The Sindh High Court has delivered an important ruling on default surcharge under the Sindh Sales Tax on Services Act, holding that the liability is statutory and compensatory in nature. According to the Court, the department is not required to establish wilfulness or mens rea before imposing default surcharge where tax has not been paid within the prescribed time.
The ruling came in a series of references filed by the Sindh Revenue Board against appellate tribunal decisions that had waived surcharge on the basis that the taxpayers’ defaults were not deliberate, including defaults occurring during the Covid-19 disruption. The High Court held that neither SRB officers nor the Commissioner or Appellate Tribunal possess general powers to waive, reduce or defer statutory surcharge merely on considerations of hardship, equity or absence of intention.
For businesses, the judgment carries a practical compliance message: delayed payment can create an additional tax cost even where there was no deliberate intention to default. Where legislation provides a specific mechanism for relaxation or exemption, taxpayers must pursue that statutory route instead of relying solely on equitable considerations at the appellate stage. Timely identification and discharge of Sindh sales tax liabilities therefore becomes even more important.