Input tax and output tax have been explained under Sales Tax Act, 1990 for Tax Year 2024 by the Federal Board of Revenue (FBR).
The FBR in Pakistan has shed light on the intricacies of input tax and output tax under the Sales Tax Act, 1990, providing clarity for the tax year 2024. The FBR recently released the updated Sales Tax Act, 1990, extending up to June 30, 2023, offering comprehensive insights into the tax treatment of input and output transactions.
According to the revised sales tax act, input tax for a registered person encompasses various components:
(a) Tax on Supply of Goods: Input tax includes the tax levied under the Sales Tax Act, 1990, on the supply of goods to the registered person. This covers transactions where goods are purchased and the applicable sales tax is imposed.
(b) Tax on Import of Goods: Input tax also incorporates the tax levied under the Sales Tax Act, 1990, on the import of goods by the registered person. This recognizes the tax implications of importing goods into the country.
(c) Federal Excise Act, 2005: Input tax extends to goods or services acquired by the registered person, including tax levied under the Federal Excise Act, 2005, in sales tax mode. This refers to the duty of excise imposed on the manufacture or production of goods or the rendering or providing of services.
(d) Provincial Sales Tax on Services: Input tax further encompasses Provincial Sales Tax levied on services rendered or provided to the registered person. This acknowledges the role of provincial taxation in transactions involving services.
(e) Sales Tax in Azad Jammu and Kashmir: Input tax also includes the tax 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. This ensures consistency in the treatment of sales tax across different regions.
On the other hand, the concept of output tax, in relation to a registered person, encompasses the following:
(a) Tax on Supply of Goods: Output tax includes the tax levied under the Sales Tax Act, 1990, on the supply of goods made by the registered person. This pertains to the tax imposed on the sale of goods by the registered person.
(b) Federal Excise Act, 2005: Output tax extends to tax levied under the Federal Excise Act, 2005, in sales tax mode as a duty of excise on the manufacture or production of goods or the rendering or providing of services by the registered person.
(c) Sales Tax on Services in Islamabad Capital Territory: Output tax also includes sales tax levied on the services rendered or provided by the registered person under the Islamabad Capital Territory (Tax on Services) Ordinance, 2001 (XLII of 2001). This covers the taxation of services within the jurisdiction of Islamabad.
Understanding the dynamics of input and output tax is crucial for businesses to navigate the complex landscape of sales tax compliance. The detailed provisions in the updated Sales Tax Act, 1990, offer a comprehensive framework for businesses to ensure accurate and transparent reporting of their tax liabilities. As the FBR continues its efforts to streamline tax regulations, these clarifications aim to promote a fair and consistent tax environment for businesses operating in Pakistan.
