Sales tax deduction to be made through automated system from July 1

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The Federal Board of Revenue (FBR) has announced that sales tax deduction will be made through an automated system from July 1.

A spokesman for the FBR said the Board has developed a software for automated verification of Sales Tax Registration Number (STRN) and deduction of applicable rates of sales tax from the vendors’ claims submitted at accounting offices.

The system will be implemented across all accounting offices from the start of the financial year 2016-17 and is expected to significantly enhance the performance of accounting offices in their role as withholding tax agents for the government, and contribute substantively to the government’s sales tax collection.

The system will link up with FBR database to the determine status of the vendor’s Sales Tax Registration and authenticity of Sales Tax Registration Number (STRN) as well as authenticity of allied master-data of the vendor in the database of the Accounting Office, and calculate correct amount of sales tax to be withheld in line with the applicable rates as determined by the FBR.

Based on verifications along the above mentioned dimensions, the system will deduct applicable rates i.e. 10 per cent, 20 per cent and 100 per cent of the sales tax. Full applicable rate of sales tax shall be deducted from claims of those vendors who do not have STRN, whose STRN does not get validated from the FBR database or who are blacklisted.

The software was developed by the IRS-Operations Wing of FBR in collaboration with the office of Controller General of Accounts (CGA) following a pilot project launched earlier this year at AG Office Islamabad in collaboration with the FABS.

Ahead of the software implementation on July 1, the FBR has already started contacting the government departments and ministries to instruct their concerned staff to ensure that purchases are made from registered vendors as well as ascertain that vendors’ STRN and master-records with Accounting Offices are validated to avoid deduction of full applicable sales tax from the respective vendors.