FBR Press Release

Audit Policy for 2017 pertaining to Tax Year 2016

Audit Policy for 2017 pertaining to Tax Year 2016 has been approved by the Federal Board of Revenue. Criteria for selection of cases (for all taxes) for TY 2016 would be parametric. It has been decided by the Board that in order to provide ease and facilitate the tax payers case of a tax payer once selected for audit though ballot shall not be selected for audit for next (consecutive) two tax years under section 214C of the Income Tax Ordinance 2001, under section 72B of the Sales Tax Act 1990 and 42B of the Federal Excise Act 2005 respectively. For such purposes base year would be TY 2015 for Income Tax & Tax Periods July 2014 to June 2015 for Sales Tax & Federal Excise Duty. The Parameters for selection of cases for audit in the aforementioned Audit Policy are as follows:

1. Income Tax: According to section 214C (1A) of Income Tax Ordinance, 2001 the Board shall keep the parameters confidential.

2. Sales Tax: Following risk parameters have been determined by the Board for selection of cases for audit under Sales Tax:

1. Decline in value of supplies is greater than 10% over last year;
2. Consistent decrease in output tax/input tax ratio over last three years;
3. Decrease in ratio of taxable supplies to total supplies by 10% or more as compared to previous year;
4. Non-filer, nil-filer or null-filer for more than 6 months in the year in case the Registered Person is showing any turnover in income tax return of the corresponding period;
5. Manufacturers showing value addition of less than 10%;
6. Where more than 30% purchases are from “unregistered persons”.
7. Where more than 30% sales are to “unregistered persons”.
8. Increase in carry forward of input tax and reduction in sales by margin of 10%.

3. Federal Excise

Following risk parameters have been determined by the Board for selection of cases for audit under Federal Excise:

1. Decline in value of supplies is greater than 10% over last year;
2. Consistent decrease in output tax/input tax ratio over last three years;
3. Decrease in proportion of taxable supplies to total supplies by 10% as compared to previous year;
4. Non-filer, nil-filer or null-filer for more than 6 months in the year, in case the Registered Person is showing any turnover in income tax return of the corresponding period;
5. Manufacturers showing value addition of less than  10%;
6. Where more than 30% purchases are from “unregistered persons”;
7. Where more than 30% sales are to “unregistered persons”;
8. Increase in carry forward of input tax and reduction in sales by margin of 10%.

Balloting on the basis of such policy would be held shortly. Audit Policy for 2017 pertaining to Tax Year 2016 has also been placed on the website of FBR which can be accessed at www.fbr.gov.pk