Significant changes to sales tax laws through Finance Act 2022

KARACHI: Significant changes have been made to sales tax laws through Finance Act, 2022 and that are applicable from July 01, 2022.

PwC A.F. Ferguson & Co interpreted the changes made to Sales Tax Act, 1990 through the Finance Act, 2022, which are as follow:

1. The requirement of CNIC / NTN for the purposes of invoices issued to unregistered persons and restriction of input tax attributed to such supplies retained to the extent of supplies to unregistered distributors.

2. Sales tax regime of pharma sector revamped with 1 per cent final sales tax on manufacturers and importers without any input adjustment.

3. The rate of fixed tax on other than Tier-1 retailers shall be increased by 100 per cent if the said retailers are not appearing on the Active Taxpayer List.

4. Fertilizers exempted from sales tax.

5. Value of supply not to include the amount of subsidy provided by the Federal Government or Provincial Government to the electricity consumer.

6. Through the Bill, ‘locally produced coal’ was proposed to be taxed at 17 per cent which has not been approved in the Act. It has now been subject to sales tax at higher of 17 per cent ad valorem or Rs 700 per metric tonne.

7. The proposed increase in sales tax rate from 5 per cent to 10 per cent for following has not been approved in the Act.

— natural gas

— Phosphoric acid

8. Electric vehicle in CBU condition of 50 kwh battery or below is now subject to sales tax at 12.5 per cent.

9. Electric vehicle transport buses of 25 seats or more in CBU condition are now subject to sales tax at 1 per cent.

10. Changes proposed in the rate of sales tax on different categories of mobile / satellite phones have not been approved in the Act.

11. Online marketplace is now required to withhold sales tax at 1 per cent (instead of 2 per cent).