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Category: Definitions

  • Sales Tax Act defines ‘supply’

    Sales Tax Act defines ‘supply’

    Sales Tax Act, 1990 has explained the word ‘supply’ for the purpose of imposition and collection of tax.

    The Sales Tax Act, 1990 [updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR)] has defined the word ‘supply’ as:

    “Supply” means a sale or other transfer of the right to dispose of goods as owner, including such sale or transfer under a hire purchase agreement, and also includes –

    (a) putting to private, business or non-business use of goods produced or manufactured in the course of taxable activity for purposes other than those of making a taxable supply;

    (b) auction or disposal of goods to satisfy a debt owed by a person;

    (c) possession of taxable goods held immediately before a person ceases to be a registered person; and

    (d) in case of manufacture of goods belonging to another person, the transfer or delivery of such goods to the owner or to a person nominated by him:

    Provided that the Board, with the approval of the Federal Minister-in-charge, may, by notification in the official Gazette, specify such other transactions which shall or shall not constitute supply;

    The law also explained “supply chain” as the series of transactions between buyers and sellers from the stage of first purchase or import to the stage of final supply.

  • What is sales tax?

    What is sales tax?

    Sales Tax Act, 1990 has explained the meaning of sales tax imposed on supply of goods.

    The Sales Tax Act, 1990 [updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR)] has explained the following:

     “sales tax” means – –

    (a) the tax, additional tax, or default surcharge levied under this Act;

    (b) a fine, penalty or fee imposed or charged under this Act; and

    (c) any other sum payable under the provisions of this Act or the rules made thereunder;

     “sales tax account” means an account representing the double entry recording of sales tax transactions in the books of account.

  • Income tax law defines amalgamation

    Income tax law defines amalgamation

    The word ‘amalgamation’ has been defined under Income Tax Ordinance, 2001.

    The Ordinance updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR) has defined the word ‘amalgamation’ as:

    “Amalgamation” means the merger of one or more banking companies or non-banking financial institutions, or insurance companies, or companies owning and managing industrial undertakings or companies engaged in providing services and not being a trading company or companies in either case at least one of them being a public company, or a company incorporated under any law, other than Companies Ordinance, 1984 (XLVII of 1984), for the time being in force, (the company or companies which so merge being referred to as the “amalgamating company” or companies and the company with which they merge or which is formed as a result of merger, as the “amalgamated company”) in such manner that –

    (a) the assets of the amalgamating company or companies immediately before the amalgamation become the assets of the amalgamated company by virtue of the amalgamation, otherwise than by purchase of such assets by the amalgamated company or as a result of distribution of such

    assets to the amalgamated company after the winding up of the amalgamating company or companies; and

    (b) the liabilities of the amalgamating company or companies immediately before the amalgamation become the liabilities of the amalgamated company by virtue of the amalgamation.

  • What is taxable activity under Sales Tax Act?

    What is taxable activity under Sales Tax Act?

    The Sales Tax Act, 1990, as updated by the Federal Board of Revenue (FBR) up to June 30, 2020, clearly defines the term ‘taxable activity’ for the purpose of determining liability under the sales tax regime.

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  • Retail price defined under Sales Tax Act

    Retail price defined under Sales Tax Act

    Sales Tax Act, 1990 has defined ‘retail price’ as a price fixed for sales of goods to the end consumers.

    The Sales Tax Act, 1990 [updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR)] defines the ‘retail price’ with reference to the Third Schedule of the Act, as the price fixed by the manufacturer or importer, in case of imported goods, inclusive of all duties, charges and taxes (other than sales tax) at which any particular brand or variety of any article should be sold to the general body of consumers or, if more than one such price is so fixed for the same brand or variety, the highest of such price:

    Provided that the FBR may through a general order specify zones or areas for the purpose of determination of highest retail price for any brand or variety of goods.

    The Act also defines the work retailer as a person supplying goods to general public for the purpose of consumption:

    Provided that any person, who combines the business of import and retail or manufacture or production with retail, shall notify and advertise wholesale prices and retail prices separately, and declare the address of retail outlets.

  • Registered person defined under sales tax

    Registered person defined under sales tax

    Sales tax laws have defined ‘person’ for determining transactions i.e. supplies and purchases and application of sales tax rate.

    The Sales Tax Act, 1990 [updated June 30, 2020 issued by the Federal Board of Revenue (FBR)] explained the following:

     (21) “person” means,–

    (a) an individual;

    (b) a company or association of persons incorporated, formed, organized or established in Pakistan or elsewhere;

    (c) the Federal Government;

    (d) a Provincial Government;

    (e) a local authority in Pakistan; or

    (f) a foreign government, a political subdivision of a foreign government, or public international organization;]

    (22) “prescribed” means prescribed by rules made under this Act;

    (22A) “Provincial sales tax” means tax levied under, Provincial laws or laws relating to Islamabad Capital Territory, which are declared by the Federal Government, through notification in the official Gazette to be Provincial Sales Tax for the purpose of input tax;

    (23) “registered office” means the office or other place of business specified by the registered person in the application made by him for registration under this Act or through any subsequent application to the 2[Commissioner];

    (24) “registration number” means the number allocated to the registered person for the purpose of this Act;

    (25) “registered person” means a person who is registered or is liable to be registered under this Act:

    Provided that a person liable to be registered but not registered under this Act shall not be entitled to any benefit available to a registered person under any of the provisions of this Act or the rules made thereunder.

  • What is output tax under Sales Tax Act?

    What is output tax under Sales Tax Act?

    Sales tax law has defined output tax as a supply of goods, made by the person.

    The Sales Tax Act, 1990 (updated June 30, 2020) issued by the Federal Board of Revenue (FBR) has defined output tax in relation to a registered person as:

    (a) tax levied under this Act on a supply of goods, made by the person;

    (b) tax levied under the Federal Excise Act, 2005 in sales tax mode as a duty of excise on the manufacture or production of the goods, or the rendering or providing of the services, by the person;

    (c) sales tax levied on the services rendered or provided by the person under Islamabad Capital Territory (Tax on Services) Ordinance, 2001 (XLII of 2001).

  • Definition of manufacturer or producer under Sales Tax Act

    Definition of manufacturer or producer under Sales Tax Act

    A definition of manufacturer of producer has been included into the Sales Tax Act, 1990 (updated up to June 30, 2020) issued by the Federal Board of Revenue (FBR).

    According to the definition “manufacturer” or “producer” means a person who engages, whether exclusively or not, in the production or manufacture of goods whether or not the raw material of which the goods are produced or manufactured are owned by him; and shall include –

    (a) a person who by any process or operation assembles, mixes, cuts, dilutes, bottles, packages, repackages or prepares goods by any other manner;

    (b) an assignee or trustee in bankruptcy, liquidator, executor, or curator or any manufacturer or producer and any person who disposes of his assets in any fiduciary capacity; and

    (c) any person, firm or company which owns, holds, claims or uses any patent, proprietary, or other right to goods being manufactured, whether in his or its name, or on his or its behalf, as the case may be, whether or not such person, firm or company sells, distributes, consigns or otherwise disposes of the goods :

    Provided that for the purpose of refund under this Act, only such shall be treated as manufacturer-cum-exporter who owns or has his own manufacturing facility to manufacture or produce the goods exported or to be exported.

    It further explains “manufacture” or “produce”, which includes:

    (a) any process in which an article singly or in combination with other articles, materials, components, is either converted into another distinct article or product or is so changed, transformed or reshaped that it becomes capable of being put to use differently or distinctly and includes any process incidental or ancillary to the completion of a manufactured product;

    (b) process of printing, publishing, lithography and engraving; and

    (c) process and operations of assembling, mixing, cutting, diluting, bottling, packaging, repacking or preparation of goods in any other manner.

  • What is input tax under Sales Tax Act?

    What is input tax under Sales Tax Act?

    The Sales Tax Act, 1990 as issued by the Federal Board of Revenue (FBR) as updated up to June 30, 2020 has explained input tax in relation to a registered person.

    The input tax in relation to a registered person has been explained as:

     (a) tax levied under this Act on supply of goods to the person;

    (b) tax levied under this Act on the import of goods by the person;

    (c) in relation to goods or services acquired by the person, tax levied under the Federal Excise Act, 2005 in sales tax mode as a duty of excise on the manufacture or production of the goods, or the rendering or providing of the services;

    (d) Provincial Sales Tax levied on services rendered or provided to the person; and

    (e) levied under the Sales Tax Act, 1990 as adapted in the State of Azad Jammu and Kashmir, on the supply of goods received by the person.

  • Associates defined under Sales Tax Act 1990

    Associates defined under Sales Tax Act 1990

    Associates or Associated Persons have been defined under Sales Tax Act, 1990.

    Section 2 of Sales Tax Act, 1990 (updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR) explained associates as:

     (3) associates (associated persons) means, –

    (i) subject to sub-clause (ii), where two persons associate and the relationship between the two is such that one may reasonably be expected to act in accordance with the intentions of the other, or both persons may reasonably be expected to act in accordance with the intentions of a third person;

    (ii) two persons shall not be associates solely by reason of the fact that one person is an employee of the other or both persons are employees of a third person;

    (iii) without limiting the generality of sub-clause (i) and subject to sub-clause (iv), the following shall be treated as associates, namely: –

    (a) an individual and a relative of the individual;

    (b) members of an association of persons;

    (c) a member of an association of persons and the association, where the member, either alone or together with an associate or associates under another application of this section, controls fifty per cent or more of the rights to income or capital of the association;

    (d) a trust and any person who benefits or may benefit under the trust;

    (e) a shareholder in a company and the company, where the shareholder, either alone or together with an associate or associates under another application of this section, controls either directly or through one or more interposed persons–

    (i) fifty per cent or more of the voting power in the company;

    (ii) fifty per cent or more of the rights to dividends; or

    (iii) fifty per cent or more of the rights to capital; and

    (f) two companies, where a person, either alone or together with an associate or associates under another application of this section, controls either directly or through one or more interposed persons –

    (i) fifty per cent or more of the voting power in both companies;

    (ii) fifty per cent or more of the rights to dividends in companies; or

    (iii) fifty per cent or more of the rights to capital in both companies.

    (iv) two persons shall not be associates under sub-clause (a) or (b) of paragraph (iii) where the Commissioner is satisfied that neither person may reasonably be expected to act in accordance with the intentions of the other.

    (v) In this clause, “relative” in relation to an individual, means–

    (a) an ancestor, a descendant of any of the grandparents, or an adopted child, of the individual, or of a spouse of the individual; or

    (b) a spouse of the individual or of any person specified in sub-clause (a).

    (3A) “association of persons” includes a firm, a Hindu undivided family, any artificial juridical person and anybody of persons formed under a foreign law, but does not include a company;

    (3AA) “banking company” means a banking company as defined in the Banking Companies Ordinance, 1962 (LVII of 1962) and includes anybody corporate which transacts the business of banking in Pakistan;