It is pertinent to mention that the National Sales Tax Return was developed after rigorous discussions with the provincial governments and their revenue authorities. The feedback from other stakeholders, including taxpayers and tax practitioners, was incorporated. This digital facility will simplify tax filing procedures and thereby save compliance costs. This has been one of the key recommendations of international agencies such as World Bank and IMF.
The National Sales Tax Return will minimize data entry, which will address the common issues of data and calculation errors. The system will automatically apportion input tax adjustment as well as tax payments across the sales tax authorities, eliminating the need for reconciliations and payment transfers.
Through this system, officers of all the revenue authorities will be able to make better informed decision regarding matters of the taxpayers. It will enable tax collectors to improve revenue potential and tax compliance without audits. Another benefit of this system is that it will encourage harmonization of tax procedures, definitions and principles between the federal government and the provinces, which will promote national unity and ensure cohesion.
In Pakistan, sales tax on goods is collected by the FBR while sales tax on services is collected by each of the four provinces in their respective territory. Sales tax on services in the Federal Capital Territory in Islamabad is also collected by FBR, while Azad Jammu and Kashmir and Gilgit-Baltistan have their own tax authorities.
For this reason, taxpayers were required to file separate sales tax returns every month to each of the different collecting authorities where they conducted business, which was causing them hardship and increased compliance costs. For example, a telecommunication service provider operating throughout Pakistan had to file returns every month to FBR, Sindh Revenue Board, Punjab Revenue Authority, Khyber Pakhtunkhwa Revenue Authority, Baluchistan Revenue Authority, AJK Council Board of Revenue and Gilgit-Baltistan Revenue Authority. This was a very tedious and cumbersome task, which often led to errors and disputes.
Keeping the above in view, this milestone initiative is going to contribute significantly to not only maximizing revenue potential but also to eliminating the culture of fake/flying invoicing, suppression of sales and thereby ensure tax compliance across Pakistan.