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Tag: Sales Tax Act 1990

  • Penalty up to Rs3 million for failure to integrate business

    Penalty up to Rs3 million for failure to integrate business

    ISLAMABAD: The Federal Board of Revenue (FBR) may impose up to Rs3 million as a monetary penalty upon persons for failure to integrate their businesses with the online system under Sales Tax Act, 1990.

    An important amendment has been made through Tax Laws (Third Amendment) Ordinance, 2021, which was promulgated on September 15, 2021 through a presidential order.

    Serial No. 25A has been added to Section 33 of the Sales Tax Act, 1990 to prescribe penalty for non-integration of businesses under the sales tax regime.

    Text of the newly added Serial No. 25A of the Section 33 is:

    25A.  A person required to integrate his business as stipulated under sub-section (9A) of section 3, who fails to get himself registered under the Sales Tax Act,1990 and if registered, fails to integrate in the manner as required under the law and rules made thereunder.

    Such person shall be liable to pay

    (i) penalty of five hundred thousand rupees for first default;

    (ii) penalty of one million rupees for second default after fifteen days of order for first default;

    (iii) penalty of two million rupees for third default after fifteen days of order for second default;

    (iv) penalty of three million rupees for fourth default after fifteen days of order for third default:

    Provided that if such person fails to integrate his business within fifteen days of imposition of penalty for fourth default, his business premises shall be sealed till such time he integrates his business in the manner as stipulated under sub-section (9A) of section 3:

    Provided further that if the retailer integrates his business with the Board [FBR]’s computerized system before imposition of penalty for second default, penalty for first default shall be waived by the Commissioner.”

    The condition of making mandatory the integration of businesses has been introduced through sub-section 9A of the Section 3 of Sales Tax Act, 1990.

    Text of the sub-section 9A of Section 3 is:

    “(9A) Notwithstanding anything contained in this Act, Tier-1 retailers shall pay sales tax at the rate as applicable to the goods sold under relevant provisions of this Act or a notification issued thereunder:

    Provided further that from such date, and in such mode and manner, as prescribed by the Board, all Tier-1 retailers shall integrate their retail outlets with Board’s computerized system for real-time reporting of sales.”

    FBR to stop gas, electricity of unregistered persons
  • FBR to stop gas, electricity of unregistered persons

    FBR to stop gas, electricity of unregistered persons

    ISLAMABAD: Federal Board of Revenue (FBR) has been empowered to discontinue gas and electricity connections of any person who is making taxable supplies but not registered for sales tax.

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  • Operator of online market place to withhold sales tax

    Operator of online market place to withhold sales tax

    ISLAMABAD: The operator of the online market place has been made liable to withholding sales tax on sales of goods.

    An important amendment has been made through Tax Laws (Third Amendment) Ordinance, 2001, which was promulgated on September 15, 2021 through a presidential order.

    A new proviso has been inserted to Section 3 of the Sales Tax Act, 1990 to make an operator of market place to withhold sales tax.

    The text of the new proviso is:

    “Provided that in case of the online market place facilitating the sale of third party goods, the liability to withhold tax on taxable supplies of such party at the rates specified in column (4) against S. No. 8 of the Eleventh Schedule to this Act, shall be on the operator of such market place.”

    According to the Eleventh Schedule of the Sales Tax Act, 1990, the online market place shall collect from persons other than active taxpayers the withholding sales tax at the rate of 2 per cent of gross value of supplies:

    Provided that the provisions of this entry shall be effective from the date as notified by the Board [Federal Board of Revenue].

    A new clause 18A was inserted to Section 2 of the Sales Tax Act, 1990 through Finance Act, 2021 to bring online market place under sales tax ambit.

    The text of clause 18A is:

    “(18A) online market place: includes an electronic interface such as a market place, e-commerce platform, portal or similar means which facilitate sale of goods, including third party sale, in any of the following manner, namely:–

    (a) by controlling the terms and conditions of the sale;

    (b) authorizing the charge to the customers in respect of the payment for the supply; or

    (c) ordering or delivering the goods.”

    Provisional valuation disallowed on existing VR
  • FBR explains taxation of erstwhile FATA/PATA industries

    FBR explains taxation of erstwhile FATA/PATA industries

    ISLAMABAD: The Federal Board of Revenue (FBR) has explained tax treatment of erstwhile FATA/PATA domiciled industries after amendment brought through Finance Act, 2021.

    The FBR in a circular No. 03 issued on Tuesday said a number of significant amendments have been introduced through Finance Act, 2021 in the Sales Tax Act, 1990 as applicable to various industries located in erstwhile FATA/PATA regions.

    The most important change brought about by the Finance Act 2021, is vis-A-vis the new entry No. 74 added in 8th Schedule to the Sales Tax Act, 1990, to charge sales tax at the rate of 16 per cent on all “goods supplied from tax-exempt areas of erstwhile FATA/PATA to the taxable areas.”

    Accordingly, a FATA/PATA-domiciled person having status of “active taxpayer” in terms of Section 2(1) of the Sales Tax Act, 1990 would continue to import raw materials for consumption at his own manufacturing site against deposit of post-dated cheques (PDC) in line with its determined installed production capacity.

    The importation, transportation, exemption (from import-stage income tax), and consumption of raw materials have been elaborately dealt with vide FBR‘s CGO # 1 of 2021, Circular # 5 of 2021, Circular # 9 of 2021 and Circular No.13 of 2021, which continue to be applicable.

    In order to facilitate the operationalization of benefits laid down in the law, the FATA/PATA-domiciled industrial units may acquire installed capacity determination certificate (ICDC) from the Khyber Pakhtunkhwa Department of Industries or the Ministry of Industries, Government of Pakistan.

    The Commissioner concerned shall accept the ICDC presented until he has reasons to believe that the actual capacity installed is less than the capacity determined and certified.

    “It goes without saying that only the goods meant for value addition are to be imported and not finished products,” the FBR said.

    In order to undertake foolproof surveillance of exit points from non-taxable to taxable territories, Inland Revenue Enforcement Network (IREN) check posts under Section 40D of the Sales Tax Act, 1990 are being established and functionalized to ensure that due tax is paid at the rate of 16 per cent on goods supplied into taxable territories.

    The Regional Tax Office (RTO), Peshawar shall also establish a tax office in Malakand Division for prompt release of consignments, processing of consumption and exemption certificates and effective and timely implementation of law in letter and spirit.

    FBR issues procedure for availing exemption certificate by erstwhile FATA/PATA residents
  • List of items for sales tax on retail printed prices

    List of items for sales tax on retail printed prices

    The Federal Board of Revenue (FBR) has updated the list of items on which the sales tax will be collected on the basis of printed retail price.

    The sales tax at the rate of 17 per cent on the retail printed price shall be applicable for tax year 2021/2022.

    The items are included in the Third Schedule of Sales Tax Act, 1990 which is updated by the FBR up to June 30, 2021.

    Following is the list of items:

    Fruit juices and vegetable juices at harmonized system (HS) Code 20.09

    Ice Cream with HS Code 2105.0000

    Aerated waters or beverages with HS Code 22.01 and 20.02

    Syrups and squashes with respective headings

    Cigarettes with HS Code 2402.2000

    Toilet soap with HS Code 3401.1100 and 3401.2000

    Detergents with HS Code 3402.2000

    Shampoo with HS Code 3305.1000

    Toothpaste with HS Code 3306.1010

    Shaving cream with HS Code 3307.1000

    Perfumery and cosmetics with HS Code in respective sub-headings of 33.03 and 33.04

    Tea with HS code of respective sub-headings of 09.02

    Powder drinks with HS Code of 21.06

    Milky drinks with HS Code of 2106.9090

    Toilet paper and tissue paper with HS Code 4818.1000 and 4818.2000

    Spices sold in retail packing bearing brand names and trade marks with HS codes 09.04, 09.06, 09.08 and 09.10

    Shoe polish and shoe cream with HS Code 3405.1010

    Fertilizers with HS Code of respective heading

    Cement sold in retail packing with HS Code of respective heading

    Mineral/bottled water with HS Code of respective headings

    Household electrical goods, including air conditioners, refrigerators, deep freezers, televisions, recorders and players, electric bulbs, tube-lights, electric fans, electric irons, washing machines and telephone sets with HS Code of respective headings

    Household gas appliances, including cooking range, ovens, geysers and gas heater with HS code of respective headings

    Foam or spring mattresses and other foam products for household use with HS code of respective headings

    Paints, distempers, enamels, pigments, colors, varnishes, gums, resins, dyes, glazes, thinners, blacks, cellulose lacquers and polishes sold in retail packing with HS codes of respective headings

    Lubricating oils, brake fluids, transmission fluid, and other vehicular fluids sold in retail packing with HS codes of respective headings

    Storage batteries excluding those sold to automotive manufacturers or assemblers with HS code of respective headings

    Tyres and tubes excluding those sold to automotive manufacturers or assemblers with HS code of respective headings

    Motorcycles with HS code of respective headings

    Auto rickshaws with HS code of respective headings

    Biscuits in retail packing with brand name with HS code of respective headings

    Tiles with HS code of respective Headings

    Auto-parts, in retail packing, excluding those sold to automotive manufacturers or assemblers with HS code in respective Headings

    Sugar except where it is supplied as an industrial raw material to pharmaceutical, beverage and confectionery industries with HS code of respective heading.

    Note: the implementation of sales tax on retail price on supply of sugar has been deferred by the FBR till November 30, 2021 through SRO 989(I)/2021 dated August 5, 2021.

  • Tax on sugar retail sale to be imposed from December 01

    Tax on sugar retail sale to be imposed from December 01

    The Federal Board of Revenue (FBR) has announced the deferral of the imposition of sales tax on the retail sale of sugar until December 1, 2021.

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  • FBR redefines Tier-1 retailers for integration

    FBR redefines Tier-1 retailers for integration

    The Federal Board of Revenue (FBR) has redefined Tier-1 retailers, making it mandatory for them to integrate sales data on a real-time basis.

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  • Retailers accepting debit, credit cards payment to be treated as Tier-I

    Retailers accepting debit, credit cards payment to be treated as Tier-I

    ISLAMABAD: The Federal Board of Revenue (FBR) will bring more retailers into sales tax ambit after the proposal made through Finance Bill, 2021 related to Tier-I retailers.

    Tier-I retailers are commonly known for having huge volume sales and operating in a mall, air conditioned environment etc.

    Sources in the FBR said that retailer receiving payment through debit card and debit card would also qualify for Tier-I retailers.

    KPMG Taseer Hadi & Co. Chartered Accountants in its commentary on Budget 2021/2022 stated that the Section 2(43A) of Sales Tax Act, 1990 provides threshold limit and qualification criteria for tier-1 retailers.

    The Finance Bill now proposes to enhance the qualification criteria of tier-1 retailers by following additions

    – Retailers of furniture whose shop measures two (2) thousand square feet or more.

    – Retailer operating an online market place supplying goods through e-commerce platform, whether the goods are owned by him or not.

    – A retailer who has acquired point of sale for accepting payment through debit or credit cards from banking companies or any other digital payment service provider authorized by State Bank of Pakistan.

    The Bill further proposes to do away with on incentive of the cash back, up to five percent of the tax involved, to customers of Tier-1 retailer who have integrated their retail outlets with the Board’s computerized system for real-time reporting of sales.

  • Wholesaler defined under Sales Tax Act

    Wholesaler defined under Sales Tax Act

    Sales Tax Act, 1990 has defined the word ‘wholesaler’ for the purpose of levying tax on supply of goods.

    Sales Tax Act, 1990 – updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR) – explained the word ‘wholesaler’ as:

     “Wholesaler” includes a dealer and means any person who carries on, whether regularly or otherwise, the business of buying and  selling goods by wholesale or of supplying or distributing goods, directly or indirectly, by wholesale for cash or deferred payment or for commission or other valuable consideration or stores such goods belonging to others as an agent for the purpose of sale; and includes a person supplying taxable goods to a person who deducts income tax at source under the Income Tax Ordinance, 2001.

  • Value of supply defined for applying sales tax

    Value of supply defined for applying sales tax

    Sales Tax Act, 1990 has defined “value of supply” in respect of taxable supply, as the consideration in money including all federal and provincial duties and taxes, if any, which the supplier receives from the recipient for that supply.

    The Sales Tax Act, 1990 updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR), explained the value of supply as

    “Value of supply” means:–

    (a) in respect of a taxable supply, the consideration in money including all Federal and Provincial duties and taxes, if any, which the supplier receives from the recipient for that supply but excluding the amount of tax:

    Provided that –

    (i) in case the consideration for a supply is in kind or is partly in kind and partly in money, the value of the supply shall mean the open market price of the supply excluding the amount of tax;

    (ii) in case the supplier and recipient are associated persons and the supply is made for no consideration or for a consideration which is lower than the open market price, the value of supply shall mean the open market price of the supply excluding the amount of tax; and

    (iii) in case a taxable supply is made to a consumer from general public on installment basis on a price inclusive of mark up or surcharge rendering it higher than open market price, the value of supply shall mean the open market price of the supply excluding the amount of tax.

    (b) in case of trade discounts, the discounted price excluding the amount of tax; provided the tax invoice shows the discounted price and the related tax and the discount allowed is in conformity with the normal business practices;

    (c) in case where for any special nature of transaction it is difficult to ascertain the value of a supply, the open market price;

    (d) in case of imported goods excluding those as specified in the Third Schedule, the value determined under section 25 of the Customs Act, including the amount of customs-duties and central excise duty levied thereon;

    (e) in case where there is sufficient reason to believe that the value of a supply has not been correctly declared in the invoice, the value determined by the Valuation Committee comprising representatives of trade and the Inland Revenue constituted by the Commissioner;

    (f) in case of manufacture of goods belonging to another person, the actual consideration received by the manufacturer for the value addition carried out in relation to such goods;

    (g) in case of a taxable supply, with reference to retail tax, the price of taxable goods excluding the amount of retail tax, which a supplier will charge at the time of making taxable supply by him, or such other price as the Board may, by a notification in the official Gazette, specify.

    (h) in case of supply of electricity by an independent power producer or WAPDA, the amount received on account of energy purchase price only; and the amount received on

    account of capacity purchase price, energy purchase price premium, excess bonus, supplemental charges etc. shall not be included in the value of supply;

    (i) in case of supply of electric power and gas by a distribution company, the total amount billed including price of electricity and natural gas, as the case may be, charges, rents, commissions and all duties and taxes local, provincial and federal but excluding the amount of late payment surcharge and the amount of sales tax; and

    (j) in case of registered person who is engaged in purchasing used vehicles from general public on which sales tax had already been paid at the time of import or manufacturing, and which are, later on, sold in the open market after making certain value addition, value of supply will be the difference between sale and purchase price of the said vehicle on the basis of the valuation method prescribed by the Board.

    Provided that, where the Board deems it necessary it may, by notification in the official Gazette, fix the value of any imported goods or taxable supplies or class of supplies and for that purpose fix different values for different classes or description of same type of imported goods or supplies:

    Provided further that where the value at which import or supply is made is higher than the value fixed by the Board, the value of goods shall, unless otherwise directed by the Board, be the value at which the import or supply is made.