Islamabad, August 12, 2024 – The Federal Board of Revenue (FBR) has recently released a comprehensive guide explaining the basics of sales tax to help taxpayers navigate the complexities of registration and filing. This initiative aims to ensure that taxpayers have a clear understanding of sales tax laws, thereby facilitating compliance and reducing errors in tax returns.
According to the FBR, having a fundamental grasp of sales tax processes is crucial for anyone involved in taxable activities. By understanding key concepts, taxpayers can ensure that they perform their duties efficiently and in accordance with legal requirements.
Sales Tax, as defined by the FBR, is a tax imposed by the Federal Government under the Sales Tax Act, 1990. It applies to the sale and supply of goods, as well as to goods imported into Pakistan. Additionally, the Federal Government levies sales tax on services under The Islamabad Capital Territory (Tax on Services) Ordinance, 2001.
Input and Output Tax: A Brief Overview
The FBR explained that Input Tax refers to the tax paid by a registered person on taxable goods and services purchased or acquired. This includes sales tax paid on imports. On the other hand, Output Tax is the sales tax charged and levied on the sale or supply of goods or services that are subject to sales tax.
Scope of Sales Tax
The FBR highlighted that sales tax applies to a wide range of goods and services. Specifically, all goods are taxable unless they are explicitly exempted under section 13 of the Sales Tax Act, 1990, as detailed in the Sixth Schedule. The term “goods” for sales tax purposes encompasses all movable property, excluding actionable claims, money, stocks, shares, and securities.
Imports into Pakistan
All goods imported into Pakistan are subject to sales tax at the time of import, with the exception of those goods that are explicitly exempted under section 13 of the Sales Tax Act, 1990, as listed in the Sixth Schedule.
Exempt Goods
Under the Sales Tax Act, 1990, certain goods are exempt from sales tax. These exemptions are clearly outlined in the Sixth Schedule. Additionally, other exemptions may be granted through various notifications (SROs) issued by the Government under section 13 of the Act.
The FBR’s detailed explanation is part of its ongoing efforts to simplify the tax system and assist taxpayers in fulfilling their obligations. By providing this essential information, the FBR aims to foster a more informed and compliant taxpayer base across Pakistan.