The Federal Board of Revenue (FBR) has issued a clarification regarding the treatment of closing stock at the time of change of taxation regime from final to the minimum tax.
Lahore Chamber of Commerce and Industry (LCCI), in its letter to FBR, had sought clarification in this regard.
FBR had clarified the query of Lahore Chamber of Commerce and Industry in its letter of 3rd December. However, concern has been shown from certain quarters that the clarification could not be widely publicized. To quell these concerns, the clarification is being clarified through media.
Lahore Chamber of Commerce and Industry had stated in the letter that in the case of importers, the tax collected at the import stage during Tax Year 2019 had become final tax at the time of collection, therefore, the turnover or income arising from the disposal of such closing stock should not be included in taxable income for the Tax Year 2020 as this would result in double taxation.
FBR has informed in its clarification that the turnover resulting from the disposal of closing stock already declared under Final Tax Regime in the previous tax year should not make part of next year’s turnover as it would be tantamount to double taxation.
Therefore, such turnover should not be declared in the column subject to NTR for Tax Year 2020.
FBR has further clarified that to avoid misuse or mis-declaration, field formations are required to conduct desk audits of all such cases for Tax Year 2020 and cross-match turnover with relevant Sales Tax declarations.