ISLAMABAD: The Federal Board of Revenue’s provision to make it mandatory for ordinary citizens to show Computerised National Identity Card (CNIC) in case of over Rs50,000 worth of purchase from a registered sales tax seller has come into effect from today (Saturday, Feb 1).
“In case of violation, the person involved in the transaction will be prosecuted. Traders having a turnover up to Rs100 million for the tax year will not be considered withholding agents,” read a notification issued by FBR last month to clarify issues pertaining to the same.
“In the case of a female buyer, the CNIC of her husband or father will be considered valid for the purchase. The condition will not apply if the value of purchases is below Rs50,000 in case sales are being made to an ordinary consumer.”
According to the FBR, the main purpose of the CNIC condition was to document business-to-business transactions and identify fictitious business buyers that disturb the tax value chain.
The FBR clarification came through a sales tax circular issued to explain the amendments made in the Sales Tax Act, which made it mandatory for buyers to show CNIC on purchases made from a sales tax registered person.
As of Jan 22, 2020, there were 41,484 such sales tax registered persons who were regularly filing returns.
As per the amendment, “If a purchase is made from a sales tax registered person, the CNIC number of the buyer is to be provided in limited situation. Provision of CNIC number does not mean that the buyer has to be a registered person under the sales tax law.”
The FBR further clarified, “If it is subsequently proved that CNIC provided by the purchaser was not correct, the liability of loss or penalty will not arise against the seller in case the sale is made in good faith.”
In Pakistan, under the present regime and also under the proposed one for retailers, small and medium-sized retailers fall outside the sales tax regime. Therefore, sales by such persons would not be affected by this provision in any manner.
Moreover, no action would be taken against the seller if any error or incorrectness was identified subsequently, provided the transaction has been made in good faith. Certain policy guidelines will be followed in this regard.
“No action will be undertaken without the approval of the chief commissioner of the jurisdiction. Furthermore, where the incidence exceeds Rs5 million, the action will require further approval of member operation or director general (export-oriented sector). No action will be taken unless it has been undertaken against the person who has used fake CNIC,” the FBR stated.