agreed by the FBR that no coercive measures would be taken related to CNIC condition till January 31, 2020.
Although the application of the CNIC condition was deferred till January 31, 2020, no subsequent amendment was made to the sales tax law.
A senior official at the Regional Tax Office (RTO)-II Karachi said as per law, a commissioner of Inland Revenue had been empowered to examine monthly sales tax returns to check sales to unregistered persons.
“Since statutory regulatory order (SRO) is not issued and no amendment has been made to Sales Tax Act 1990 in this regard, therefore, the condition is implemented from August 1, 2019,” the official said, adding that in such scenario, the commissioner could select sales tax returns filed for the month of August 2019 onwards for examination.
They said the purpose of the CNIC condition was to document the sales and purchases in the economy.
Reports suggest the size of the black economy was almost equal to the formal economy in Pakistan.
The official said certain exclusions had been allowed such as CNIC or NTN would not be required in case supplies where the transaction value inclusive of sales tax amount did not exceed Rs50,000, and the sale was being made to an ordinary consumer buying goods for their own consumption and not for the purpose of resale or processing.
Further, in case it was proven that the CNIC provided by the purchaser was not correct, liability of tax or penalty would not arise against the seller, if the sale was made in good faith.