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Certified, quarterly ST returns filing for commercial entities in the offing

Certified, quarterly ST returns filing for commercial entities in the offing

ISLAMABAD: Finance Ministry on proposals of Federal Board of Revenue may introduce fresh regulations in the upcoming budget to reduce evasion of sales tax by hiring chartered accountants to verify the authenticity of filed returns by commercial entities in four quarterly filings rather than monthly filing.

As a test case, quarterly filings may be made mandatory for certain picked sectors. The move shall make things easier for commercial entities. The sales tax returns will have to be certified by a chartered accountant for the authenticity of the information that has been declared. In case fraud is detected, the accountant concerned will also be held accountable and penalised accordingly. FBR will not accept returns that are not duly endorsed and bear the certificate of a chartered accountant.

Sources said that the chartered accountant certifying returns would be held personally accountable for their actions and omissions. Therefore, the accountant will have to ensure that no tax fraud has been committed in the sales tax returns filed.

Moreover, the chartered accountant would be carrying out an audit of the company every quarter, which would ensure timely depositing of tax in the national exchequer. The onus of substantiating the declared returns would be on the chartered accountant, the sources added.

Critics have said that such measures are more effective in documented economies where all expenditure of tax payers’ money is a matter of public record. The quantum of tax evasion is higher in Pakistan because the economy mostly operates on cash transactions, which are undocumented. FBR would be far more successful if it were to focus on enforcement.

FBR holds that problems such as input or output adjustment of sales tax and the issue of fake invoices can be addressed by incorporating accountants into the process. National exchequer suffers an estimated loss of Rs 500 billion annually due to sales tax evasion. FBR’s proposals are based on minimising tax fraud and ensuring a better tax-to-GDP ratio.