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Tag: Sales Tax Act 1990

  • 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.

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  • 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.

  • What is output tax under Sales Tax Act?

    What is output tax under Sales Tax Act?

    Sales tax law has defined output tax as a supply of goods, made by the person.

    The Sales Tax Act, 1990 (updated June 30, 2020) issued by the Federal Board of Revenue (FBR) has defined output tax in relation to a registered person as:

    (a) tax levied under this Act on a supply of goods, made by the person;

    (b) 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, by the person;

    (c) sales tax levied on the services rendered or provided by the person under Islamabad Capital Territory (Tax on Services) Ordinance, 2001 (XLII of 2001).

  • Definition of manufacturer or producer under Sales Tax Act

    Definition of manufacturer or producer under Sales Tax Act

    A definition of manufacturer of producer has been included into the Sales Tax Act, 1990 (updated up to June 30, 2020) issued by the Federal Board of Revenue (FBR).

    According to the definition “manufacturer” or “producer” means a person who engages, whether exclusively or not, in the production or manufacture of goods whether or not the raw material of which the goods are produced or manufactured are owned by him; and shall include –

    (a) a person who by any process or operation assembles, mixes, cuts, dilutes, bottles, packages, repackages or prepares goods by any other manner;

    (b) an assignee or trustee in bankruptcy, liquidator, executor, or curator or any manufacturer or producer and any person who disposes of his assets in any fiduciary capacity; and

    (c) any person, firm or company which owns, holds, claims or uses any patent, proprietary, or other right to goods being manufactured, whether in his or its name, or on his or its behalf, as the case may be, whether or not such person, firm or company sells, distributes, consigns or otherwise disposes of the goods :

    Provided that for the purpose of refund under this Act, only such shall be treated as manufacturer-cum-exporter who owns or has his own manufacturing facility to manufacture or produce the goods exported or to be exported.

    It further explains “manufacture” or “produce”, which includes:

    (a) any process in which an article singly or in combination with other articles, materials, components, is either converted into another distinct article or product or is so changed, transformed or reshaped that it becomes capable of being put to use differently or distinctly and includes any process incidental or ancillary to the completion of a manufactured product;

    (b) process of printing, publishing, lithography and engraving; and

    (c) process and operations of assembling, mixing, cutting, diluting, bottling, packaging, repacking or preparation of goods in any other manner.

  • What is input tax under Sales Tax Act?

    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.

  • Associates defined under Sales Tax Act 1990

    Associates defined under Sales Tax Act 1990

    Associates or Associated Persons have been defined under Sales Tax Act, 1990.

    Section 2 of Sales Tax Act, 1990 (updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR) explained associates as:

     (3) associates (associated persons) means, –

    (i) subject to sub-clause (ii), where two persons associate and the relationship between the two is such that one may reasonably be expected to act in accordance with the intentions of the other, or both persons may reasonably be expected to act in accordance with the intentions of a third person;

    (ii) two persons shall not be associates solely by reason of the fact that one person is an employee of the other or both persons are employees of a third person;

    (iii) without limiting the generality of sub-clause (i) and subject to sub-clause (iv), the following shall be treated as associates, namely: –

    (a) an individual and a relative of the individual;

    (b) members of an association of persons;

    (c) a member of an association of persons and the association, where the member, either alone or together with an associate or associates under another application of this section, controls fifty per cent or more of the rights to income or capital of the association;

    (d) a trust and any person who benefits or may benefit under the trust;

    (e) a shareholder in a company and the company, where the shareholder, either alone or together with an associate or associates under another application of this section, controls either directly or through one or more interposed persons–

    (i) fifty per cent or more of the voting power in the company;

    (ii) fifty per cent or more of the rights to dividends; or

    (iii) fifty per cent or more of the rights to capital; and

    (f) two companies, where a person, either alone or together with an associate or associates under another application of this section, controls either directly or through one or more interposed persons –

    (i) fifty per cent or more of the voting power in both companies;

    (ii) fifty per cent or more of the rights to dividends in companies; or

    (iii) fifty per cent or more of the rights to capital in both companies.

    (iv) two persons shall not be associates under sub-clause (a) or (b) of paragraph (iii) where the Commissioner is satisfied that neither person may reasonably be expected to act in accordance with the intentions of the other.

    (v) In this clause, “relative” in relation to an individual, means–

    (a) an ancestor, a descendant of any of the grandparents, or an adopted child, of the individual, or of a spouse of the individual; or

    (b) a spouse of the individual or of any person specified in sub-clause (a).

    (3A) “association of persons” includes a firm, a Hindu undivided family, any artificial juridical person and anybody of persons formed under a foreign law, but does not include a company;

    (3AA) “banking company” means a banking company as defined in the Banking Companies Ordinance, 1962 (LVII of 1962) and includes anybody corporate which transacts the business of banking in Pakistan;

  • Active taxpayer under Sales Tax Act 1990

    Active taxpayer under Sales Tax Act 1990

    Sales Tax Act, 1990 (updated up to June 30, 2020) has defined the active taxpayer. The term ‘active taxpayer’ was introduced through Finance Act, 2015. It has been defined as a registered person who does not fall in any of the following categories, namely:-

    (a) who is blacklisted or whose registration is suspended in terms of section 21 of the Act;

    (b) fails to file the return under section 26 of the Act by the due date for two consecutive tax periods;

    (c) who fails to file an Income Tax return under section 114 or statement under section 115, of the Income Tax Ordinance, 2001(XLIX of 2001), by the due date; and

    (d) who fails to file quarterly or an annual withholding tax statement under section 165 of the Income Tax Ordinance, 2001.

    The Federal Board of Revenue (FBR) further explained:

    The Active Taxpayer List (Sales Tax) is a central record of online active Sales Tax Return filers.

    To become part of the Active Taxpayer List (ST), the Active Taxpayer must be a registered person who does not fall in the following categories:

    Blacklisted or whose registration is suspended or blocked;

    Failed to file return by the due date for two consecutive tax periods;

    Failed to file Income Tax Return by the due date;

    Failed to file withholding tax statement.

    Active Taxpayer status (ST) can be checked through the online portal.

    The ATL status check allows you to confirm your Active Taxpayer status.

    The Commissioner may suspend registration of a Taxpayer, if the person is found to have issued fake invoices, evaded tax or committed tax fraud without prior notice, pending further inquiry.

    Suspension of registration can occur due to the following possibilities:

    Non-availability of the registered person at the given address;

    Refusal to allow access to business premises or refusal to furnish records to an authorized Inland Revenue Officer;

    Abnormal tax profile, such as taking excessive input tax adjustments, continuous carry-forwards, or sudden increase in turnover;

    Making substantial purchases from or making supplies to other blacklisted or suspended person;

    Non-filing of sales tax returns by a registered person for six consecutive months;

    On recommendation of a commissioner of any other jurisdiction;

    Any other reason to be specified by the Commissioner;

    Impact of Suspension

    Commissioner shall issue written order to the concerned registered person detailing the reasons for suspension. The order shall also be provided to all other Large Taxpayer Units (LTUs)/Regional Tax Offices (RTOs), the FBR‘s computer system, the STARR computer system and the Customs Wing computer system for information and necessary action as per law;

    Suspension of registered person will make them ineligible to avail input tax adjustment/refund. Similarly, no input tax adjustment/refund shall be allowed to any other registered persons on the basis of invoices issued by such suspended person (whether issued prior to or after such suspension);

    The suspended registered person will be issued a show cause notice (through registered post or courier service) within seven days of issuance of order of suspension by the Commissioner. The registered person will have an opportunity of hearing with fifteen days of the issuance of such notice clearly indicating that the will be blacklisted. In case of non-availability of the suspended person at the given address, the notice may be placed on the main notice Board of the LTU/RTO;

    Where the show cause notice is not issued within seven days of the order of suspension, the order of suspension shall become invalid;

    For restoration of Active Taxpayer (ST), Sales Tax General Order No. 34/2010 dated 16-9-2010 may be followed.  

    A non-active taxpayer may be restored to active taxpayer status:

    If the respective RTO/LTU recommends the same to FBR after conducting audit or other investigation;

    Compotent Authority, Appellate Authority, Court or FTO orders for the restoration.

  • Sales tax value addition at 3 percent applicable on all imported goods

    Sales tax value addition at 3 percent applicable on all imported goods

    ISLAMABAD: Sales tax on account of minimum value addition at three percent is applicable on all imported goods subject to exclusions on import of various imported goods.

    According to Sales Tax Act, 1990, all imported goods are subject to 3 percent ad valorem subject to exclusion as in conditions and procedure.

    The government recently abolished three percent sales tax value addition on import of sugar to help in reducing domestic prices of the commodity.

    The officials at the Federal Board of Revenue (FBR) said that under the Sales Tax Act, 1990 the procedure and conditions have been laid down for the levy of three percent value addition tax on imported goods.

    (1) The sales tax on account of minimum value addition as payable under this Schedule (hereinafter referred to as value addition tax), shall be levied and collected at import stage from the importers on all taxable goods as are chargeable to tax under section 3 of the Act or any notification issued thereunder at the rate specified in the Table in addition to the tax chargeable under section 3 of the Act or a notification issued thereunder:

    (2) The value addition tax under this Schedule shall not be charged on,—

    (i) Raw materials and intermediary goods imported by a manufacturer for in-house consumption;

    (ii) The petroleum products falling in Chapter 27 of Pakistan Customs Tariff as imported by a licensed Oil Marketing Company for sale in the country;

    (iii) Registered service providers importing goods for their in-house business use for furtherance of their taxable activity and not intended for further supply;

    (iv) Cellular mobile phones or satellite phones;

    (v) LNG / RLNG;

    (vi) Second hand and worn clothing or footwear (PCT Heading 6309.000);

    (vii) Gold, in un-worked condition;

    (viii) Silver, in un-worked condition;

    (ix) The goods as specified in the Third Schedule on which tax is paid on retail price basis; and

    (x) plant, machinery and equipment falling in Chapters 84 and 85 of the First Schedule to the Customs Act, 1969 (IV of 1969), as are imported by a manufacturer for in-house installation or use.

    (3) The value addition tax paid at import stage shall form part of input tax, and the importer shall deduct the same from the output tax due for the tax period, subject to limitations and restrictions under the Act, for determining his net liability.

    The excess of input tax over output tax shall be carried forwarded to the next tax period as provided in section 10 of the Act.

    (4) The refund of excess input tax over output tax, which is attributable to tax paid under this Schedule, shall not be refunded to a registered person in any case, except that as used for making of zero-rated supplies.

    (5) The registered person, if also dealing in goods other than imported goods, shall be entitled to file refund claim of excess carried forward input tax for a period as provided in section 10 or in a notification issued there under by the Board after deducting the amount attributable to the tax paid at import stage i.e. sum of amounts paid during the claim period and brought forward to claim period. Such deducted amount may be carried forward to subsequent tax period.