Business premises: sales tax officials may be deputed

The Federal Board of Revenue (FBR) has ordered Collectors of Sales Tax to invoke a harsh provision, ie section 40B of the Sales Tax Act 1990, to depute sales tax officials on the business premises of manufacturing units, hotels/restaurants and any other business establishment where massive revenue leakage is taking place.

Sources told Business Recorder on Monday that according to the instructions, “enforcement actions like proceeding under 40B in selective cases should be made”. The directive said that there was need of transparent enforcement of tax laws. The sectors like hotels and restaurants warranted close monitoring, and analysis of data for effective enforcement has to be done on selective basis.

However, the selection of cases under section 40B should be done in an objective manner, where leakage of revenue is rampant. So far, the FBR has deputed sales tax officials at selected businesses. The Board had deputed sales tax officials at sugar mills to monitor their actual production in the past. Section 40-B empowers FBR to post sales tax officers at the premises of registered person to monitor their production, sale of taxable goods and stock position.

It is worth mentioning that the board is very cautious in exercising section 40-B and does not permit collectors to use these powers until it is extremely necessary for detection of tax evasion. This is for the first time that the FBR has allowed the collectors to selectively use this harsh provision at different business premises since its promulgation in budget 2003-04.

Sources said that generally there are complaints about less deposit of tax in certain sectors, like hotels, beverages, paper, etc. There is a possibility that the collectors might invoke 40B for deputation of sales tax officials at the business premises of selected units of these sectors.