FBR gets financial forensic software update

MULTAN: The Federal Board of Revenue (FBR) has instructed tax officials to conducted detailed audit of discrepancies identified by an online software in sales and purchases. In this regard, the FBR updated the software of Computerized Risk-Based Evaluation of Sales Tax (CREST), and instructed that the system provides summary and overall view of the selected cases of various transactions.

The screen displays various columns related to discrepancies like Purchase, zero rated supplies, Imports, Exports, Section 8B, Commercial Imports, Short payments, Further Tax, Non-Filing of ST & IT Return and IT Withholding Statement Discrepancy, Inadmissible Input Tax (SRO.490) Discrepancy, Extra Tax Chapter-XIII Discrepancy, Reduce Rate Discrepancy, Inadmissible STWH (SRO.660) discrepancy. The FBR said that with the co-operation of taxpayers, FBR is now capturing the transactions made by the registered persons. This has enabled us to identify cases where any genuine registered person is denied any benefit admissible under the Sales Tax Act. Accordingly, FBR has developed an end to end IT solution (CREST) Sales Tax.

This home-grown system checks the information contained in monthly returns, Customs import and export data and cross matches each other for every registered person. Any exceptions pointed out by the system will be provided electronically to the concerned registered person who in turn can explain the position through attaching the supporting documents.

The system has in built capacity to verify the veracity of the reply received from the registered person. The system is designed for Sales tax Registered persons based on their declarations and It covers following areas: Purchases Input tax adjustment of buyer which is cross matched with their suppliers’ returns and Customs import data. Excess input adjustment of buyer is highlighted. With the launching of STRIVe system, no further discrepancy will be made after July 2016.

Showing Zero rated sales made to registered person with non-active status in ATL or blacklisted or suspended.

Under Section 8B, there are certain restrictions on the input tax credit. There are certain categories of registered persons, who have been excluded from these restrictions. The system checks from returns whether a person claiming exemption from section 8B has been excluded or not in the relevant Notification.

In order to protect the genuine exporters, system points out any person who is claiming export in the return which is not matched with the Customs export data.

Any registered person who is a not a manufacturer and also not paying value addition tax on imports. The supplies made @ 16% instead of 17% have been highlighted in short payment discrepancies. This is a one-time exercise and further no more discrepancies will appear in this Tab. Supplies to unregistered person attract levy of further tax under section 3(1A) of the Sales Tax Act, 1990 except exclusion available under SRO.648(I)/2013 dated 09.07.2013, amended vide SRO 487(i)/2016 dated 30-06-2016. The system pointed out levy of further tax on supplies to unregistered persons where further tax @ 2% has not been paid. Through Finance Act 2017, five zero rate sectors are now required to pay further tax @ 1%.

The import GDs declared in sales tax return are cross-matched with Custom’s import data. The miss-matching is highlighted.

Non-Filing of ST & IT Return and IT Withholding Statement Discrepancy

The system identifies registered persons who have not filed their sales tax returns, income tax returns for the financial year 2012 and 2013 & income tax withholding.

The Federal Board of Revenue has withdrawn input tax adjustment / refund entitlement on number of items particularly, building material, office equipment and other ancillary items by introducing amendment vide section 8(1)(h) & (i) read with notification 490(I)/2004. The system identifies registered persons who have claimed such input tax.

Under chapter XIII of the Sales Tax Special Procedures Rules, 2007, extra sales tax at the rate of 2% will be charged on value of supplies of certain goods. The system identifies taxpayers who have not paid 2% extra sales tax on such supplies.

The reduced-rate supplies are cross-matched with buyers returns and registration data. The system segregates reduced rate supplies made to non-filer, null-filler, blacklisted/suspended registered person besides highlighting miss-matching in the supplies.

The system has pointed out that certain registered persons have claimed credit/adjustment of sales tax deducted by withholding agents, whereas the withholding agents (buyers) have not paid/deposited the withheld amount in government treasury. With the launching of STRIVe system, real time verification of declaration of seller and buyers, this discrepancy will not be developed after July 2016. Finance Act 2017, Sales Tax Withholding Regime has been abolished. Mohammad Rizwan Awan