FBR to Implement Uniform Tax Recovery Rules in Upcoming Budget 2024-25

Islamabad (PNI) The Federal Board of Revenue (FBR) plans to implement uniform rules for sales tax, income tax, and federal excise recovery in the 2024-25 budget as part of its tax harmonization policy.

Sources informed Business Recorder that under the Sales Tax Act of 1990, taxpayers have 30 days to settle their tax liability per Rule 71(1) of the Sales Tax Rules, 2006. After this period, the liability becomes enforceable unless a restraining order is issued by the Commissioner IR (Appeals) or another competent judicial authority. The recovery process under Rule 60(3) of the Federal Excise Rules, 2005, is similar.

The FBR has already directed its field formations to follow legal procedures for tax recovery and not to proceed if there is a restraining/stay order from any appeal forum. Multiple recovery procedures have been issued to ensure compliance with this directive.

According to the latest recovery procedure (C.NO.6(25)S(IR-Operations)/2019-Pt-2/20144-R, dated February 7, 2024), field formations must halt recovery proceedings if a court restrains tax recovery. Recovery can only proceed after notifying the taxpayer once the restraining order is lifted.

If a restraining order is received after recovery actions have started, no further actions should be taken. Once the order expires, a fresh recovery notice under Section 138(1) of the Income Tax Ordinance, 2001, must be issued, giving taxpayers at least seven days to pay or obtain a new stay order. Subsequent recovery actions under Section 140 of the Income Tax Ordinance, 2001, require approval from a committee of senior Commissioners IR, headed by the Chief Commissioner IR.

For Sales Tax and Federal Excise Duty (FED) recovery, the FBR issued Circular No.1 on February 7, 2024, aligning with the Sales Tax Act of 1990 and the Federal Excise Act of 2005. Unlike the Income Tax Ordinance, 2001, these acts lack provisions similar to Section 138, which allows a seven-day notice period. To harmonize recovery procedures across tax laws, administrative instructions mandate giving at least seven days’ notice before initiating recovery in confirmed appellate cases involving Sales Tax and FED.

The FBR emphasizes compliance with court and adjudicatory forum directives, ensuring no tax recovery occurs under a restraining order. These instructions aim to give taxpayers sufficient time to seek legal relief.

Regarding court observations on recovery delays until decisions by an independent forum, it’s noted that while the Commissioner Inland Revenue (Appeals) is appointed and assigned jurisdiction by the Board under Sections 208 and 209 of the Income Tax Ordinance, 2001, its judicial independence is protected by law, preventing Board interference.