The Federal Board of Revenue (FBR) launched the National Sales Tax Return (NSTR) on Friday without the participation of the officials of the Sindh Revenue Board, the Khyber Pakhtunkhwa Revenue Authority, the Baluchistan Revenue Authority, the AJK Council Board of Revenue, and the Gilgit-Baltistan Revenue Authority.
Federal Minister for Finance and Revenue, Shaukat Fayaz Ahmed Tarin, presided over the launching ceremony of the National Sales Tax Return for all the federal and provincial sales taxpayers at the FBR headquarters in Islamabad, as the chief guest. However, only the Office of the Punjab Revenue Authority (PRA) attended it while the representatives of the provincial revenue authorities and boards and the Chief and Finance Ministers of all the provinces were absent.
A press release issued by the FBR detailed that for:
Achieving yet another significant milestone towards automation and data integration in order to facilitate the taxpayers, promote ease of doing business and reduce compliance costs, FBR has launched its National Sales Tax Return (NSTR), this afternoon. Federal Minister for Finance & Revenue, Shaukat Fayaz Ahmed Tarin, presided over the launching ceremony at FBR (HQs), Islamabad as the Chief Guest.
The Minister for Finance Minister addressed all the Members of the FBR, dignitaries, senior officers, and media representatives, and congratulated the Chairman of the FBR (also the Secretary of the Revenue Division) and his team for expediting this long-awaited initiative. “This milestone has been achieved only through a meaningful engagement of FBR with provincial revenue authorities, which is a good example of the cooperation and unity between these organizations,” he said.
Minister Tarin explained that taxpayers are required to file separate Sales Tax returns every month to each of the different Sales Tax collecting authorities due to the fragmentation in the Sales Tax payments.
“For example, a telecommunication service provider operating throughout Pakistan has 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,” he clarified, and termed it a ‘very tedious and cumbersome task which often led to errors and disputes’.
He added that the reforms of the Sales Tax regime that had been introduced in the Supplementary Finance Bill 2021 and the new data repository developed by the FBR in collaboration with the National Database & Registration Authority (NADRA) are big leaps toward the documentation of the economy and the completion of VAT chain which had remained severed due to distortions.
He emphasized that the NSTR will be another pillar in the achievement of this objective, and the FBR will now be able to assess the indicative income of non-filers with sufficient accuracy through the use of technology.
Therefore, the National Sales Tax Return was developed after discussions and agreements were signed with the provincial revenue authorities, and they found it acceptable. The feedback from other stakeholders, including taxpayers and tax practitioners, is also very positive, it will save time and effort and will reduce compliance costs. Furthermore, this was also a key recommendation of international agencies such as the World Bank.
One of the greatest benefits of this system is that it encourages the harmonization of tax procedures, definitions, and principles between the federal government and the provinces, which will promote national unity and cohesion.
The Chairman FBR welcomed the Minister for Finance on the occasion, explained the scope and significance of the Sales Tax regime, and highlighted the salient features of the National Sales Tax Return. He added that the Sales Tax in Pakistan is fragmented among seven different revenue collecting authorities.
Sales Tax on goods is collected by the FBR for the federal government throughout Pakistan, whereas Sales Tax on services is collected by the provincial revenue authorities. Although this arrangement is according to the Constitution of Pakistan, 1973, it creates many practical challenges for taxpayers and tax collectors, the Chairman FBR explained.
He elaborated on the salient features of the NSTR and stated that the system will act as a single repository for all domestic transactions and invoice management. It will automatically apportion input tax, prepare the return, and work out the tax payable to each of the relevant authorities. The new system is based on the IRIS platform, which already has many built-in functionalities. It has linkages with POS transactions and Track & Trace which will contribute significantly to broadening the tax base and will ensure the ease of doing business.
The Chairman continued that the FBR is accelerating toward developing a similar National Income Tax Return to facilitate taxpayers while simultaneously maximizing tax compliance. He concluded by reiterating that these innovative and out-of-the-box digital interventions are primarily meant to enhance the Tax-to-GDP ratio to 15 percent over the short term.
