The Federal Board of Revenue (FBR) has clarified the rates and application of default surcharge for taxpayers who fail to meet their tax payment obligations. This surcharge is governed under Section 34 of the Sales Tax Act, 1990, and applies to both intentional and unintentional delays or errors in tax payments. What is Default Surcharge? Default surcharge is an additional charge imposed on taxpayers who fail to pay their due taxes on time, make inadmissible claims for refunds, or incorrectly apply tax rates such as the zero percent rate on supplies. Applicable Rates Under Section 34, the following rates for default surcharge are applied: 1. General Default: Taxpayers failing to pay their due taxes or receiving erroneous refunds are liable to pay default surcharge at either 12 percent per annum or KIBOR (Karachi Interbank Offered Rate) plus 3 percent per annum, whichever is higher. 2. Tax Fraud Cases: For cases involving tax fraud, the rate increases significantly. Taxpayers must pay default surcharge at 2 percent per month of the amount of tax evaded or the refund fraudulently claimed until the full liability, including the surcharge, is cleared. Calculation of Default Surcharge The FBR has outlined…