ISLAMABAD, February 20, 2024 – The Federal Board of Revenue (FBR) has issued a clarification stating that female consumers can present the CNIC of their husband or father when making purchases above Rs50,000.
(more…)Tag: Sales Tax Act 1990
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Consumers may not able to get 5pc sales tax rebate till FBR notification
ISLAMABAD: General public may not be able to avail 5 percent rebate on their purchases until a notification is issued by the Federal Board of Revenue (FBR).
Through Finance Act, 2019 a new proviso has been added wherein customers of Tier-1 retailers are entitled for pay-back up to 5 percent of sales tax involved in the sales tax invoice.
This shall encourage the customers to demand sales tax invoice from registered retailers.
“However, these provisions shall be applicable when the Board so notifies,” said the FBR in instructions to Inland Revenue offices regarding enforcing changes to sales tax laws made through Finance Act, 2019.
The FBR informed the IR about changes made to regime of Tier-1 retailers.
These changes are included option to pay 2 percent turnover tax has been withdrawn.
Provisions relating to SRO 1125(I)/2011 under which zero-rate sales tax was available, have been omitted, thus subjecting textile and leather items to normal rate except for the integrated retail outlets for which the rate shall be 14 percent as per amendment in Eighth Schedule.
Another new proviso aims at expanding the scope of real-time integration beyond textile and leather. These provisions shall become effective when the Board so notifies.After such notification, the input tax shall be reduced by 15 percent for retailers failing to integrate Point of Sales (POSs) in the prescribed manner, as provided in the newly inserted sub-section (6) in section 8B.
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FBR directs customs to ensure retail price print on imported goods
KARACHI: Federal Board of Revenue (FBR) has directed customs authorities to ensure printing of retail prices on imported goods for collection of sales tax while clearance of consignments.
The Inland Revenue Policy Wing issued directives on Wednesday to Inland Revenue and Customs for the implementation of changes brought in to Sales Tax Act, 1990 through Finance Act, 2019.
It said that the locally manufactured goods specified in Third Schedule are already chargeable to sales tax on the basis of retail price.
Now, through amendment in section 3(2)(a) of Sales Tax Act, 1990, retail price taxation has also been made applicable to imported goods.
The importers are required to print the retail price in the manner prescribed in the aforesaid clause and such goods shall be assessed on the basis of declared retail price and not on the basis of customs value under section 25 of the Customs Act, 1969.
“All Model Customs Collectorates (MCCs) are requested to ensure that the declared retail prices are duly printed in the prescribed manner and that the sales tax is charged on the basis of such declared retail price,” the FBR said.
Twelve new serial numbers have been added to Third Schedule through Finance Act, 2019 such as electric and gas appliances, motorcycles, auto-rickshaws biscuits, tiles etc.
The FBR directed Large Taxpayers Units (LTUs) / Regional Tax Offices (RTOs) / MCCs should ensure application accordingly.
The FBR defined the value of supply, which has been amended to provide for application of retail price taxation to imported goods, and also to incorporate provisions from rescinded rules and STGOs.
These modifications are enumerated below:
Amendment in clause (d) to exclude imported Third Schedule items from purview of application of ‘customs value’ determined under section 25 of the Customs Act, 1969. These items are to be assessed on the basis of declared retail price. Further such price is also required to be printed on imported goods as stipulated in clause (a) of section 3(2) of the Sales Tax Act, 1990.
(ii) Substitution of clause (f) in section 2(46) pertains to value of supply in case of toll manufacturing, which has defined to be the charges received in lieu of value addition carried out on goods;
(iii) Newly added clause (h) defines value to be energy purchase price in case of supply by IPPs; and
(iv) Another new clause (i) transposes the provisions relating to exclusion of late payment surcharge from value, in case of supply of electricity and gas by the distribution companies, from the rescinded Sales Tax Special Procedures Rules, 2007.
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Reduced sales tax rates on supply of gold, jewelry imposed
The Federal Board of Revenue (FBR) has introduced significant amendments through the Finance Act, 2019, bringing gold, jewelry, and other precious articles into the sales tax ambit by implementing reduced rates on supplies.
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Finance Act 2019: CNIC condition for sales tax invoices applicable from August 01
KARACHI: The condition of obtaining CNIC number for unregistered persons at the time of supplies by registered person will be applicable from August 01, 2019.
The condition has been proposed to be applicable from July 01, 2019 through Finance Bill 2019.
However, through Finance Act, 2019 this condition now will be applicable from August 2019.
An amendment has been introduced through Finance Bill 2019 to Section 23 of Sales Tax Act, 1990 under which it was now required specifically to mention particulars on invoices in Urdu or English language. Tax Invoice is also required to reflect CNIC Number of recipient in case supplies are made to unregistered person.
The Finance Bill 2019 also proposed to require a supplier of textile yarn and fabric to mention count, denier and construction, in addition to description, on tax invoice at the time of making taxable supply.
According to commentary on Finance Act, 2019 issued by PwC A F Ferguson Chartered Accountants NTN or CNIC are now required to be mentioned in tax invoice in respect of supply to unregistered persons.
In the Finance Bill 2019, only CNIC was proposed to be mentioned on tax invoice.
Further through Finance Act 2019, such requirements have been made effective from 1st August, 2019.
However, an exception from such requirement has been introduced through the Finance Act for supplies made by a retailer where the transaction value inclusive of sales tax does not exceed rupees fifty thousand, if sale is being made to an ordinary consumer.
The term ‘Ordinary Consumer’ has also been explained in the Finance Act as a person who is buying goods for his own consumption and not for the purpose of re-sale or processing. It has been further provided in the Finance Act that in case 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.
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New values of steel products fixed for sales tax payment
ISLAMABAD: Federal Board of Revenue (FBR) has notified new valuations for steel products for the purpose of collecting sales tax from July 01, 2019.
The FBR on Saturday issued SRO 697(l)/2019 to fix the following values of locally produced goods specified in the Table below, for the purpose of payment of sales tax on ad valorem basis, at the rate as applicable to specified in sub-section (1) of section 3 of the Sales Tax Act, 1990.
1. Steel bars: Rs83,000 per metric ton
2. Steel Billets: Rs74,000 per metric ton
3. Steel Ingots/bala: Rs72,000 per metric ton
4. Ship plates: Rs72,000 per metric ton
5. Other re-rollable iron & steel scrap: Rs47,000 per metric tons
In case the value of supply of the goods specified in this notification is higher than the values fixed herein, the value of goods shall be the value at which the supply is made.
The FBR said that the SRO would take effect on and from the 1st day of July, 2019.
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Finance Bill 2019: 12th Schedule introduced to levy 3pc value addition sales tax on all imported goods
ISLAMABAD: The government has proposed Twelfth Schedule to Sales Tax Act, 1990 to streamline imposition of 3 percent value addition tax on imported goods.
The schedule has been proposed to make part of the Act through Finance Bill, 2019.
According to the schedule,
(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 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 meant for use in an industrial process which are subject to customs duty at 16% or 20% 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; and
(iv) Cellular mobile phones or satellite phones.
(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) In no case, the refund of excess input tax over output tax, which is attributable to tax paid at import stage, shall be refunded to a registered person.
(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.”
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PTBA advises revisiting arrest, prosecution law under sales tax
KARACHI: Pakistan Tax Bar Association (PTBA) has advised the Federal Board of Revenue (FBR) to revisit law related to arrest and prosecution under Sales Tax Act, 1990.
In its tax proposals for budget 2019/2020, the apex tax bar said that under the existing law, every director and officer of the Company is liable to be arrested if the officer has reasons to believe that such director or officer is personally responsible for actions of the Company contributing tax fraud.
Accordingly, a person who is a nominee director or employee director can be held responsible for the liability of the company.
The PTBA said that as per interpretation of the law nominee or employee directors be who are not involved in the administrative matters of a taxpayer are being held responsible for the liability of the taxpayer.
“It is a trite law that before any coercive action is taken against any person; it is the duty of the Revenue Officer to provide proper opportunity of being heard and pass a judicious order to establish that the act of the registered person is willful and there was an element of mens rea.”
In the Income Tax Ordinance, 2001 such matters are covered under Section 139 thereof which comprehensively deals with the liability both in case of company and association of Persons. “Section 139 needs to be replicated in the Sales Tax Act, 1990 on the similar lines.”
The PTBA said that the proposed amendment would protect interest of the nominee/employee directors.
Pointing out the issue of recovery of arrears under sales tax law, the PTBA said under Section 48 which deals with recovery of arrears does not provide any time limit to initiate the recovery proceedings.
“By virtue of section 45B of the Act, a registered person aggrieved by any decision, may file an appeal within thirty days of the date of receipt of the order. On the contrary, under Rule 71 of the Sales Tax Rules, proceeding of recovery of impugned tax may be initiated after thirty days from the date of order.”
In addition, recovery proceedings may be initiated as soon as Commissioner Inland Revenue (Appeals) confirmed the Order under Section 45B of the Sales Tax Act or Section 33 of the Federal Excise Act.
The PTBA said that the section 45B, 48 and the rule are not harmonized. Sometimes order is served to the registered person after many days of the date of order and the recovery proceedings may be initiated under the Rule even if the time limit provided for filing of the appeal has not lapsed.
Therefore, it is recommended that Rule 71 should be amended to provide commencement of recovery proceedings after thirty days from the date of receipt of the order.
Similarly, time limit of 30 days from the date of receipt of the order should be provided in section 48 to bring harmony between the Act and Rules.
The PTBA suggested that thirty days shall also be allowed for initiation of recovery proceedings in case demand is confirmed by the Commissioner Inland Revenue (Appeals) while disposing appeals filed under section 45B of STA and 33 of FEA.
Giving rationale to the proposal, the PTBA said that it would keep harmony between the Act and the Rules in the spirit of natural justice.
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Omitting condition on input sales tax claim proposed where tax unpaid by supplier
KARACHI: Pakistan Business Council (PBC) has suggested to omitting the condition of disallowing input tax adjustment where tax unpaid by supplier.
In its tax proposals for budget 2019/2020, the PBC said that according to Section 8(1)(ca) of Sales Tax Act, 1990, input sales tax is not allowed where tax unpaid by supplier.
“A taxpayer is not entitled to claim input tax paid on the goods (or services) in respect of which sales tax has not been deposited in the government treasury by the respective suppliers.
The PBC said that this provision needs to be omitted especially after the implantation of the STRIVe system.
Giving rationale to the proposal, it said that the matter was challenged in the Lahore High Court (LHC), in a petition W.P.No.3515/2012 filed by D.G Khan Cement Company Limited.
LHC permitted relief and declared the provision as unconstitutional.
“With the implementation of the STRIVe system this is redundant,” the PBC said.
The PBC further said that based on the Doctrine of Revenue Neutrality and plethora of judgments of superior courts, it is now a settled principal of law that if any liability for short paid tax is subsequently discharged, then the same cannot be recovered from the taxpayer again.
However, unfortunately, such provision is not part of the Sales Tax Act, 1990.
It proposed that Sub-Section 4B should be inserted in Section 11 of the Sales Tax Act with the purpose of introducing “doctrine of revenue neutrality”.
It is a settled principal of law that if any liability for short paid tax is subsequently discharged, then the same cannot be recovered from the taxpayer again.
Proposed insertion in Section 11 of the Sales Tax Act 1990:
“(4B) Where at the time of recovery of sales tax under sub-section (1), (2), (3), or (4) and (4A), it is established that the sales tax that was required to be paid has been meanwhile been paid by that person or recovered from the supply chain, no recovery shall be made from the person who had failed pay the sales tax or had paid short-amount of sales tax.”
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Sales Tax Act 1990: treatment of tax paid by person required to get registration
KARACHI: A person, who is required to be get registration, paid sales tax on goods purchased from a registered person shall be treated as input tax.
According to updated Sales Tax Act, 1990 issued by Federal Board of Revenue (FBR), the Section 59 explained the treatment of tax paid shall be input tax for a person who purchased goods from a registered person.
Section 59: Tax paid on stocks acquired before registration
The tax paid on goods purchased by a person who is subsequently required to be registered under section 14 due to new liabilities or levies or gets voluntary registration under this Act or the rules made thereunder, shall be treated as input tax, provided that such goods were purchased by him from a registered person against an invoice issued under section 23 during a period of thirty days before making an application for registration and constitute his verifiable unsold stock on the date of compulsory registration or on the date of application for registration or for voluntary registration:
Provided that where a person imports goods, the tax paid by him thereon during a period of ninety days before making an application for registration shall be treated as an input tax subject to the condition that he holds the bill of entry relating to such goods and also that these are verifiable unsold or un-consumed stocks on the date of compulsory registration or on the date of application for registration or for voluntary registration.