The complaint was made due to difficulties with the procedure of validating tax challans for withholding tax on real estate transfers. The complainant claimed that collecting PSIDs, making bank deposits, and obtaining challans, which must subsequently be delivered to the FBR office for endorsement and verification, are all laborious processes.
The FBR authorities had ordered the property registering authorities to forbid the registration of the transfer unless the tax challans had been confirmed by the FBR Office in Quetta.
The FBR has also stated that its withholding powers have been delegated and are restricted to audits, but that it has instead made the registration of transfers contingent on the FBR Authorities’ review of tax challans. The FBR offices are not required by law to verify the tax challans, and the withholding authorities are not required by tax law to request the FBR offices to verify the tax challans.
FTO forwarded the complaints to the secretary of Revenue Divisions for input in this respect. According to the Commissioner of the Regional Tax Office in Quetta, every effort has been made to offer comprehensive facilitation and simplify the PSIDS submission and tax payment processes for regular taxpayers.
The audit, however, exposed a staggering amount of short deductions and non-deductions in taxes charged on the transfer of property. The concerned withholding authorities argued that they were unfamiliar with the FBR taxes and that their personnel was ineffective in this area.
The withholding authorities requested assistance in order to stop such malpractices. As the property registration authorities were not sufficiently versed in the right application of rates, generation of PSIDs, and validation of tax challans, it was further argued that the verification of CPRs was predicated on continual demand of the property registering authorities.
In summarising the complaint, FTO noted that the rest of the IR formations across the nation are not familiar with RTO Quetta’s unique administrative intervention in regulating withholding taxes on properties. Despite the justifications offered by RTO Quetta, it would seem inappropriate to organise a second forum without receiving explicit authorisation from FBR.
Although FBR is able to pre-audit withholding taxes, the authority also has a duty to provide taxpayer assistance, which is easily achieved through the use of technology. The FBR should ideally undertake a post-audit using the CPRs stored in its database.
In order to reduce human discretion in the application of valuation rates and tax calculation, FTO has instructed FBR to install relevant operational software in the offices of all withholding agents responsible for the transfer of properties.
In its conclusions, FTO also stressed the need for FBR to develop and implement watertight procedures for prompt post-audits of CPRS across the nation.