ISLAMABAD: The Federal Board of Revenue (FBR) has reiterated the legal authority granted under Section 11A of the Sales Tax Act, 1990, regarding the recovery of short paid tax amounts without issuing any prior notice. This provision remains an essential tool for tax enforcement, especially in cases where taxpayers underreport their liabilities.
(more…)Tag: Sales Tax Act 1990
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Assessment and recovery of tax not levied
Section 11 of Sales Tax Act, 1990 has explained assessment of tax and recovery of tax not levied or short levied or erroneously refunded.
.The Federal Board of Revenue (FBR) issued the Sales Tax Act, 1990 updated up to June 30, 2021. The Act incorporated amendments brought through Finance Act, 2021.
Following is the text of section 11 of Sales Tax Act, 1990:
11. Assessment of Tax & Recovery of Tax not levied or short levied or erroneously refunded .– (1) Where a person who is required to file a tax return fails to file the return for a tax period by the due date or pays an amount which, for some miscalculation is less than the amount of tax actually payable, an officer of Inland Revenue shall, after a notice to
Show cause to such person, make an order for assessment of tax, including imposition of penalty and default surcharge in accordance with sections 33 and 34:
Provided that where a person required to file a tax return files the return after the due date and pays the amount of tax payable in accordance with the tax return along with default surcharge and penalty, the notice to show cause and the order of assessment shall abate.
(2) Where a person has not paid the tax due on supplies made by him or has made short payment or has claimed input tax credit or refund which is not admissible under this Act for reasons other than those specified in sub-section (1), an officer of Inland Revenue shall after a notice to show cause to such person, make an order for assessment of tax actually payable by that person or determine the amount of tax credit or tax refund which he has unlawfully claimed and shall impose a penalty and charge default surcharge in accordance with sections 33 and 34.
(3) Where by reason of some collusion or deliberate Act any tax or charge has not been levied or made or has been short levied or has been erroneously refunded, the person liable to pay any amount of tax or charge or the amount of fund erroneously made shall be served with the notice requiring him to show cause for payment of the amount specified in the notice.
(4) Where, by reason of any inadvertence, error or misconstruction any tax or charge has not been levied or made or has been short-levied or has been erroneously refunded, the person liable to the amount of tax or charge or the amount of refund erroneously made shall be served with a notice requiring him to show cause for payment of the amount specified in the notice;
Provided that, where a tax or charge has not been levied under this sub section the amount of tax shall be recovered as tax fraction of the value of supply.
(4A)Where any person, required to withhold sales tax under the provisions of this Act or the rules made thereunder, fails to withhold the tax or withholds the same but fails to deposit the same in the prescribed manner, an officer of Inland Revenue shall after a notice to such person to show cause, determine the amount in default.
(5) No order under this section shall be made by an officer of Inland Revenue unless a notice to show cause is given within five years, of the end of the financial year in which the relevant date falls, to the person in default specifying the grounds on which it is intended to proceed against him and the officer of Sales Tax shall take into consideration the representation made by such person and provide him with an opportunity of being heard:
Provided that order under this section shall be made within one hundred and twenty days of issuance of show cause notice or within such extended period as the Commissioner may, for reasons to be recorded in writing, fix provided that such extended period shall in no case exceed ninety days:
Provided further that any period during which the proceedings are adjourned on account of a stay order or Alternative Dispute Resolution proceedings or the time taken through adjournment by the petitioner not exceeding sixty days shall be excluded from the computation of the period specified in the first proviso.
(6) Notwithstanding anything in sub-section (1), where a registered person fails to file a return, an officer of Inland Revenue, not below the rank of Assistant Commissioner, shall subject to such conditions as specified by the Federal Board of Revenue, determine the minimum tax liability of the registered person.
(7) For the purpose of this section, the expression “relevant date” means—
(a) the time of payment of tax or charge as provided under section 6; and
(b) in a case where tax or charge has been erroneously refunded, the date of its refund.
(Disclaimer: The text of above section is only for information. Team PkRevenue.com makes all efforts to provide the correct version of the text. However, the team PkRevenue.com is not responsible for any error or omission.)
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Refund of input under sales tax law
Section 10 of Sales Tax Act, 1990 has explained refund of input tax under sales tax law.
The Federal Board of Revenue (FBR) issued the Sales Tax Act, 1990 updated up to June 30, 2021. The Act incorporated amendments brought through Finance Act, 2021.
Following is the text of section 10 of Sales Tax Act, 1990:
10. Refund of input tax.– (1) If the input tax paid by a registered person on taxable purchases made during a tax period exceeds the output tax on account of zero rated local supplies or export made during that tax period, the excess amount of input tax shall be refunded to the registered person not later than forty-five days of filing of refund claim in such manner and subject to such conditions as the Board may, by notification in the official Gazette specify:
Provided that in case of excess input tax against supplies other than zero-rated or exports, such excess input tax may be carried forward to the next tax period, along with the input tax as is not adjustable in terms of sub-section (1) of section 8B, and shall be treated as input tax for that period and the Board may, subject to such conditions and restrictions as it may impose, by notification in the official Gazette, prescribe the procedure for refund of such excess input tax.
Provided further that the Board may, from such date and subject to such conditions and restrictions as it may impose, by notification in the official Gazette, direct that refund of input tax against exports shall be paid at the fixed rates and in the manner as notified in the such notification.
(2) If a registered person is liable to pay any tax, default surcharge or penalty payable under any law administered by the Board, the refund of input tax shall be made after adjustment of unpaid outstanding amount of tax or, as the case may, default surcharge and penalty.
(3) Where there is reason to believe that a person has claimed input tax credit or refund which was not admissible to him, the proceedings against him shall be completed within sixty days. For the purposes of enquiry or audit or investigation regarding admissibility of the refund claim, the period of sixty days may be extended up to one hundred and twenty days by an officer not below the rank of an Additional Commissioner Inland Revenue and the Board may, for reasons to be recorded in writing, extend the aforesaid period which shall in no case exceed nine months.
(Disclaimer: The text of above section is only for information. Team PkRevenue.com makes all efforts to provide the correct version of the text. However, the team PkRevenue.com is not responsible for any error or omission.)
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Issuance of debit, credit notes for tax adjustment
Section 9 of the Sales Tax Act, 1990 provides a framework for the issuance of debit and credit notes by registered persons.
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Provision for input tax adjustment
Section 8B of Sales Tax Act, 1990 has defined provision for input tax adjustment.
The Federal Board of Revenue (FBR) issued the Sales Tax Act, 1990 updated up to June 30, 2021. The Act incorporated amendments brought through Finance Act, 2021.
Following is the text of section 8B of Sales Tax Act, 1990:
8B. Adjustable input tax.– (1) Notwithstanding anything contained in this Act, in relation to a tax period, a registered person other than public limited companies listed on Pakistan Stock Exchange 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.
(4A) Notwithstanding anything contained in sub-sections (1), (2) and (3), input tax allowed in case of locally manufactured electric vehicles subject to reduced rate of tax under the Eighth Schedule shall be limited to the extent of amount of output tax and no refund or carry forward of excess input tax shall be allowed.
(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 60%.
(Disclaimer: The text of above section is only for information. Team PkRevenue.com makes all efforts to provide the correct version of the text. However, the team PkRevenue.com is not responsible for any error or omission.)
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Joint, several liability in tax default
Section 8A of Sales Tax Act, 1990 has explained joint and several liability of registered persons in supply chain where tax unpaid.
The Federal Board of Revenue (FBR) issued the Sales Tax Act, 1990 updated up to June 30, 2021. The Act incorporated amendments brought through Finance Act, 2021.
Following is the text of section 8A of Sales Tax Act, 1990:
8A. Joint and several liability of registered persons in supply chain where tax unpaid.– Where a registered person receiving a taxable supply from another registered person is in the knowledge or has reasonable grounds to suspect that some or all of the tax payable in respect of that supply or any previous or subsequent supply of the goods supplied would go unpaid, of which the burden to prove shall be on the department such person as well as the person making the taxable supply shall be jointly and severally liable for payment of such unpaid amount of tax:
Provided that the Board may by notification in the official gazette, exempt any transaction or transactions from the provisions of this section.
(Disclaimer: The text of above section is only for information. Team PkRevenue.com makes all efforts to provide the correct version of the text. However, the team PkRevenue.com is not responsible for any error or omission.)
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Tax credit on certain supplies not allowed
Section 8 of Sales Tax Act, 1990 has defined tax credit on certain supplies not allowed.
The Federal Board of Revenue (FBR) issued the Sales Tax Act, 1990 updated up to June 30, 2021. The Act incorporated amendments brought through Finance Act, 2021.
Following is the text of section 8 of Sales Tax Act, 1990:
8. Tax credit not allowed. – (1) Notwithstanding anything contained in this Act, a registered person shall not be entitled to reclaim or deduct input tax paid on –
(a) the goods or services used or to be used for any purpose other for taxable supplies made or to be made by him;
(b) any other goods or services which the Federal Government may, by a notification in the official Gazette, specify;
(c) the goods under sub-section (5) of section 3:
(ca) the goods or services in respect of which sales tax has not been deposited in the Government treasury by the respective supplier;
(caa) purchases, in respect of which a discrepancy is indicated by CREST or input tax of which is not verifiable in the supply chain;
(d) fake invoices;
(e) purchases made by such registered person, in case he fails to furnish the information required by the Board through a notification issued under sub-section (5) of section 26;
(f) goods and services not related to the taxable supplies made by the registered person.
(g) goods and services acquired for personal or non-business consumption;
(h) goods used in, or permanently attached to, immoveable property, such as building and construction materials, paints, electrical and sanitary fittings, pipes, wires and cables, but excluding pre-fabricated buildings and such goods
acquired for sale or re-sale or for direct use in the production or manufacture of taxable goods;
(i) vehicles falling in Chapter 87 of the First Schedule to the Customs Act, 1969 (IV of 1969), parts of such vehicles, electrical and gas appliances, furniture furnishings, office equipment (excluding electronic cash registers), but excluding such goods acquired for sale or re-sale;
(j) services in respect of which input tax adjustment is barred under the respective provincial sales tax law;
(k) import or purchase of agricultural machinery or equipment subject to sales tax at the rate of 7% under Eighth Schedule to this Act;
(l) from the date to be notified by the Board, such goods and services which, at the time of filing of return by the buyer, have not been declared by the supplier in his return or he has not paid amount of tax due as indicated in his return; and
(m) the input goods or services attributable to supplies made to un-registered person, on pro-rata basis, for which sale invoices do not bear the NIC number or NTN as the case may be, of the recipient as stipulated in section 23.
(2) If a registered person deals in taxable and non-taxable supplies, he can reclaim only such proportion of the input tax as is attributable to taxable supplies in such manner as may be specified by the Board.
(3) No person other than a registered person shall make any deduction or reclaim input tax in respect of taxable supplies made or to be made by him.
(4) Omitted
(5) Notwithstanding anything contained in any other law for the time being in force or any decision of any Court, for the purposes of this section, no input tax credit shall be allowed to the persons who paid fixed tax under any provisions of this Act as it existed at any time prior to the first day of December, 1998.
(6) Notwithstanding anything contained in any other law for the time being in force or any provision of this Act, Board, with the approval of the Federal Minister-in-charge, may, by notification in the official Gazette, specify any goods or class of goods which a registered person cannot supply to any person who is not registered under this Act.
(7) Omitted
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Levy and collection of tax on goods
Section 7A of Sales Tax Act, 1990 has defined levy and collection of tax on goods.
The Federal Board of Revenue (FBR) issued the Sales Tax Act, 1990 updated up to June 30, 2021. The Act incorporated amendments brought through Finance Act, 2021.
Following is the text of section 7A of Sales Tax Act, 1990:
7A. Levy and collection of tax on specified goods on value addition. – (1) Notwithstanding anything contained in this Act or the rules made there under, the Federal Government may specify, by notification in the official Gazette, that sales tax chargeable on the supply of goods of such description or class shall, with such limitations or restrictions as may be prescribed, be levied and collected on the difference between the value of supply for which the goods are acquired and the value of supply for which the goods, either in the same state or on further manufacture, are supplied.
(2) Notwithstanding anything contained in this Act or the rules made thereunder, in respect of the goods or class of goods specified in the Twelfth Schedule, the minimum value addition tax, against the value added by the registered person, shall be payable, at the rate and by the registered persons or class of registered persons, specified therein, subject to the conditions, limitations, restrictions and procedure specified therein:
Provided that the Federal Government may, through a notification published in the official Gazette, amend any provision of the said Twelfth Schedule.
(Disclaimer: The text of above section is only for information. Team PkRevenue.com makes all efforts to provide the correct version of the text. However, the team PkRevenue.com is not responsible for any error or omission.)
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Determination of tax liability for supplies under tax law
Section 7 of Sales Tax Act, 1990 has defined determination of tax liability for supplies made by registered persons.
The Federal Board of Revenue (FBR) issued the Sales Tax Act, 1990 updated up to June 30, 2021. The Act incorporated amendments brought through Finance Act, 2021.
Following is the text of section 7 of Sales Tax Act, 1990:
7. Determination of tax liability. – (1) Subject to the provisions of section 8 and 8B, for the purpose of determining his tax liability in respect of taxable supplies made during a tax period, a registered person shall, subject to the provisions of section 73, be entitled to deduct input tax paid or payable during the tax period for the purpose of taxable supplies made, or to be made, by himfrom the output tax excluding the amount of further tax under sub-section (1A) of section 3. That is due from him in respect of that tax period and to make such other adjustments as are specified in Section 9:
Provided that where a registered person did not deduct input tax within the relevant period, he may claim such tax in the return for any of the six succeeding tax periods.
(2) A registered person shall not be entitled to deduct input tax from output tax unless,-
(i) in case of a claim for input tax in respect of a taxable supply made, he holds a tax invoice in his name and bearing his registration number in respect of such supply, or in case of supply of electricity or gas, a bill bearing his registration number and the address where the connection is installed:
Provided that from the date to be notified by the Board in this respect, in addition to above, if the supplier has not declared such supply in his return or he has not paid amount of tax due as indicated in his return;
(ii) in case of goods imported into Pakistan, he holds bill of entry or goods declaration in his name and showing his sales tax registration number, duly cleared by the customs under section 79, section 81 or section 104 of the Customs Act, 1969 (IV of 1969);
(iii) in case of goods purchased in auction, he holds a treasury challan, in his name and bearing his registration number, showing payment of sales tax;
(3) Notwithstanding anything in sub-sections (1) and (2), Board, with the approval of the Federal Minister-in-charge, may, by a special order, subject to such conditions, limitations or restrictions as may be specified therein allow a registered person to deduct input tax paid by him from the output tax determined or to be determined as due from him under this Act.
(4) Notwithstanding anything contained in this Act or rules made there under, the Federal Government may, by notification in the official Gazette, subject to such conditions, limitations or restrictions as may be specified therein, allow a registered person or class of persons to deduct such amount of input tax from the output tax as may be specified in the said notification.
(5) Notwithstanding anything contained in this Act or the rules made thereunder, the Board, by notification in the official Gazette, may impose restrictions on wastage of material on which input tax has been claimed in respect of the goods or class of goods.
(Disclaimer: The text of above section is only for information. Team PkRevenue.com makes all efforts to provide the correct version of the text. However, the team PkRevenue.com is not responsible for any error or omission.)
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Sales tax law explains time of payment
Section 6 of Sales Tax Act, 1990 has defined sales tax law explains time of payment.
The Federal Board of Revenue (FBR) issued the Sales Tax Act, 1990 updated up to June 30, 2021. The Act incorporated amendments brought through Finance Act, 2021.
Following is the text of section 6 of Sales Tax Act, 1990:
6. Time and manner of payment. – (1) The tax in respect of goods imported into Pakistan shall be charged and paid in the same manner and at the same time as if it were a duty of customs payable under the Customs Act, 1969 and the provisions of the said Act including section 31A thereof, shall, so far as they relate to collection, payment and enforcement including recovery of tax under this Act on such goods where no specific provision exists in this Act, apply,
(1A) Notwithstanding anything contained in any other law for the time being in force, including but not limited to the Protection of Economic Reforms Act, 1992 (XII of 1992), and notwithstanding any decision or judgment of any forum, authority or court whether passed, before or after the promulgation of the Finance Act, 1998 (III of 1998), the provisions of section 31-A of the Customs Act, 1969 (IV of 1969), referred to in sub-section (1) shall be incorporated in and shall be deemed to have always been so incorporated in this Act and no person shall be entitled to any exemption from or adjustment of or refund of tax on account of the absence of such a provision in this Act, or in consequence of any decision or judgment of any forum, authority or court passed on that ground or on the basis of the doctrine of promissory estoppel or on account of any promise or commitment made or understanding given whether in writing or otherwise, by any government department or authority.
(2) The tax in respect of taxable supplies made during a tax period shall be paid by the registered person by the date as prescribed in this respect:
Provided that the Board may, by a notification in the Official Gazette, direct that the tax in respect of all or such classes of supplies (other than zero-rated supplies) of all or such taxable goods, as may be specified in the aforesaid notification, shall be charged, collected and paid in any other way, mode, manner or at time as may be specified therein.
(3) The tax due on taxable supplies shall be paid by any of the following modes, namely:-
(i) through deposit in a bank designated by the Board; and
(ii) through such other mode and manner as may be specified by the Board.
(Disclaimer: The text of above section is only for information. Team PkRevenue.com makes all efforts to provide the correct version of the text. However, the team PkRevenue.com is not responsible for any error or omission.)