Karachi, August 7, 2024 – The Federal Board of Revenue (FBR) has announced a significant redefinition of the “time of supply” under sales tax law, as stipulated in the Finance Act, 2024.
This change is expected to have wide-reaching implications for businesses and taxpayers across Pakistan.
In a detailed explanation provided through Sales Tax Circular No. 3, the FBR outlined the amendments made to section 2(44)(a) of the Sales Tax Act, 1990. Prior to the enactment of the Finance Act, 2024, the time of supply was defined as the moment goods were delivered or made available to the recipient. This definition has now been expanded to capture additional scenarios that affect the liability to pay sales tax.
The revised definition states that the obligation to pay sales tax on goods will now arise at either the time when the goods are delivered or made available to the recipient or when any payment is received by the supplier in respect of that supply, whichever occurs first. This dual criterion ensures that sales tax liability is triggered not only by the physical delivery of goods but also by the receipt of payment.
“This amendment aims to close loopholes and ensure timely collection of sales tax,” a FBR official said. “By linking the liability to the earlier of delivery or payment, the FBR is working to enhance the efficiency and effectiveness of tax collection.”
The change is part of a broader effort by the FBR to tighten regulatory compliance and improve the fiscal framework. Businesses are now required to adjust their accounting and operational practices to comply with this new regulation. This may involve changes to invoicing processes, payment tracking, and delivery documentation to ensure that sales tax is calculated and paid promptly.
The Finance Act, 2024, with its comprehensive amendments, reflects the government’s commitment to strengthening the tax system and boosting revenue collection. The FBR’s move to redefine the time of supply is a strategic step towards reducing tax evasion and ensuring a more consistent flow of tax revenues.
