The disputed sales tax SRO 350(I)/2024 is no longer applicable, which presents issues for registered taxpayers completing their sales tax returns. This decision was made by the Lahore High Court (LHC).
Additionally, the Federal Board of Revenue (FBR) has been instructed by the LHC to receive sales tax returns from taxpayers. According to the LHC ruling in Shahzad Textile Mills v. Federation of Pakistan, the petitioners’ attorney argues that section 50 of the Sales Tax Act, 1990 does not permit the Board to issue the contested notification S.R.O. 350(1)/2024 because it only grants the Board the authority to make rules by publication in the official Gazette for the purpose of carrying out the Act.
The challenged modification modifies Rule 18 of the Sales Tax Rules, 2006 and eliminates the petitioners’ direct entitlement to an input tax adjustment under Section 7 of the Sales Tax Act in order to ascertain a registered person’s tax due.
Additionally, the modification requires that the relevant seller file their return for the same tax period in order for the return to be filed and the input tax deduction to be made. Briefly put, the petitioners’ attorney claims that the aforementioned modification violates both the petitioners’ legal rights and the rights provided by the Constitution, namely Article 18 of the Constitution.
This petition is accepted for regular hearings and presents significant legal issues. The learned D.A.G., who is present at the court’s call, accepts notices on behalf of the respondents and notifies them to file written statements and provide legal counsel for the next hearing date. Additionally, notification will be sent to Pakistan’s Attorney General, whose acceptance is also confirmed by the knowledgeable D.A.G.
