Modification in e-filling of sales tax return
If you are person responsible for tax function of any organization (size and form of the organization doesn’t matter), whether it’s a public listed company or a sole proprietorship both face the same deals of problems while e-filing sales tax return.
A very awkward feature of sales tax returns is CREST. You must be aware of what CREST means and its relevance, in case you don’t. Here is an brief introduction of the same
What is CREST?
It’s an electronic system introduced by FBR through Finance Act, 2013.
How CREST works?
CREST cross match declarations made by Buyer-Seller. It means purchases claimed by buyers are automatically verified from sales declared by seller.
In case there is any difference in respect of amount / sales tax amount or date or invoice number, CREST highlights the transaction for resolution.
Once discrepancy is highlighted / identified buyer shall not be entitled to claim tax credit (Refer section 8 of the Sales Tax Act, 1990)
CREST – Inland Revenue Officers’ corrupt practices
One cannot simply rule out the possibility of corrupt practices while dealing with Tax authorities in any country of the world.
CREST discrepancies are also subject to mal-practices by IR-officers. For example there are instances where rounding-off differences (Discrepancy) resulted in disallowance of whole input tax claim by buyer.
Other issues with current system
- Unnecessary Show cause notices, adjudication and litigation complications.
- Time and energy wastage of FBR and taxpayers.
- Lack of transparency regarding communication of discrepancies to the registered person.
- Buyers are unaware of suppliers’ behavior.
Discouraging after the event verification
CREST system is based on after the event verification methodology i.e. declaration (returns) are verified once filed by BUYER and SUPPLIER. Delayed detection of discrepancies lead to disappearance and change in status of suppliers (suspended / blacklisted / non-active).
Through this modification in the system FBR intends to verify declarations right before submission.
MODIFICATION IN THE PROCESS (SUBJECT TO FINAL APPROVAL OF THE PROJECT)
Step 1: Entry in the system
- Suppliers shall file Annex C for sales made during the month by 10th of every month.
- Sales transactions reported by suppliers (as mentioned in sr. 1 above) shall be immediately available in e-panel of respective buyers. It means buyers shall be required to select transactions reported by respective suppliers in to their purchase annexure (Annexure B).
- All registered persons will file provisional return along with due payment of tax for self-processing by 15th of the return filling month.
- Matched invoices will be frozen, unmatched invoices will remain open for use.
Step 2: Imitation by the system
- Buyers shall be automatically notified of the following
- Return has been successfully submitted or
- Short payment in terms of unverified input tax may be resolved by the registered buyer
- Those buyers whose input tax remains unmatched, will be provided 03 more days upto 18th of the return filing month for resolution of such input tax discrepancy by the way of following;
- Contact the supplier to file return or
- Buyer make payment of unmatched input tax.
Built in checks for self-processing of return
- System will not allow input credits on the invoices
- Null filers
- Suppliers not shown to the specific buyer
- Blacklisted, suspended, Non Active suppliers
- System will handle payment of withholding of sales tax by the suppliers and the buyers
- Sales invoices for services issued by services provider registered with respective provinces can be integrated for credit through Submitted returns.
- Utility data of Discos having reference No. and Sales tax registration No. shall be considered for integration.
- Data of AJK returns shall be obtained for integration.
- Manual Entry of invoices from unregistered persons in Annexure A of the return shall be allowed as it does not involves input tax credit.
Entry in Sales Annexure (Annex –C of the Return)
Availability of data of purchase invoices
Uploading In Purchase Annexure (Annex –A of the Return)
Process and Submit
Cross Matching Report
Re-Processing with additional payment
Advantages to registered person
- Authority to process return is in the hands registered persons itself.
- Minimized role of Department for compliance.
- Transparency in processing of return.
- Facility of re-use of data as the registered persons will not be required to prepare data for Annex-A of the return.
- Annex-A, STARR, ERS data integration.
- Registered Person can instantly see the relevant profile of his supplier
- System can be rolled out for load testing from July 2016
- If approved, system shall be functional from July, 2016 Paid August, 2016 ST Returns.