Islamabad, December 14, 2023 –The Federal Board of Revenue (FBR) issued a comprehensive list of Harmonized System (HS) Products eligible for tax input adjustment in a move aimed at facilitating manufacturers across various sectors.
(more…)Tag: input tax
-
Input tax adjustment restricted for oil, ghee, steel makers
ISLAMABAD: The Federal Board of Revenue (FBR) has restricted input adjustment for manufacturers of steel and oil and ghee.
The FBR issued Sales Tax General Order (STGO) No. 12 of 2022 dated April 07, 2022, regarding input tax adjustment to manufacturers of oil and ghee and steel melters and re-rollers.
Under the STGO, the sectors of oil & ghee and steel would only avail input adjustment against invoices issued for the same products falling under these sectors.
READ MORE: FBR detects fraudulent declaration of goods in ST returns
The FBR said the Sales Tax Act, 1990 mandates a taxpayer registered with FBR to claim input tax credit on import/purchases from registered suppliers only.
Section 8(1)(a) of the Act restricts the adjustment of input on goods or services used or to be used for any purpose other than for taxable supplies made or to be made.
Similarly, Section 8(1)(f) and (i) of the Act provide that tax credit shall not be admissible on the goods or services not related to the taxable supplies made by the taxpayer.
This essentially being a self-assessment based system warrants high standards of responsibility and integrity on part of the UST filers.
READ MORE: Adjustment restrictions hamper return filing by retailers
“However, the analysis of the data available in the system has led to conclude that the facilities/benefits provided through automated sales tax return are being misused by the manufacturers of oil & ghee and steel melters and re-rolling mills who are claiming inputs other than their relevant business activities in violation of provisions of law.”
In order to ensure certainty, transparency across-the-board, it has been decided that input tax adjustment shall not be allowed to the manufacturers of Oil & Ghee and Steel Melters and Re-Rollers on the goods which are not related to their business activity.
The list of such goods attached as Annexure-I for manufacturers of Oil & Ghee and as Annexure-11 for Steel Melters and Re-Rollers on the basis of PCT heading on which input tax credit shall not be admissible under the law.
Although, all these PCT headings have been identified after due diligence, yet any hardship caused may be brought to the notice of the Commissioner concerned. This STGO become applicable with effect from April 1, 2022.
-
Budget 2021/2022: Input tax allowed to companies listed on stock exchange
ISLAMABAD: The government has announced input sales tax adjustment for companies listed on Pakistan Stock Exchange (PSX) to promote corporatization in the country.
Finance Minister Shaukat Tarin while presenting federal #budget 2021/2022 on Friday said that relaxation of restriction on input tax adjustment under section 8B of Sales Tax Act, 1990 had been granted.
He said that removal of restriction on input tax allowance under sales tax law has been a major demand from business community; however, considering the importance of minimum value addition on VAT model, it is proposed to eliminate this restriction on highly regulated corporate sector that is public limited companies listed on Pakistan Stock Exchange.
This would be a big breakthrough for further corporatization of economy and facilitation of regulated corporate sector.
-
FPCCI demands restriction withdrawal on input tax adjustment
KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has demanded the tax authorities withdraw restriction on input adjustment under Sales Tax Act, 1990.
A statement issued on Wednesday said that Advisory Council of the FPCCI on budget found various laws and regulations that failed to generate much revenue on the other hand badly affecting ease of doing business ranking of Pakistan.
Mian Nasser Hyatt Maggo President FPCCI in this regards has already communicated to the Prime Minister and other concerned ministries for such impediments that are negatively impacting economic growth.
During the meeting Advisory Council of the FPCCI has decided to extend its full support and cooperation to the government which is struggling to improve economic environment under the adverse conditions created by COVID-19.
The Advisory Committee during its first meeting analysed the hardships being created under section 8B of the Sales Tax Act, 1990, wherein a registered person is not allowed to adjust input tax in excess of ninety percent of the output tax.
“This restriction not only restrains the taxpayer to claim its legitimate input tax but is also affecting the ease of doing business and thereby increasing the cost of business.”
The Advisory Council under the Convenership of Mr. Zakariya Usman former President of FPCCI reviewed the whole scenario and after due diligence unanimously proposed that hardship and discrepancy created by Section 8B of Sales Tax Act should be removed in the adjustment of input and output tax by allowing 100 percent adjustment of input tax.
Amendment in Section-8B of Sales Tax Act 1990 should be made in the coming budget to allow 100 percent adjustment of input tax against output tax to all registered persons in order to remove anomalies.
Mian Nasser Hyatt Maggo President of FPCCI has categorically informed that the present global and domestic conditions are completely different; COVID-19 has changed the world economic situation dramatically as most of the businesses are struggling for their survival.
-
What is input tax under Sales Tax Act?
The Sales Tax Act, 1990 as issued by the Federal Board of Revenue (FBR) as updated up to June 30, 2020 has explained input tax in relation to a registered person.
The input tax in relation to a registered person has been explained as:
(a) tax levied under this Act on supply of goods to the person;
(b) tax levied under this Act on the import of goods by the person;
(c) in relation to goods or services acquired by the person, 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;
(d) Provincial Sales Tax levied on services rendered or provided to the person; and
(e) 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 person.
-
FBR allows input tax adjustment to retailers
ISLAMABAD: Federal Board of Revenue (FBR) on Wednesday allowed input adjustment of sales tax to Tier-1 retailers.
The FBR issued SRO 344(I)/2020 to amend SRO 1190(I)/2019 dated October 02, 2019.
The FBR allowed 95 percent input adjustment against output tax.
The FBR through SRO 1190(I)/2019 issued fresh list of sectors to allow input adjustment by amending the Section 8B of Sales Tax Act, 1990.
The following sectors were allowed input adjustment and refunds:
- Persons registered in electrical energy sector.
- Oil marketing companies and petroleum refineries.
- Fertilizers manufacturers.
- Persons making zero-rated supplies, including exports, provided that value of such supplies exceeds 50 percent of value of all taxable supplies in a tax period.
- Distributors.
- Gas distribution companies.
- Telecommunication services.
- Pakistan Steel, Bin Qasim, Karachi.
- Registered persons other than manufacturers, making supplies of items covered under the Third Schedule to the Sales tax Act, 1990, on which sales tax has been paid by the manufacturer or importer on retail price, provided that value of such supplies exceeds 80 percent of value of all taxable supplies in a tax period.
- Commercial importers where value of import subject to 3 percent value addition as prescribed in Twelfth Schedule to the Act exceeds 50 percent of value of all taxable purchases, including imports, in a tax period.
-
Chartered accountants liable to penal action for issuing false tax certificate
KARACHI: Any auditor of professional accountancy firm is liable to penal action in case found guilty of misconduct in furnishing false tax certificate, sources in Federal Board of Revenue (FBR) said.
Referring to Section 8B of Sales Tax Act, 1990, the sources said that tax authorities allowed input tax adjustment to a taxpayer on the basis of certificate issued by auditors of professional accountancy firms.
“Any auditor found guilty of misconduct in furnishing the certificate mentioned in sub-section (2) shall be referred to the Council for disciplinary action under section 20D of Chartered Accountants, Ordinance, 1961,” according to Sales Tax Act, 1990.
Section 20D of Chartered Accountants Ordinance, 1961 explains:
“20-D. Orders by the Council if member found guilty.-(1) If, on receipt of the report under Section 20-B the Council is of opinion that the member of the Institute has been guilty of any professional misconduct specified in Schedule I, it may, after affording such member an opportunity of being heard, either personally or through counsel or another member of the Institute, make any of the following orders, namely:-
(a) Reprimand or warn such member;
(b) Impose such penalty as it may deem necessary not exceeding one thousand rupees; and
(c) Remove the name of such member from the Register for a period not exceeding five years:
Provided that, where it appears to the Council that the case is one in which the name of such member ought to be removed from the Register for a period exceeding five years or permanently, he shall not make any order but shall refer the case to the High Court with its recommendations thereon.
(2) If the Council is of opinion that the member of the Institute is guilty of a professional misconduct specified in Schedule II, it shall refer the case to the High Court with its recommendations thereon.
According to Section 8B of Sales Tax Act, 1990 taxpayers have not been allowed to adjust input tax except for some cases.
Following is Section 8B of the Act:
“8B. Adjustable input tax.– (1) Notwithstanding anything contained in this Act, in relation to a tax period, a registered person shall not be allowed to adjust input tax in excess of ninety per cent of the output tax for that tax period:
Provided that the restriction on the adjustment of input tax in excess of ninety percent of the output tax, shall not apply in case of fixed assets or Capital goods:
Provided further that the Board may by notification in the official Gazette, exclude any person or class of persons from the purview of sub-section (1).
(2) A registered person, subject to sub-section (1), may be allowed adjustment or refund of input tax not allowed under sub-section (1) subject to the following conditions, namely:–
(i) in the case of registered persons, whose accounts are subject to audit under the Companies Ordinance, 1984, upon furnishing a statement along with annual audited accounts, duly certified by the auditors, showing value additions less than the limit prescribed under sub-section (1) above; or
(ii) in case of other registered persons, subject to the conditions and restrictions as may be specified by the Board by notification in the official Gazette.
(3) The adjustment or refund of input tax mentioned in sub-sections (2), if any, shall be made on yearly basis in the second month following the end of the financial year of the registered person.
(4) Notwithstanding anything contained in sub-sections (1) and (2), the Board may, by notification in the official Gazette, prescribe any other limit of input tax adjustment for any person or class of persons.
(5) Any auditor found guilty of misconduct in furnishing the certificate mentioned in sub-section (2) shall be referred to the Council for disciplinary action under section 20D of Chartered Accountants, Ordinance, 1961 (X of 1961).
(6) In case a Tier-1 retailer does not integrate his retail outlet in the manner as prescribed under sub-section (9A) of section 3, during a tax period or part thereof, the adjustable input tax for whole of that tax period shall be reduced by 15 percent.”
-
KTBA highlights anomalies in claiming input tax adjustment
KARACHI: Karachi Tax Bar Association (KTBA) has highlighted impediments face by taxpayers in claiming input sales tax adjustment.
The KTBA in a letter to Federal Board of Revenue (FBR) on Wednesday said that after introduction of STRIVe, there have arisen certain practical impediments at the time of filing sales tax returns to avail the exclusion from Section 8B of the Act read with SRO 1190 of 2019 dated 02/10/2019.
The option of exclusion as provided under SRO 1190(I)/2019 dated 02/10/2019 has been allowed only to certain taxpayers who are enlisted in the list of exclusion as provided thereunder while, earlier it was provided under SRO 647(I)/2007 in general.
Consequently, the taxpayers who are engaged in multiple businesses or have not updated their tax profiles are not allowed to avail the benefit of the aforesaid exclusion despite the fact that their activity is excluded from Section 8B of the Act.
In addition to the above a clarification was also issued through STM (IR) letter C.No.1(211)STM/2019/272646-12 dated 14/11/2019, whereby the taxpayers have been required to update their tax profiles to avail the benefits of SRO 1190(I)/2019 dated 02/10/2019.
The situation on the other hand is further deteriorated as there is no option in the Tax Asaan application for “change in particular”, due to which complications have cropped up for taxpayers to update their tax profiles as required. Presently, the taxpayers are left with no other option but to file an application for change in particulars on the line of previous prescribed procedure whereby a ‘No Objection Certification (NOC)’ was required to be issued by the concerned Commissioner to the ‘Local Registration Office’.
This consumes considerable time. What has been observed that even after updating the tax profile, certain taxpayers, mostly importer, are not getting exclusions from Section 8B.
It is also essential to highlight that taxpayers do not have clear understanding about the business classification available on IRIS portal.
While updating the tax profile, taxpayers are unable to select their applicable business category from the IRIS portal as FBR has not provided any guideline about the correct classification of business category of respective businesses.
The taxpayers are also not getting any support from the FBR Helpline as the Support Officer at the Helpline are themselves not clear and often provide different suggestions through telephone, email etc.
Consequent to above lack of training or knowledge, the taxpayers are unable to avail the above benefit even after updating their tax profile.
On a slightly different note, it also must be allowed for all the categories to whom it is applicable, especially in the following situations:
(i) Persons who have paid minimum value addition tax at import stage are excluded from Section 8B, however, if the goods are not imported in any tax period but supplies are made from opening stock of such imports, the system does not allow the exclusions from Section 8B. In this case, the exclusion is only allowed in the tax period in which imports are made but not available in the subsequent periods when the stock of such imported goods are sold.
This is totally bizarre and is against the scheme of the Section 8B. It is, therefore, suggested to allow the exclusion throughout the year for 12 tax periods if the taxpayer is a “commercial importer”.
(ii) Sales tax paid on Fixed assets is also not subject to the restrictions provided under Section 8B, however, the return has not allowed the said exclusion in cases where such sales tax of fixed assets, being excess of the output tax, is carried forward to the next month.
The same is treated as part and parcel of the normal carry forward balance. It is, therefore, suggested that the sales tax on Fixed Asset must require to be separately treated as compared to the normal input tax adjustment with respect to the provision of Section 8B and in case, where input tax of fixed asset is in excess of the output tax in a tax period, it must have a separate row of carry forward balance in the returns, likewise the sales tax return provided by SRB.
The aforesaid anomalies are not more than technicalities of the system but are prone to give rise to the unnecessary litigation due to infringement of the vested right of the input tax adjustment of the taxpayers.
-
FBR urged to resolve input adjustment on payment made through BOAD
KARACHI: Karachi Tax Bar Association (KTBA) on Thursday urged Federal Board of Revenue (FBR) to resolve the input adjustment issue on payment made through Bill of Additional Duty (BOAD).
The KTBA in a letter informed the FBR that it had highlighted the matter through communications dated November 27, 2013 and June 23, 2014, respectively whereby the issue of non-adjustment of input tax, paid through challan of BOAD was highlighted that a registered person remained unable to claim its input sales tax against the output sales tax.
The KTBA informed through the instant letter that the these paid challans of BOAD were still not available in the uploadable format in the system due to which the issue was still persist.
The tax bar pointed out that the issue had been duly addressed at the WeBOC system already and the PRAL through its communication on December 05, 2013 intimated that the provision for the requested adjustment had been made available for payment made through WeBOC system in the online sales tax return portal.
A similar mechanism should be devised and put in place for the adjustment of sales tax paid through BOAD for challans paid through One Customs as well, which has been held pending for a considerable time period for the last five years.
The issue needs to be addressed and resolved, the KTBA said.
-
FBR issues fresh list of sectors allowed input tax adjustment
ISLAMABAD: Federal Board of Revenue (FBR) has issued fresh list of sectors to allow input adjustment by amending the Section 8B of Sales Tax Act, 1990.
The FBR issued SRO 1190(I)/2019 on Thursday in suppression of its previous SRO 647(I)/2007 dated June 27, 2007.
The following sectors have been allowed input adjustment and refunds:
01. Persons registered in electrical energy sector.
02. Oil marketing companies and petroleum refineries.
03. Fertilizers manufacturers.
04. Persons making zero-rated supplies, including exports, provided that value of such supplies exceeds 50 percent of value of all taxable supplies in a tax period.
05. Distributors.
06. Gas distribution companies.
07. Telecommunication services.
08. Pakistan Steel, Bin Qasim, Karachi.
09. Registered persons other than manufacturers, making supplies of items covered under the Third Schedule to the Sales tax Act, 1990, on which sales tax has been paid by the manufacturer or importer on retail price, provided that value of such supplies exceeds 80 percent of value of all taxable supplies in a tax period.
10. Commercial importers where value of import subject to 3 percent value addition as prescribed in Twelfth Schedule to the Act exceeds 50 percent of value of all taxable purchases, including imports, in a tax period.
Through the latest SRO the retailers also importing goods in bulk and operating chain stores have been allowed adjustment of input tax to the extent of 95 percent of the output tax for the tax period and the excess amount shall be carried forward to the next period.
The FBR further said that the first proviso of sub-section (1) and sub-section (2) and (3) of Section 8B of the Sales Tax Act, 1990, shall apply, mutatis mutandis, to the input tax to be adjusted or carried forward as provided in clause (b).