This blog is written by Mr. Muhammad Shafaat Ali, Assistant Manager Taxation Advisory Services. Please read this blog and provide your valued comments.

Blacklisting and Suspension of Sales Tax Registration

 Section 21 of the Sales Tax Act 1990, and Rule 12 of the Sales Tax Rules, 2006 explained the blacklisting and suspension of sales tax registration.

The Commissioner may suspend/black list a registered if satisfied that the he has issued fake invoices, evaded tax or committed tax fraud.

Before initiating any action to blacklist or suspend any registered or enrolled person, the Collectorate shall make efforts to confirm the facts and veracity of the information. In case of reported non-availability at the given address, it may be checked from the Registration Division whether the person submitted any information about change in address, the given address may be visited by an officer of the Collectorate, or an attempt may be made to trace the person from documents such as National Identity Card, income tax records, bank account, etc. In case of reported non-access to the premises and/or non-production of record, a notice may be issued through registered post to the person to allow access/produce records, clearly indicating that refusal or delay will result in blacklisting or suspension of his registration/ enrollment.

If the Collector is satisfied that the person needs to be blacklisted or his registration/enrolment suspended, he shall issue an order for the same, mentioning reasons for such blacklisting/suspension. Copies of the order shall be endorsed to the person concerned, all other Sales Tax Collectorates, the Sales Tax Wing computer system and the STARR system. Each Collectorate shall circulate all such lists to their refund, audit and other concerned staff to ensure that no refund is paid or input adjustment is taken on invoices issued by such suspected persons.

Now we will discuss the procedure/reasons for suspension/blacklisting as per Sales Tax Rules 2006.

SUSPENSION

The bases for suspension may include the following:

Non-availability at the given address;

Refusal to allow access to business premises or to furnish records to an authorized inland revenue officer;

Abnormal tax profile, such as taking abnormal input tax adjustments continuous carry-forwards, or sudden increase in turnover

Making substantial purchases from or supplies to other blacklisted/suspended persons

Non-filing of sales tax returns for six or more months

On recommendation of a commissioner of any other jurisdiction

Any other reason to be specified by the Commissioner

  • The suspension of registration shall take place through a written order of the Commissioner concerned, giving reasons for suspension. This order shall be endorsed to the registered person concerned, all other LTUs/RTOs, the FBR‘s computer system, the STARR computer system and the Customs Wing computer system for information and necessary action as per law
  • A registered person who does not file sales tax return for six consecutive months shall be caused to be suspended through the system without any notice;
  • In cases, where the buyers and suppliers of any such person, whose registration is being suspended, belongs to another LTU/ RTO, and these buyers / suppliers are also required to be suspended, the Commissioner shall intimate the Chief Commissioner of the concerned LTU/RTO in whose jurisdiction such buyers/suppliers fall, in writing explaining the complete facts of the case and the reasons on the basis of which these buyers/suppliers are to be suspended, to initiate proceedings for suspension/blacklisting of the buyers/suppliers; 
  • No input tax adjustment/refund shall be admissible to the registered person during the currency of suspension. Similarly, no input tax adjustment/refund shall be allowed to any other registered persons on the strength of invoices issued by such suspended person (whether issued prior to or after such suspension), during the currency of suspension. 
  • The Commissioner shall, within seven days of issuance of order of suspension, issue a show cause notice (through registered post or courier service) to the registered person to afford an opportunity of hearing with fifteen days of the issuance of such notice clearly indicating that he will be blacklisted, in case– 

There is no response to the notice

He has not provided the required record

He has not allowed access to his business record or premises; and

Any other reason specified by the Commissioner 

  • In case show cause notice is not issued within seven days of the order of suspension, the order of suspension shall become void ab-initio. 
  • In case of non-availability of the suspended person at the given address, the notice may be affixed on the main notice Board of the LTU/RTO 
  • On receipt of the reply to the notice and after giving an opportunity of hearing to the registered person, if the Commissioner is satisfied, he may order for revoking of suspension of the registered person. 

BLACKLISTING

The bases for blacklisting may include the following:

  • In case, after giving an opportunity of hearing, the offence is confirmed, the Commissioner shall issue an appealable self-speaking order for blacklisting of the registered person, and shall proceed to take legal and penal action under the relevant provisions of the Act. 
  • The order of blacklisting shall contain the reasons for blacklisting, the time period for which any refund or input tax claimed by such person or by any other registered person on the strength of invoices issued by him from the date of his registration shall be inadmissible, any recovery to be paid or penalties to be imposed. 
  • The order of blacklisting shall be issued within ninety days of the issuance of the notice of hearing. In case, the order of blacklisting is not issued within this time period the suspension of registered person shall become void ab-initio. 
  • Copies of the order shall be endorsed to the registered person concerned, all other LTUs/RTOs, the FBR/PRAL computer system, the STARR computer system and the Customs Wing computer system. Each LTU/RTO shall circulate all such lists to their refund sections, audit sections and other concerned staff to ensure that the order is implemented in letter and spirit by all concerned. 
  • All LTUs / RTOs shall further circulate the copies of the order along with a computer system-generated list of invoices issued by the blacklisted persons as referred to in the preceding clause, to all officers of Inland Revenue having jurisdiction over the registered persons who have claimed credit of input tax or refund on the strength of the invoices issued by the said blacklisted persons; and 
  • the officer of Inland Revenue receiving the aforesaid list under clause (v) shall issue show-cause notice under section 11 and sub-section (3) of section 21 of the Act to a registered person for rejecting the input tax or refund claimed against the invoices so circulated and further proceed to decide the matter as per law through a self-speaking appealable order and after affording a reasonable opportunity of being heard to such person, in the manner as provided in the said sub-section (3).

Hafiz Muhammad Shafaat Ali