Karachi, December 17, 2024 – The Federal Board of Revenue (FBR) has issued a detailed clarification on the treatment of sales tax when there is a change in the applicable tax rate. This clarification is designed to provide clear guidance to taxpayers and ensure uniform compliance.
The FBR stated that the procedure for handling changes in the tax rate is explicitly outlined in Section 5 of the Sales Tax Act, 1990. This section establishes the framework for determining the applicable tax rate based on the timing and circumstances of supply or importation.
Key Provisions on Tax Rate Changes:
1. Taxable Supplies:
o For taxable supplies made by registered persons, the applicable tax rate will be the rate in effect at the time of the supply.
2. Imported Goods:
o For goods entered for home consumption, the applicable tax rate will be the rate in effect on the date the goods declaration is presented under Section 79 of the Customs Act, 1969.
o For goods cleared from a warehouse, the applicable tax rate will be the rate in effect on the date the goods declaration for clearance is presented under Section 104 of the Customs Act, 1969.
Special Provisions:
• If a goods declaration is presented in advance of the arrival of the conveyance transporting the goods, the tax rate will be the one in effect on the date the manifest of the conveyance is submitted.
• If the tax is not paid within seven days of the goods declaration under Section 104 of the Customs Act, 1969, the applicable tax rate will be the one in effect on the actual date of payment.
This clarification emphasizes the importance of timing in determining the tax rate, ensuring that taxpayers can accurately calculate their liabilities in accordance with the prevailing laws. The FBR’s guidance provides much-needed clarity and reduces the potential for disputes arising from rate changes.
The FBR has urged taxpayers to familiarize themselves with these provisions and comply accordingly to avoid penalties or delays in the clearance of goods. This directive is effective immediately and aligns with the FBR’s efforts to streamline tax administration and enhance transparency.