Tag: Sales Tax Act 1990

  • 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.

  • Sales tax law explains ‘time of supply’

    Sales tax law explains ‘time of supply’

    Sales Tax Act, 1990 has explained ‘time of supply’ for collection of sales tax.

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

    Time of supply”, in relation to,

    (a) a supply of goods, other than under hire purchase agreement, means the time at which the goods are delivered or made available to the recipient of the supply” “or the time when any payment is received by the supplier in respect of that supply, whichever is earlier;

    (b) a supply of goods under a hire purchase agreement, means the time at which the agreement is entered into; and

    (c) services, means the time at which the services are rendered or provided;

    Provided that in respect of sub clause ( a) ,(b) or (c), where any part payment is received, –

    (i) for the supply in a tax period, it shall be accounted for in the return for that tax period; and

    (ii) in respect of exempt supply, it shall be accounted for in the return for the tax period during which the exemption is withdrawn from such supply .

  • Who are Tier-1 retailers under Sales Tax Act?

    Who are Tier-1 retailers under Sales Tax Act?

    The term ‘Tier-1 retailer’ was introduced through Finance Act, 2017 by inserting relevant clause into Sales Tax Act, 1990.

    All Tier-1 retailers are required to integrate all their Point of Sales (POSs) with computerized system of the Federal Board of Revenue (FBR).

    The Sales Tax Act, 1990 (updated up to June 30, 2020 issued by the FBR), defined Tier-1 retailer as:

     “Tier-1 retailer” means a retailer falling in any one or more of the following categories, namely:-

    (a) a retailer operating as a unit of a national or international chain of stores;

    (b) a retailer operating in an air-conditioned shopping mall, plaza or centre, excluding kiosks;

    (c) a retailer whose cumulative electricity bill during the immediately preceding twelve consecutive months exceeds Rupees twelve hundred thousand;

    (d) a wholesaler-cum-retailer, engaged in bulk import and supply of consumer goods on wholesale basis to the retailers as well as on retail basis to the general body of the consumers”;

    (e) a retailer, whose shop measures one thousand square feet in area or more; and

    (f) any other person or class of persons as prescribed by the Board.”

  • What is tax fraud?

    What is tax fraud?

    Sales Tax Act, 1990 has defined ‘tax fraud’ as doing of any act knowingly without lawful excuse.

    The Sales Tax Act, 1990 [updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR)] explained ‘tax fraud’ as:

    Tax fraud” means knowingly, dishonestly or fraudulently and without any lawful excuse (burden of proof of which excuse shall be upon the accused) –

    (i) doing of any act or causing to do any act; or

    (ii) omitting to take any action or causing the omission to take any action, including the making of taxable supplies without getting registration under this Act; or

    (iii) falsifying or causing falsification the sales tax invoices,

    in contravention of duties or obligations imposed under this Act or rules or instructions issued thereunder with the intention of understating the tax liability or underpaying the tax liability for two consecutive tax periods or overstating the entitlement to tax credit or tax refund to cause loss of tax.

  • Sales Tax Act defines ‘supply’

    Sales Tax Act defines ‘supply’

    Sales Tax Act, 1990 has explained the word ‘supply’ for the purpose of imposition and collection of tax.

    The Sales Tax Act, 1990 [updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR)] has defined the word ‘supply’ as:

    Supply” means a sale or other transfer of the right to dispose of goods as owner, including such sale or transfer under a hire purchase agreement, and also includes –

    (a) putting to private, business or non-business use of goods produced or manufactured in the course of taxable activity for purposes other than those of making a taxable supply;

    (b) auction or disposal of goods to satisfy a debt owed by a person;

    (c) possession of taxable goods held immediately before a person ceases to be a registered person; and

    (d) in case of manufacture of goods belonging to another person, the transfer or delivery of such goods to the owner or to a person nominated by him:

    Provided that the Board, with the approval of the Federal Minister-in-charge, may, by notification in the official Gazette, specify such other transactions which shall or shall not constitute supply;

    The law also explained “supply chain” as the series of transactions between buyers and sellers from the stage of first purchase or import to the stage of final supply.

  • What is sales tax?

    What is sales tax?

    Sales Tax Act, 1990 has explained the meaning of sales tax imposed on supply of goods.

    The Sales Tax Act, 1990 [updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR)] has explained the following:

     “sales tax” means – –

    (a) the tax, additional tax, or default surcharge levied under this Act;

    (b) a fine, penalty or fee imposed or charged under this Act; and

    (c) any other sum payable under the provisions of this Act or the rules made thereunder;

     “sales tax account” means an account representing the double entry recording of sales tax transactions in the books of account.

  • What is taxable activity under Sales Tax Act?

    What is taxable activity under Sales Tax Act?

    The Sales Tax Act, 1990, as updated by the Federal Board of Revenue (FBR) up to June 30, 2020, clearly defines the term ‘taxable activity’ for the purpose of determining liability under the sales tax regime.

    (more…)
  • Retail price defined under Sales Tax Act

    Retail price defined under Sales Tax Act

    Sales Tax Act, 1990 has defined ‘retail price’ as a price fixed for sales of goods to the end consumers.

    The Sales Tax Act, 1990 [updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR)] defines the ‘retail price’ with reference to the Third Schedule of the Act, as the price fixed by the manufacturer or importer, in case of imported goods, inclusive of all duties, charges and taxes (other than sales tax) at which any particular brand or variety of any article should be sold to the general body of consumers or, if more than one such price is so fixed for the same brand or variety, the highest of such price:

    Provided that the FBR may through a general order specify zones or areas for the purpose of determination of highest retail price for any brand or variety of goods.

    The Act also defines the work retailer as a person supplying goods to general public for the purpose of consumption:

    Provided that any person, who combines the business of import and retail or manufacture or production with retail, shall notify and advertise wholesale prices and retail prices separately, and declare the address of retail outlets.

  • Registered person defined under sales tax

    Registered person defined under sales tax

    Sales tax laws have defined ‘person’ for determining transactions i.e. supplies and purchases and application of sales tax rate.

    The Sales Tax Act, 1990 [updated June 30, 2020 issued by the Federal Board of Revenue (FBR)] explained the following:

     (21) “person” means,–

    (a) an individual;

    (b) a company or association of persons incorporated, formed, organized or established in Pakistan or elsewhere;

    (c) the Federal Government;

    (d) a Provincial Government;

    (e) a local authority in Pakistan; or

    (f) a foreign government, a political subdivision of a foreign government, or public international organization;]

    (22) “prescribed” means prescribed by rules made under this Act;

    (22A) “Provincial sales tax” means tax levied under, Provincial laws or laws relating to Islamabad Capital Territory, which are declared by the Federal Government, through notification in the official Gazette to be Provincial Sales Tax for the purpose of input tax;

    (23) “registered office” means the office or other place of business specified by the registered person in the application made by him for registration under this Act or through any subsequent application to the 2[Commissioner];

    (24) “registration number” means the number allocated to the registered person for the purpose of this Act;

    (25) “registered person” means a person who is registered or is liable to be registered under this Act:

    Provided that a person liable to be registered but not registered under this Act shall not be entitled to any benefit available to a registered person under any of the provisions of this Act or the rules made thereunder.