Karachi, July 23, 2023 – The Federal Board of Revenue (FBR) has recently updated the Sales Tax Act, 1990, introducing clear definitions of input tax and output tax aimed at streamlining tax-related processes and providing greater clarity for taxpayers. The updated act, which covers changes up to June 30, 2023, is set to be applicable from July 1, 2023.
The amendments made to the Sales Tax Act, 1990 have specifically outlined the definitions of input tax and output tax for registered individuals under the statute. These definitions are crucial for taxpayers as they determine the amount of tax payable and the tax credits they are eligible to claim.
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Input Tax Definition:
Input tax, in relation to a registered person, encompasses the following components:
(a) Tax on Goods Supplied: This includes the tax levied under the Sales Tax Act, 1990, on the supply of goods to the registered person.
(b) Tax on Imported Goods: The input tax also covers the tax levied under the Sales Tax Act, 1990, on the import of goods by the registered person.
(c) Tax on Acquired Goods or Services: In the case of goods or services acquired by the registered person, the input tax includes the tax levied under the Federal Excise Act, 2005, in sales tax mode. This applies as a duty of excise on the manufacture or production of the goods or the rendering or providing of the services.
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(d) Provincial Sales Tax on Services: The input tax definition extends to cover the Provincial Sales Tax levied on services rendered or provided to the registered person.
(e) Sales Tax in Azad Jammu and Kashmir: Additionally, the input tax incorporates any taxes levied under the Sales Tax Act, 1990, as adapted in the State of Azad Jammu and Kashmir, on the supply of goods received by the registered person.
Output Tax Definition:
The updated Sales Tax Act, 1990 also clarifies the concept of output tax, which relates to a registered person’s tax obligations on their supplies and services. The definition is as follows:
(a) Tax on Goods Supplied: The output tax includes the tax levied under the Sales Tax Act, 1990, on supplies of goods made by the registered person.
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(b) Tax on Manufactured or Produced Goods: It encompasses the tax levied under the Federal Excise Act, 2005, in sales tax mode as a duty of excise on the manufacture or production of the goods, or the rendering or providing of the services, by the registered person.
(c) Tax on Services Rendered: Furthermore, the output tax definition incorporates sales tax levied on the services rendered or provided by the registered person under the Islamabad Capital Territory (Tax on Services) Ordinance, 2001.
The FBR has emphasized that the detailed explanation of the tax statute is solely intended for understanding purposes and should not be treated as legal advice for any matters related to taxation.
These defined terms of input tax and output tax are expected to facilitate taxpayers in Pakistan by providing greater clarity on their tax obligations and tax credits, ultimately contributing to a more transparent and efficient tax system.
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Disclaimer:
The information presented in this news report is based on the Sales Tax Act, 1990, updated up to June 30, 2023, and applicable from July 1, 2023. While efforts have been made to ensure accuracy and reliability, this report is for informational purposes only and should not be considered as legal advice or a substitute for professional consultation. The tax laws and regulations may undergo changes and interpretation, and individuals or businesses seeking specific tax guidance should consult qualified legal and tax professionals. The author and publisher of this report do not assume any liability for actions or decisions taken based on the information provided herein.
