Sales tax deductions to be automated from July 1

ISLAMABAD: The Federal Board of Revenue (FBR) has said that sales tax deductions will be made through an automated system from July 1.

In this regard, the FBR has developed software for the automated verification of Sales Tax Registration Number (STRN) and deduction of applicable rates of sales tax from vendors’ claims submitted at accounting offices.

Ahead of the software’s implementation on July 1, the FBR has started contacting government departments and ministries to instruct concerned staff to ensure purchases are made from registered vendors.

The departments were also instructed to ascertain that vendors’ STRN and master-records with accounting offices are validated to avoid deduction of full applicable sales tax from respective vendors.

An official statement issued here said that the system will be implemented across all accounting offices from the start of financial year 2016-17 and is expected to significantly enhance the performance of accounting offices in their role as withholding tax agents for the government, and contribute substantively to the government’s sales tax collection.

The system will link up with the FBR database to determine status of vendor’s sales tax registration and authenticity of STRN as well as authenticity of allied master-data of the vendor in database of the accounting office, and calculate correct amount of sales tax to be withheld in line with the applicable rates as determined by FBR.

Based on verifications along the above mentioned dimensions, the system will deduct applicable rates – 10 per cent, 20pc and 100pc of the sales tax.

Full applicable rate of sales tax shall be deducted from claims of those vendors who do not have STRN, whose STRN does not get validated from FBR database or who are blacklisted.

The software was developed by the IRS-Operations Wing of FBR in collaboration with the Office of Controller General of Accounts following a pilot project launched earlier this year at AG Office Islamabad.