Lahore High Court (LHC) has suspended the applicability of controversial sales tax SRO 350(I)/2024, creating sales tax return filing problems for the registered taxpayers.
The LHC has also directed the Federal Board of Revenue (FBR) to accept taxpayers’ sales tax returns.
The LHC order in the matter of Shahzad Textile Mills vs Federation of Pakistan revealed that the counsel for the petitioners contends that the impugned notification S.R.O. 350(1)/2024 could not have been issued under section 50 of the Sales Tax Act, 1990 as that provision merely gives the power to the Board by notification in the official Gazette to make rules for carrying out the purposes of the Act.
The impugned amendment amends rule 18 of the Sales Tax Rules, 2006, and takes away the right of the petitioners directly under section 7 of the Sales Tax Act for input tax adjustment to determine the tax liability of a registered person.
The amendment also makes the filing of the return and the deduction of the input tax contingent upon the filing of the return by the respective seller for the same tax period. In short, according to counsel for the petitioners, the said amendment impinges upon the rights of the petitioners to be dealt with in accordance with law and the rights guaranteed under the Constitution, particularly Article 18 of the Constitution.
This petition raises important questions of law and is admitted to regular hearings. Notices on behalf of respondents are accepted by the learned D.A.G., present on the Court’s call, who shall inform the respondents to file their written statements and to make their legal representation on the next date of hearing. Notice shall also be issued to the Attorney General for Pakistan under which too is accepted by the learned D.A.G.
Till the next date of hearing, it is directed that the returns filed by the petitioners for May and June 2024 as well as subsequent returns till the next date of hearing shall be accepted by the FBR and shall not be blocked. This shall be subject to the notices and hearing on the next date of hearing, it concluded.