FBR explains cash discount under sales tax laws

FBR explains cash discount under sales tax laws

ISLAMABAD: The Federal Board of Revenue (FBR) has explained cash discount related to invoices issued through Point of Sale (POS) by Tier-1 retailers.

The FBR explained through an official note dated March 17, 2022 that cash discount has been allowed in the form of reduction of prices in seasonal sales / sales and the consideration in money is received after cash discount has been allowed.

It is clarified that the value of supply for sales tax purpose is the actual value received in monetary terms excluding the amount of sales tax and not the gross value. “Hence, the sales tax will be calculated and charged on the actual or discounted price accordingly,” the FBR added.

The FBR previously issued clarification in this regard through the official order dated October 13, 2021 on the standardized format of the sales tax invoice notified through SRO 1006(I)/2021 dated August 09, 2021.

The revenue body said that representations from the taxpayers and bar councils were received seeking further clarification of the ‘trade discount’.

It said that value of supply as per section 2 (46) of the Sales Tax Act, 1990 in respect of taxable supply means the consideration in money which the supplier receives from the recipient for that supply but excluding the amount of tax.

In the previous explanation dated October 13, 2021, the FBR clarified that the discount if any to be given by a retailer has to be depicted on the invoice horizontally i.e. from left to right.

READ MORE: Trade discount should be displayed on invoice: FBR

“The captions such as total, sales tax, discount allowed appearing at the bottom of the invoice are standalone notations and do not necessarily add or subtract one another.”

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