The Federal Board of Revenue (FBR) has provided clarity regarding the zero-rated supply of goods and services to diplomats and foreign missions under the Sales Tax Rules, 2006.
These provisions ensure that diplomats and diplomatic missions receive tax exemptions on eligible purchases, promoting diplomatic reciprocity.
According to the FBR, under Rule 52 of the Sales Tax Rules, 2006, zero-rated sales tax applies to supplies made to diplomats and foreign missions. This tax relief is contingent upon the fulfillment of specific conditions outlined in the regulations.
Procedure for Diplomats and Diplomatic Missions
Under Rule 52, any diplomat or diplomatic mission seeking zero-rated supplies from a registered supplier must apply to the Assistant Collector or Deputy Collector with jurisdiction. The application must be accompanied by an exemption certificate issued by the Ministry of Foreign Affairs.
The Ministry of Foreign Affairs grants exemption certificates based on the principles of reciprocity and a minimum purchase value of Rs. 10,000. If a diplomat or diplomatic mission inadvertently pays sales tax, the Ministry forwards such claims to the FBR for a potential refund, provided all conditions are met.
Once an exemption certificate is issued, the Assistant Collector or Deputy Collector records the goods being purchased and retains the certificate for official records. The diplomat or diplomatic mission is then provided an “Authorization for Zero-Rated Supplies” in the prescribed STR-12 format, allowing them to make tax-free purchases from registered suppliers.
Zero-Rated Supplies Through Tier-1 Retailers
Under Rule 52A, tier-1 retailers supplying goods to diplomats and diplomatic missions must ensure that sales tax is charged at a zero rate. The exemption certificate issued by the Ministry of Foreign Affairs must explicitly state the description and quantity of the goods being purchased.
Invoices for zero-rated supplies must reference the exemption certificate’s number and issuance date. If a diplomat or diplomatic mission is mistakenly charged sales tax, the tier-1 retailer may refund the amount after issuing a credit note that details the original invoice and exemption certificate.
The FBR’s clarification on these provisions aims to facilitate diplomats and foreign missions while ensuring compliance with tax regulations. By streamlining the exemption process, the government reinforces its commitment to supporting diplomatic relations and upholding international tax protocols.