ISLAMABAD: The government has proposed major changes to sales tax law through Finance Bill 2020 to be applicable from July 01, 2020.

EY Ford Rhodes Chartered Accountants highlighted the major changes to Sales Tax Act, 1990 through Finance Bill, 2020:

A person whose refunds or input tax adjustment is blocked will continue to be treated as an active taxpayer to facilitate buyers so as they claim input tax on purchases made from him/it.

Value of electricity supplied by WAPDA and IPPs is streamlined with effect from 01 July 2019.

Sales tax on supply of used vehicle is applicable only on value addition to the used vehicles purchased locally.

Scope of sales tax withholding extended on acquisition of services.

FBR is empowered to impose restrictions on wastage of materials vis-à-vis claim of input tax relating thereto.

The restriction on claim of input tax has been extended to services where supplies were made to un- registered persons without mentioning of NTN or CNIC.

Where a transactional value is less than Rs 100,000 a retailer is not required to mention CNIC or NTN of an un registered person.

Commissioner may conduct audit proceedings electronically through video links or any other facility as prescribed by the FBR.

Every registered person is required to submit a complete return i.e. along with all applicable Annexures in the manner prescribed by the FBR.

Even after imposition of penalty, if a person does not integrate his business with the FBR system within two months, the business premises shall be sealed until he integrates such business.

The CIR (Appeals) is now empowered to not admit any documentary material or evidence which was not produced before the Officer Inland Revenue without any plausible reason.

Agencies including NADRA, FIA, provincial excise and taxation departments, utility companies etc. are now required to provide information to the FBR on real-time basis.

Restriction on input tax as attributable to the prescribed excess supplies to unregistered persons has now been extended to every registered person. Previously, it was applicable only on registered manufacturers.

Zero rate on supplies of raw materials, components and goods for further manufacturing in the Gwadar Free Zones and exports thereof is proposed to be re-introduced effective from 01 June 2020.

Zero rate on supplies of locally manufactured plant and machinery to the manufacturers located in Gwadar Free Zone is proposed to be re-introduced effective from 01 June 2020.

Exemption on import of goods for exclusive use within the Gwadar Free Zone or for making exports therefrom is proposed to be re-introduced effective from 01 June 2020.

Exemptions from sales tax on import and supply of ships and all floating crafts etc. is proposed to be extended upto the year 2023.

Dietetic foods for consumption of children suffering from inherent metabolic disorder is exempted subject to certain conditions.

Supplies made from retail outlets which are integrated with the FBR’s computerized system will now be subject to reduce rate of 12 percent instead of 14 percent.

Import or local supplies of smart phones value not exceeding USD 30 is subject to fixed sales tax rate of PKR 200.

Rate of sales tax withholding applicable on purchases from unregistered persons has now been extended to registered persons who are not active taxpayers.

Raw materials and intermediary goods imported by a manufacturer for in-house consumption are not subject to value addition tax of 3 percent at import stage.

ISLAMABAD: The Finance Bill 2020 has proposed to amend Sales Tax Act 1990 and empower tax authorities to modify orders.

A new section 11C to the Act has been proposed through the bill, which is as follow:

“11C. Power of tax authorities to modify orders, etc.– (1) Where a question of law has been decided by a High Court or the Appellate Tribunal in the case of a registered person, on or after first day of July, 1990, the Commissioner or an officer of Inland Revenue may, notwithstanding that he has preferred an appeal against the decision of the High Court or made an application for reference against the order of the Appellate Tribunal, as the case may be, follow the said decision in the case of the said taxpayer in so far as it applies to said question of law arising in any assessment pending before the Commissioner or an officer of Inland Revenue, until the decision of the High Court or of the Appellate Tribunal is reversed or modified.

(2) In case the decision of High Court or the Appellate Tribunal, referred to in sub-section (1), is reversed or modified, the Commissioner or an officer of Inland Revenue may, notwithstanding the expiry of period of limitation prescribed for making any assessment or order, within a period of one year from the date of receipt of decision, modify the assessment or order in which the said decision was applied so that it conforms to the final decision.”