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Tag: Sales Tax Act 1990

  • Tax Amendment Ordinance: consumer goods to be confiscated on failure to print retail price

    Tax Amendment Ordinance: consumer goods to be confiscated on failure to print retail price

    ISLAMABAD: Tax officials have been empowered to confiscate goods where importer / manufacturer failed to mandatory print the retail price on consumer goods.

    The government introduced Tax Laws (Second Amendment) Ordinance, 2019 on Wednesday through promulgated through presidential ordinance.

    Federal Board of Revenue (FBR) issued salient features of the ordinance and stated that penalty had been proposed through the ordinance for person failed to comply with mandatory requirement of printing retail price on imported goods falling under Third Schedule of Sales Tax Act, 1990.

    According to the amendment, any person, being a manufacturer or importer of an item which is subject to tax on the basis of retail price, who fails to print the retail price in the manner as stipulated under the Act.

    “Such person shall pay a penalty of ten thousand rupees or five percent of the amount of tax involved, whichever is higher:

    Further, such goods shall also be liable to confiscation. However, the adjudication authority, after such confiscation, may allow redemption of such goods on payment of fine which shall not be less than twenty percent of the total retail price of such goods.”

  • Amendment Ordinance: major changes made to ST law

    Amendment Ordinance: major changes made to ST law

    ISLAMABAD: Federal Board of Revenue (FBR) on Wednesday issued salient features of amendment to Sales Tax Act, 1990 made through Tax Law (Second Amendment) Ordinance, 2019.

    Following are the salient features of sales tax:

    1. Many queries have been received seeking clarification of the term “greenfield industry”. A definition of this term in section 2 of the Sales Tax Act, 1990 has now been inserted in clause 12A.

    2. In order to ensure that persons who are required to integrate with the FBR or have been integrated, either do not get themselves integrated or do not make proper compliance and tamper with the systems so installed so as to avoid reporting and recording of production and sales, it has been provided to amend section 33 of the Act to declare such act as an offence and punishable with imprisonment and fine both.

    3. Sales tax is levied on the basis of retail price on the items specified in the Third Schedule to the Act. Such retail price is required be printed with retail price. In order to ensure compliance in this respect, and to safeguard revenue associated therewith, it is penalty has been provided and also confiscation of contravening goods by amending section 33 of the Act.

    4. In order to safeguard industry in Pakistan and to prevent misuse of exemption, a new section 40D in the Act has been added and amendment in this regard has also been made in section 33 relating to penalties and offences, so as to provide for powers to prescribe documentation in relation to such goods and to examine and check vehicles coming from tax-exempt areas such as AJ&K, Gilgit-Baltistan and Tribal Areas.

    5. Section 73 has been amended to provide that a registered manufacturer shall make all taxable supplies to a registered person excluding supplies not exceeding a value of rupees hundred million in a financial year and rupees 10 million in a month.

    6. Sales tax on the imported cotton has been enhanced from 5 percent to 10 percent to remove disparity.

    7. PCT heading of bricks had been inadvertently mentioned as “6901.1000”, whereas the correct PCT heading is “6901.0000”. Tenth Schedule has been amended to correct the PCT heading.

    8. Manufacturers using plant and machinery for in house installation have now been excluded from the purview of the 12th, further refund of 3 percent value addition tax may not be barred if paid on goods used in making of zero-rated supplies.

    9. Sales tax on the mobile phones upto the value of 30 US dollars has been reduced from Rs 130 to Rs 100 and phones having value upto 100 US Dollars from Rs 1320 to Rs 200.

    10. Definition of tier-1 retailer has been amended in section 2(43A), whereby the Federal Board of Revenue is empowered to add any other category of retailers to tier-1. In view of the higher tariff rates of electricity the conditions to qualify for a Tier 1 retailer have been amended so as to increase the threshold of electricity consumption from Rs 600,000 to Rs 1200,000.

  • IR officers empowered to sell defaulters’ properties without attachment

    IR officers empowered to sell defaulters’ properties without attachment

    KARACHI: Officers of Inland Revenue (IR) have been empowered to sell moveable or immovable properties of sales tax defaulters for recovery of arrears.

    Section 48 of Sales Tax Act, 1990, which was updated up to June 30, 2019 by the Federal Board of Revenue (FBR) explained the powers of IR officers for recovery of arrears of tax.

    Section 48: Recovery of arrears of tax

    Where any amount of tax is due from any person, the officer of Inland Revenue may:-

    (a) deduct the amount from any money owing to person from whom such amount is recoverable and which may be at the disposal or in the control of such officer or any officer of Income Tax, Customs or Central Excise Department;

    (b) require by a notice in writing any person who holds or may subsequently hold any money for or on account of the person from whom tax may be recoverable to pay to such officer the amount specified in the notice;

    (a) stop removal of any goods from the business premises of such person till such time the amount of tax is paid or recovered in full;

    (ca) require by a notice in writing any person to stop clearance of imported goods or manufactured goods or attach bank accounts;

    (b) seal the business premises till such time the amount of tax is paid or- recovered in full;

     

    (c) attach and sell or sell without attachment any movable or immovable property of the registered person from whom tax is due; and

    (f) recover such amount by attachment and sale of any moveable or- immovable property of the guarantor, person, company, bank or financial institution, where a guarantor or any other person, company, bank or financial institution fails to make payment under such guarantee, bond or instrument:

    Provided that the Commissioner Inland Revenue or any officer of Inland Revenue shall not issue notice under this section or the rules made thereunder for recovery of any tax due from a taxpayer if the said taxpayer has filed an appeal under section 45B in respect of the order under which the tax sought to be recovered has become payable and the appeal has not been decided by the Commissioner (Appeals), subject to the condition that ten per cent of the amount of tax due has been paid by the taxpayer.

    (1A) If any arrears of tax, default surcharge, penalty or any other amount which is adjudged or payable by any person and which cannot be recovered in the manner prescribed above, the Board or any officer authorized by the Board, may, write off the arrears in the manner as may be prescribed by the Board.

     

    (2) For the purpose of recovery of tax, penalty or any other demand raised under this Act, the officer of Inland Revenue shall have the same powers which under the Code of Civil Procedure 1908 (V of 1908), a Civil Court has for the purpose of recovery of an amount due under a decree.

  • Applicable withholding sales tax rates on various supplies

    Applicable withholding sales tax rates on various supplies

    KARACHI: Federal Board of Revenue (FBR) has notified withholding sales tax rates to be deducted / collected on various supplies by withholding agents.

    The FBR recently updated Sales Tax Act, 1990 and updated sales tax rates to be collected on various supplies under sub-section 7 of section 3 of the Act.

    The tax shall be withheld by the buyer at the rate as specified in the Eleventh Schedule, by any person or class of persons as withholding agent for the purpose of depositing the same, in such manner and subject to such conditions or restrictions as the Board may prescribe in this behalf through a notification in the official Gazette.

    Following rate of withholding sales tax shall be applicable:

    01. 1/5th of Sales Tax as shown on invoice to be collected from registered persons by (a) Federal and provincial government departments; autonomous bodies; and public sector organizations; (b) Companies as defined in the Income Tax Ordinance, 2001 (XLIX of 2001)

    02. 1/10th of Sales Tax as shown on invoice to be collected from person registered as a wholesaler, dealer or distributor by (a) Federal and provincial government departments; autonomous bodies; and public sector organizations; (b) Companies as defined in the Income Tax Ordinance, 2001 (XLIX of 2001)

    03. Whole of the tax involved or as applicable to supplies on the basis of gross value of supplies from unregistered persons by Federal and provincial government departments; autonomous bodies; and public sector organizations

    04. 5 percent of gross value of supplies from unregistered persons by companies as defined in the Income Tax Ordinance, 2001 (XLIX of 2001)

    05. Whole of sales tax applicable from person providing advertisement services by registered persons as recipient of advertisement services

    06. Whole of sales tax applicable from unregistered persons by registered persons purchasing cane molasses.

    The rates for withholding or deduction by the withholding agents not applicable to following goods and supplies:

    (i) Electrical energy;

    (ii) Natural Gas;

    (iii) Petroleum Products as supplied by petroleum production and exploration companies, oil refineries, oil marketing companies and dealers of motor spirit and high speed diesel;

    (iv) Vegetable ghee and cooking oil;

    (v) Telecommunication services;

    (vi) Goods specified in the Third Schedule to the Sales Tax Act, 1990;

    (vii) Supplies made by importers who paid value addition tax on such goods at the time of import; and

    (viii) Supplies made by an Active Taxpayer as defined in the Sales Tax Act, 1990 to another registered persons with exception of advertisement services.

  • FBR withdraws 3pc value addition tax on imported consumer items

    FBR withdraws 3pc value addition tax on imported consumer items

    ISLAMABAD: Federal Board of Revenue (FBR) has withdrawn three percent minimum value addition tax on import of consumer items on which sales tax is paid on retail basis.

    The FBR on Friday issued SRO 1321(I)/2019 and amended the Twelfth Schedule of Sales Tax Act, 1990 under which three percent minimum value addition sales tax has been imposed on all imported goods subject to exclusions.

    As per the amendment the FBR withdrew the imposition of minimum value addition tax on import of goods specified in the Third Schedule of the Sales Tax Act, 1990.

    Following is Third Schedule to Sales Tax in which consumer items are mentioned for collection of sales tax on the basis of printed retail price:

    • Fruit juices and vegetable juices.
    • Ice Cream.
    • Aerated waters or beverages.
    • Syrups and squashes.
    • Cigarettes.
    • Toilet soap
    • Detergents
    • Shampoo
    • Toothpaste
    • Shaving cream
    • Perfumery and cosmetics.
    • Tea
    • Powder drinks
    • Milky drinks
    • Toilet paper and tissue paper
    • Spices sold in retail packing bearing brand names and trade marks
    • Shoe polish and shoe cream
    • Fertilizers
    • Cement sold in retail packing
    • Mineral/bottled water
    • 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.
    • Household gas appliances, including cooking range, ovens, geysers and gas heaters.
    • Foam or spring mattresses and other foam products for household use.
    • Paints, distempers, enamels, pigments, colours, varnishes, gums, resins, dyes, glazes, thinners, blacks, cellulose lacquers and polishes sold in retail packing
    • Lubricating oils, brake fluids, transmission fluid, and other vehicular fluids sold in retail packing.
    • Storage batteries excluding those sold to
    • Automotive manufacturers or assemblers
    • Tyres and tubes excluding those sold to automotive manufacturers or assemblers
    • Motorcycles
    • Auto rickshaws
    • Biscuits in retail packing with brand name
    • Tiles
    • Auto-parts, in retail packing, excluding those sold to automotive manufacturers or assemblers.

    Procedure and conditions under the Twelfth Schedule has been defined as:

    (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:

    Prior to the latest amendment the value addition tax under this Schedule shall not be charged on:

    (i) Raw materials and intermediary goods meant for use in an industrial process which are subject to customs duty at a rate less than 16% ad valorem under First Schedule to the Customs Act, 1969;

    (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; and

    (viii) Silver, in un-worked condition.”

  • No refund, input adjustment to be entertained on invoice issued prior or after of blacklisting

    No refund, input adjustment to be entertained on invoice issued prior or after of blacklisting

    KARACHI: Federal Board of Revenue (FBR) said invoices issued by a person prior or after blacklisting for sales tax will not be entertained for refunds or input adjustment.

    The FBR issued Sales Tax Act, 1990 updated till June 30, 2019 incorporating amendments brought through Finance Act, 2019.

    Section 21 of the Act explained blacklisting and suspension of a taxpayer for sales tax.

    Section 21: De-registration, blacklisting and suspension of registration

    Sub-Section (1): The Board or any officer, authorized in this behalf, may subject to the rules, de-register a registered person or such class of registered persons not required to be registered under this Act.

    Sub-Section (2): Notwithstanding anything contained in this Act, in cases where the Commissioner is satisfied that a registered person is found to have issued fake invoices or has otherwise committed tax fraud, he may blacklist such person or suspend his registration in accordance with such procedure as the Board may by notification in the official Gazette, prescribe.

    Sub-Section (3): During the period of suspension of registration, the invoices issued by such person shall not be entertained for the purposes of sales tax refund or input tax credit, and once such person is black listed, the refund or input tax credit claimed against the invoices issued by him, whether prior or after such black listing, shall be rejected through a self-speaking appealable order and after affording an opportunity of being heard to such person.

    Sub-Section (4): Notwithstanding anything contained in this Act, where the Board, the concerned Commissioner or any officer authorized by the Board in this behalf has reasons to believe that a registered person is engaged in issuing fake or flying invoices, claiming fraudulent input tax or refunds, does not physically exist or conduct actual business, or is committing any other fraudulent activity, the Board, concerned Commissioner or such Officer may after recording reasons in writing, block the refunds or input tax adjustments of such person and direct the concerned Commissioner having jurisdiction for further investigation and appropriate legal action.

  • Sellers must retain CNIC information for six years

    Sellers must retain CNIC information for six years

    ISLAMABAD: Sales tax registered persons selling goods are required to keep record of Computerized National Identity Card (CNIC) details for six years.

    Sources in Federal Board of Revenue (FBR) said that the condition of CNIC against sales of goods had been implemented from August 01, 2019. “All the details of CNIC must be maintained by the suppliers for examination and scrutiny purposes,” a tax official said.

    Under Section 24 of the Sales Tax Act, 1990, the records and documents must be retained for six years.

    “A person, who is required to maintain any record or documents under this Act, shall retain the record and documents for a period of six years after the end of the tax period to which such record or documents relate or till such further period the final decision in any proceedings including proceedings for assessment, appeal, revision, reference, petition and any proceedings before an alternative Dispute Resolution Committee is finalized.”

    The government through Finance Act, 2019 introduced significant changes to document the supply chain and made mandatory the information of CNIC on sales under Section 23 of the Sales Tax Act, 1990.

    Section 23: Tax Invoices

    Sub-Section (1): A registered person making a taxable supply shall issue a serially numbered tax invoice at the time of supply of goods containing the following particulars, in Urdu or English language, namely: –

    (a) name, address and registration number of the supplier;

    (b) name, address and registration, number of the recipient and NIC or NTN of the unregistered person, as the case may be, excluding supplies made by a retailer where the transaction value inclusive of sales tax amount does not exceed rupees fifty thousand, if sale is being made to an ordinary consumer.

    Explanation. – For the purpose of this clause, ordinary consumer means a person who is buying the goods for his own consumption and not for the purpose of re-sale or processing:

    Provided that the condition of NIC or NTN shall be effective from 1st August, 2019;

    (c) date of issue of invoice;

    (d) description including count, denier and construction in case of textile yarn and fabric, and quantity of goods;

    (e) value exclusive of tax;

    (f) amount of sales tax; and

    (g) value inclusive of tax:

    Provided that the Board may, by notification in the official Gazette, specify such modified invoices for different persons or classes of persons;

    Provided further that not more than one tax invoice shall be issued for a taxable supply:

    Provided also that if it is subsequently proved that CNIC provided by the purchaser was not correct, liability of tax or penalty shall not arise against the seller, in case of sale made in good faith.

    Sub-Section (2): No person other than a registered person or a person paying retail tax shall issue an invoice under this section.

    Sub-Section (3): A registered person making a taxable supply may, subject to such conditions, restrictions and limitations as the Board may, by notification in the official Gazette, specify, issue invoices to another registered person electronically and to the Board as well as to the Commissioner, as may be specified.

    Sub-Section (4): The Board may, by notification in the Official Gazette, prescribe the manner and procedure for regulating the issuance and authentication of tax invoices.

  • Tax officials empowered to recover short payment without notice

    Tax officials empowered to recover short payment without notice

    KARACHI: Tax officials have been authorized to recover short payment of sales tax through freezing bank accounts of taxpayers without serving show cause notice.

    Officials in Federal Board of Revenue (FBR) said that the officers of Inland Revenue had been authorized to make recovery of short payment of sales tax as declared in return of a taxpayer by taking measures including freezing bank account without issuing a show cause notice.

    The officials said that under Section 11A of Sales Tax Act, 1990, the powers of Inland Revenue officers had been explained.

    Section 11A: Short paid amounts recoverable without notice

    Notwithstanding any of the provisions of this Act, where a registered person pays the amount of tax less than the tax due as indicated in his return, the short paid amount of tax along with default surcharge shall be recovered from such person by stopping removal of any goods from his business premises and through attachment of his business bank accounts, without giving him a show cause notice and without prejudice to any other action prescribed under section 48 of this Act or the rules made thereunder:

    Provided that no penalty under section 33 of this Act shall be imposed unless a show cause notice is given to such person.

  • Payment for transactions above Rs50,000 must be made through crossed cheque

    Payment for transactions above Rs50,000 must be made through crossed cheque

    KARACHI: Federal Board of Revenue (FBR) has made it mandatory for buyers to make payment above Rs50,000 through crossed cheque or banking instruments ensuring transfer of payment to seller’s account.

    The FBR issued Sales Tax Act, 1990 updated till June 30, 2019 incorporating amendments brought through Finance Act, 2019. Under Section 73 of the Act, the FBR made it mandatory for buyers to make payment for any transaction above Rs50,000 through crossed cheque or through any banking instrument.

    Section 73: Certain transactions not admissible

    Sub-Section (1): Notwithstanding anything contained in this Act or any other law for the time being in force, payment of the amount for a transaction exceeding value of fifty thousand rupees, excluding payment against a utility bill, shall be made by a crossed cheque drawn on a bank or by crossed bank draft or crossed pay order or any other crossed banking instrument showing transfer of the amount of the sales tax invoice in favour of the supplier from the business bank account of the buyer:

    Provided that online transfer of payment from the business account of buyer to the business account of supplier as well as payments through credit card shall be treated as transactions through the banking channel, subject to the condition that such transactions are verifiable from the bank statements of the respective buyer and the supplier.

    Sub-Section (2): The buyer shall not be entitled to claim input tax credit, adjustment or deduction, or refund, repayment or draw-back or zero-rating of tax under this Act if payment for the amount is made otherwise than in the manner prescribed in sub-section (1), provided that payment in case of a transaction on credit is so transferred within one hundred and eighty days of issuance of the tax invoice.

    Sub-Section (3): The amount transferred in terms of this section shall be deposited in the business bank account of the supplier, otherwise the supplier shall not be entitled to claim input tax credit, adjustment or deduction, or refund, repayment or draw-back or zero-rating of tax under this Act.

    Explanation— For the purpose of this section, the term “business bank account” shall mean a bank account utilized by the registered person for business transactions, declared to the Commissioner in whose jurisdiction he is registered 1[through Form STR-1 or change of particulars in registration database.

  • Buyers, sellers jointly responsible for payment of unpaid tax

    Buyers, sellers jointly responsible for payment of unpaid tax

    KARACHI: The Federal Board of Revenue (FBR) has placed significant responsibility on both buyers and sellers in the supply chain for any instance where the payment of tax fails to be deposited into the national treasury.

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