LAHORE: Lahore High Court (LHC) has suspended operation of SRO 350(I)/2024 and directed the Federal Board of Revenue (FBR) to accept sales tax returns of taxpayers without incorporating amendments made in sales tax rules under SRO 350 (I) 2024.
Sources informed taxpayers are facing consistent problems in filing monthly sales tax returns due to recent amendments introduced through SRO 350 (I) /2024. A large number of taxpayers are unable to file their returns due to different technical problem.
The FBR has also issued clarification and relaxed certain conditions however still return filing didn’t become fully operational. Many taxpayers were eventually compelled to approach the court and subsequently filed petition before the LHC.
According to the order of the LHC, till next date of hearing on October 8, 2024, the LHC has suspended the applicability of SRO.350 and directed FBR to accept sales tax returns of the aggrieved petitioner taxpayers as per previous module.
Learned counsel for the petitioners contends that the impugned notification S.R.O. 350(1)/2024 could not have been issued under section 50 of the Sales Tax Act, 1990 as that provision merely gives the power to the Board by notification in the official Gazette to make rules for carrying out the purposes of the Act.
The impugned amendment amends the rule 18 of the of the Sales Tax Rules, 2006 and takes away the right of the petitioners directly under section 7 of the Sales Tax Act for input tax adjustment to determine the tax liability of a registered person.
The amendment also makes the filing of the return and for the deduction of the input tax as contingent upon the filing of the return by the respective seller for the same tax period.
In short according to counsel for the petitioners, the said amendment impinges upon the rights of the petitioners to be dealt with in accordance with law and the rights guaranteed under the Constitution and in particular Article 18 of the Constitution.
This petition raises important questions of law and is admitted to regular hearing. Notices on behalf of respondents are accepted by the learned D.A.G., present on Court’s call, who shall inform the respondents to file their written statements and to make their legal representation on the next date of hearing. Notice shall also be issued to the Attorney General for Pakistan under which too is accepted by the learned D.A.G.
Till the next date of hearing, it is directed that the returns filed by the petitioners for the months of May and June, 2024 as well as subsequent returns till the next date of hearing shall be accepted by the FBR and shall not be blocked. This shall be subject to the notices and hearing on the next date of hearing, LHC order added.
Meanwhile, FBR Chairman has been informed that through ‘Ashiana Cotton Products Limited and others Vs. Federation of Pakistan, etc.’ filed on behalf clients, vires of amendments of new proviso inserted in Rule 18(3) of the Sales Tax Rules, 2006 vide clause 2(b) of S.R.O 350(I)/2024 dated 07-03-2024 have been challenged before the Lahore High Court, Lahore, wherein, the Court is pleased to issue notices and require submission of para-wise comments from the Respondents (FBR) before the next date of hearing.
In this regard, the Court was apprised that due to no fault of their own, clients/petitioners are unable to file their sales tax returns for the month of June, 2024 due to being unlawfully blocked by the IRIS (computerized system).
The Court taking notice, observed in its order that the Impugned Amendments do not envisage blocking from filing of sales tax returns and directed our clients/ petitioners to make an appropriate representation before FBR Chairman to de-block clients/ petitioners and allow them to file their sales tax returns for the month of June, 2024 and subsequent months and not to treat our clients/petitioners as non-active taxpayer.
Therefore, upon the orders of the Court, the request for de-blocking clients/ petitioners for allowing them to file their sales tax returns for the month of June, 2024 and subsequent months is attached herewith.
FBR Chairman is therefore, requested to take immediate action and de-block clients/petitioners to allow them to file their sales tax returns as requested, in failure of which, the Court will be apprised, for passing appropriate orders in this regard, presentation to the FBR Chairman added.
