A Win for Consumers in Sales Tax Case

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The consumers have emerged as victorious in Suzuki Sales Tax case against Federal Board of Revenue (FBR). According to details, Federal Tax Ombudsman (FTO) has asked Federal Board of Revenue (FBR) to direct “the concerned Commissioner-IR to refund the amount of Sales Tax collected in excess of 12.5% from the complainant as per law.”

Background of Issue

And here is a bit of background of this whole case. Under the new Auto Policy (2021-2026), the federal government reduced the sales tax on all cars to 12.5% from 17%, along with a 2.5% reduction in Federal Excise Duty (FED) from July 1st, 2021. It means all invoices after this date will have the new tax reductions. One of the biggest beneficiaries of this policy is Pak Suzuki, but initially, it seemed that the company was not ready to transfer this benefit to the buyers. However, after further investigation, we found that Pak Suzuki has paid the tax to FBR, and it was the authority which had the additional fund.

The reports stated the car manufacturer charged 17% Sales Tax, even after July 1st,  as several customers shared their invoices with us. As per these invoices, the company reduced the FED as per the auto policy; however, the sales tax was still standing at 17%. As per the car company, it had paid the tax to FBR at time of bookings, hence, it has no authority in giving back the additional payment, making the FBR the responsible.

A number of customers raised the issue with Pak Suzuki,  the case went to FBR, and from there it went to Federal Tax Ombudsman (FTO), and now authority has issued its verdict.

Verdict on Pak Suzuki Issue

According to detailed verdict, the consumers will get the additional amount back. The FTO stated that there was a lack of clarity with regard to the definition of “time of supply” at the time of booking of the vehicle in May 2021 and that at the time of delivery in July, 2021. “As per the definition in May 2021, the relevant time for determining the taxation rate was the time when payment was received by the supplier, when Sales Tax was 17%. However, both definition and application rates of taxes had been changed,” the verdict read.

Furthermore, FBR, defines “time of supply”  in relation to –

(a) the time at which are goods are delivered or made available to the customers

(b) Change in the tax rate – if there is a change in the rate of tax –

a taxable person will be charged to tax at the rate as is in force at the time of supply.

“So, in view of this clarification, the time of payment receipt by the supplier becomes irrelevant, if the supply is made on or after July 1, 2021.” FTO said.

It is yet to see, how consumers will get their payment back from FBR.

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  1. Khurram says

    Great work F.B.R.

  2. Abcd says

    If FBR has collected excess amount from PakSuzuki, it should return it in the same spirit.

    It is wrong to penalize a business or individual for such changes in policy.

  3. Haris Khan says

    It seems like that this author holds some sort of personal grudge against Pak Suzuki.

    I think in the haste to score a point against Pak Suzuki, he forgets to read the so-called “judgement” either.

    Can he even highlight that the FTO entertained the Pak Suzuki as a party or respondent?

    Has FTO ordered Pak Suzuki to issue this refund directly or indirectly?

    I demand more explanation from this author that how it is a loss for Pak Suzuki?

    I strongly urge that Pak Suzuki must take a strict legal action against this author for deformation and twisting facts!

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