Karachi, December 12, 2024 – The Federal Board of Revenue (FBR) has clarified the concept of “time of supply” for the collection of sales tax, eliminating ambiguities that previously existed among taxpayers and businesses.
The FBR explained that the definition and rules governing the time of supply are detailed in the updated Sales Tax Act, 1990, applicable to the tax year 2025. Understanding the time of supply is crucial for businesses to determine when sales tax should be calculated and reported.
As per the FBR, the time of supply is defined as follows:
1. For Goods (Except Under Hire Purchase Agreements): The time of supply is either when the goods are delivered or made available to the recipient or when the supplier receives any payment for the goods, whichever occurs earlier.
2. For Goods under Hire Purchase Agreements: The time of supply is when the hire purchase agreement is entered into, regardless of the timing of delivery or payment.
3. For Services: The time of supply is when the services are rendered or provided to the recipient.
Additionally, the FBR provided further guidance for scenarios involving part payments:
• For Taxable Supplies: Any part payment received within a tax period must be included in the return for that tax period.
• For Exempt Supplies: If a part payment pertains to an exempt supply, it should be included in the return for the tax period in which the exemption is withdrawn.
These clarifications are intended to assist taxpayers in meeting compliance requirements and avoid errors in sales tax reporting. The provisions ensure that the timing of tax collection aligns with actual business transactions, reducing discrepancies and improving transparency.
Businesses and taxpayers are encouraged to familiarize themselves with these updated guidelines to streamline their tax submissions and maintain accurate records. The FBR reiterated its commitment to providing clear regulations to facilitate compliance and reduce administrative complexities for taxpayers across Pakistan.
For further inquiries, taxpayers are advised to consult the updated Sales Tax Act, 1990, or seek professional tax advice to ensure proper implementation of these rules.
