FTO stops FBR from penalising businesses for delayed sales tax returns due to tax department’s inaction

The Federal Tax Ombudsman (FTO) has ordered the Federal Board of Revenue (FBR) to cease imposing penalties on registered persons for delayed sales tax returns when the delay is due to the tax department’s inaction. 

According to media reports, in a ruling, the FTO clarified that there is no legal provision under the Sales Tax Act of 1990 or the Sales Tax Rules of 2006 that prevents a registered taxpayer from filing returns for the current period.

The decision follows an Own Motion investigation initiated under Section 9(1) of the Federal Tax Ombudsman Ordinance, 2000, after multiple complaints were received regarding delays in granting permission for sales tax returns by Commissioners Inland Revenue (CIR). The FTO found that such delays were adversely impacting the business sector, especially corporations, by preventing them from filing their sales tax returns on time.

The FTO stated that blocking the ability to file sales tax returns violates the basic rights of registered taxpayers, and such actions could lead to financial losses for businesses, particularly when they are placed on the inactive taxpayers’ list. This, according to the FTO, causes disruptions in payments from suppliers, further harming businesses.

According to the FTO’s findings, if a registered taxpayer misses six consecutive sales tax periods without filing, they must seek permission from the relevant CIR to file the return for the next period. 

However, the FTO noted that the requests for such permissions were often left pending in the CIR system, causing significant delays. 

The Ombudsman highlighted that this delay is detrimental to the “Ease of Doing Business” initiative and suggested that the FBR take immediate action to address the issue and prevent further inconvenience to businesses.