Islamabad, Mar 7 2025: The Federal Board of Revenue (FBR) has instructed Pakistan Revenue Automation Limited (PRAL) to lift restrictions preventing input tax adjustment in sales tax returns for 21 companies that have made tax payments on behalf of non-residents.
However, this adjustment will only be permitted if the tax payment is electronically verified by the system. This directive was formally communicated to the Director General of Information Technology at FBR and PRAL.
Referencing an interim order issued by the Sindh High Court (SHC) on February 6, 2025. The court observed that while adjustments for sales tax on services provided by non-residents were being processed through FBR’s online system, certain claims were being unjustifiably denied.
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The court has adjourned the hearing until March 6, 2025, presumably to ensure that the online system is brought in line with legal requirements. In response.
The FBR has moved to comply with the court’s observations by directing PRAL to make necessary adjustments.
The core issue revolves around the admissibility of input tax adjustment in sales tax returns, which falls under the jurisdiction of the relevant tax authorities. The decision on whether such claims comply with the Sales Tax Act, 1990.
Align with Supreme Court judgments on the authority of provincial legislatures to impose such levies, will be determined by the concerned legal and financial bodies.
This move aims to facilitate compliance with legal mandates while ensuring that businesses operating within Pakistan receive fair treatment regarding tax adjustments. The resolution of this matter will set a precedent for how sales tax on services rendered by non-residents is handled in the future.
