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Tag: Sales Tax Act 1990

  • Finance Act 2019: CNIC condition for sales tax invoices applicable from August 01

    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.

  • New values of steel products fixed for sales tax payment

    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.

  • Finance Bill 2019: 12th Schedule introduced to levy 3pc value addition sales tax on all imported goods

    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.”

  • PTBA advises revisiting arrest, prosecution law under sales tax

    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.

  • Omitting condition on input sales tax claim proposed where tax unpaid by supplier

    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.”

  • Sales Tax Act 1990: treatment of tax paid by person required to get registration

    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.

  • Sales Tax Act 1990: tax payment by company in liquidation

    Sales Tax Act 1990: tax payment by company in liquidation

    KARACHI: The sales tax law has defined the procedure for liability for payment of tax in case of private company is in state of liquidation.

    The updated Sales Tax Act, 1990 issued by Federal Board of Revenue (FBR), the Section 58 explained the payment method from the company is wound up.

    Section 58: Liability for payment of tax in the case of private companies or business enterprises

    Notwithstanding anything contained in the Companies Act, 2017 (XIX of 2017), where any private company or business enterprise is wound up and any tax chargeable on the company or business enterprise, whether before, or in the course, or after its liquidation, in respect of any tax period cannot be recovered from the company or business enterprise, every person who was a owner of, or partner in, or director of, the company or business enterprise during the relevant period shall, jointly and severally with such persons, be liable for the payment of such tax.

    Section 58A: Representatives

    Sub-Section (1): For the purpose of this Act and subject to sub-sections (2) and (3), the expression “representative” in respect of a registered person, means:

    (a) where the person is an individual under a legal disability, the guardian or manager who receives or is entitled to receive income on behalf, or for the benefit of the individual;

    (b) where the person is a company (other than a trust, a Provincial Government, or local authority in Pakistan), a director or a manager or secretary or agent or accountant or any similar officer of the company;

    (c) where the person is a trust declared by a duly executed instrument in writing whether testamentary or otherwise, any trustee of the trust;

    (d) where the person is a Provincial Government, or local authority in Pakistan, any individual responsible for accounting for the receipt and payment of money or funds on behalf of the Provincial Government or local authority;

    (e) where the person is an association of persons, a director or a manager or secretary or agent or accountant or any similar officer of the association or, in the case of a firm, any partner in the firm;

    (f) where the person is the Federal Government, any individual responsible for accounting for the receipt and payment of moneys or funds on behalf of the Federal Government; or

    (g) where the person is a public international organization, or a foreign government or political sub-division of a foreign government, any individual responsible for accounting for the receipt and payment of moneys or funds in Pakistan on behalf of the organization, government, or political subdivision of the government.

    Sub-Section (2): Where the Court of Wards, the Administrator General, the Official Trustee, or any receiver or manager appointed by, or under, any order of a Court receives or is entitled to receive income on behalf, or for the benefit of any person, such Court of Wards, Administrator General, Official Trustee, receiver, or manager shall be the representative of the person for the purposes of this Act.

    Sub-Section (3): Subject to sub-section (4), where a person is a non-resident person, the representative of the persons for the purpose of this Act for a tax year shall be any person in Pakistan:

    (a) who is employed by, or on behalf of, the non-resident person;

    (b) who has any business connection with the non-resident person;

    (c) from or through whom the non-resident person is in receipt of any income, whether directly or indirectly;

    (d) who holds, or controls the receipt or disposal of any money belonging to the non-resident person;

    (e) who is the trustee of the non-resident person; or

    (f) who is declared by the 1[Commissioner] by an order in writing to be the representative of the non-resident person.

    Sub-Section (4): No person shall be declared as the representative of a non-resident person unless the person has been given an opportunity by the 1[Commissioner] of being heard.

    Section 58B: Liability and obligations of representatives

    Sub-Section (1): Every representative of a person shall be responsible for performing any duties or obligations imposed by or under this Act on the person, including the payment of tax.

    Sub-Section (2): Subject to section 58 and sub-section (5) of this section, any tax that, by virtue of sub-section (1), is payable by a representative of a registered person shall be recoverable from the representative only to the extent of any assets of the registered person that are in the possession or under the control of the representative.

    Sub-Section (3): Every representative of a registered person who pays any tax owing by the registered person shall be entitled to recover the amount so paid from the registered person or to retain the amount so paid out of any moneys of the registered person that are in the representative’s possession or under the representative’s control.

    Sub-Section (4): Any representative, or any person who apprehends that he may be assessed as a representative, may retain out of any money payable by him to the person on whose behalf he is liable to pay tax (hereinafter in this section referred to as the “principal”), a sum equal to his estimated liability under this Act, and in the event of disagreement between the principal and such a representative or a person as to the amount to be so retained, such representative or person may obtain from the 1[Commissioner] a certificate stating the amount to be so retained pending final determination of the tax liability, and the certificate so obtained shall be his authority for retaining that amount.

    Sub-Section (5): Every representative shall be personally liable for the payment of any tax due by the representative in a representative capacity if, while the amount remains unpaid, the representative:

    (a) alienates, charges or disposes of any moneys received or accrued in respect of which the tax is payable; or

    (b) disposes of or parts with any moneys or funds belonging to the person that is in the possession of the representative or which comes to the representative after the tax is payable, if such tax could legally have been paid from or out of such moneys or funds.

    Sub-Section (6): Nothing in this section shall relieve any person from performing any duties imposed by or under this Act on the person which the representative of the person has failed to perform.

  • Sales Tax Act 1990: No suit shall lie against government servant

    Sales Tax Act 1990: No suit shall lie against government servant

    KARACHI: The sales tax law had explained that no suit, prosecution or other legal proceeding shall lie against the federal government or against any public servant in respect of any order passed in good faith.

    The updated Sales Tax Act, 1990 issued by the Federal Board of Revenue (FBR) explained the bar of suits, prosecution and other legal proceedings under this act.

    Section 51: Bar of suits, prosecution and other legal proceedings

    Sub-Section (1): No suit shall be brought in any Civil Court to set aside or modify any order passed, any assessment made, any tax levied, any penalty imposed or collection of any tax made under this Act.

    Sub-Section (2): No suit, prosecution or other legal proceeding shall lie against the Federal Government or against any public servant in respect of any order passed in good faith under this Act.

    Sub-Section (3): Notwithstanding anything in any other law for the time being in force, no investigation or inquiry shall be undertaken or initiated by any governmental agency against any officer or official for anything done in his official capacity under this Act, rules, instructions or direction made or issued thereunder without the prior approval of the Board.

    Section 52: Appearance by authorized representative

    A registered person required to appear before the Appellate Tribunal or an officer of 2[Inland Revenue] in connection with any proceedings under this Act may, in writing, authorize any person having such qualification as may be prescribed to represent him or appear on his behalf.

    Section 52A: e-intermediaries to be appointed

    Sub-Section (1): Subject to such conditions, limitations and restrictions, the Board may, by a notification in the official Gazette, appoint a person to electronically file return under Chapter V and such other documents electronically, as may be prescribed from time to time, on behalf of a person registered under section 14.

    Sub-Section (2): A person registered under section 14 may authorize an e-intermediary to electronically file return or any other documents, as specified in sub-section (1).

    Sub-Section (3): The return or such other documents filed by an e-intermediary on behalf of a registered person shall be deemed to have been filed by that registered person.

    Sub-Section (4): Where this Act requires anything to be done by the registered person and if such thing is done by an e-intermediary authorized by the registered person under sub-section (2), unless the contrary is proved, shall be deemed to have been done with the knowledge and consent of such registered person so that in any proceedings under this Act, the registered person shall be liable as if the thing has been done by him.

    Sub-Section (5): Where an e-intermediary, authorized by a registered person under sub-section (2) to act on his behalf, knowingly or willfully submits a false or incorrect information or document or declaration with an intent to avoid payment of tax due or any part thereof or claiming a tax credit or a refund that is not due to the registered person, such e-intermediary shall be jointly and severally responsible for recovery of the amount of tax short paid or the amount refunded in excess as a result of such incorrect or false information or document or declaration, without prejudice to any other action that may be taken against him under the relevant provisions of the law.

    Sub-Section (6): The Board may, by notification in the official Gazette, prescribe rules for the conduct and transaction of business of e- intermediaries, including their appointment, suspension and cancellation of appointment, subject to such conditions as specified therein.

    Section 53: Estate of deceased person

    The tax liability of a deceased registered person under the Act shall be the first charge on his estate in the hands of his successors.

    Section 54: Estate in bankruptcy

    Sub-Section (1): If a registered person is declared bankrupt, the tax liability under this Act shall pass on to the estate in bankruptcy if it continues to operate the business.

    Sub-Section (2): If tax liability is incurred by an estate in bankruptcy, the tax is deemed to be a current expenditure in the operations of the estate in bankruptcy and shall be paid before the claims preferred by other creditors are settled.

  • Sales Tax Act 1990: ownership transfer of taxable activity

    Sales Tax Act 1990: ownership transfer of taxable activity

    KARACHI: The sales tax law has explained application of sales tax on taxable activity or transfer of ownership.

    According to updated Sales Tax Act, 1990 issued by Federal Board of Revenue (FBR) the law explained the sales of taxable activity or transfer of ownership.

    Section 49: Sales of taxable activity or transfer of ownership

    Sub-Section (1): In case of termination of taxable activity or part thereof or its sale or transfer of ownership to a non-registered person, the possession of taxable goods or part thereof by the registered person shall be deemed to be a taxable supply and the registered person shall be required to account for and pay the tax on the taxable goods held by him:

    Provided that if the tax payable by such registered person remains unpaid, the amount of unpaid tax shall be the first charge on the assets of the business and shall be payable by the transferee of business.

    (2) In the case of sale or transfer of ownership of a taxable activity or part thereof to another registered person as an ongoing concern, the taxable goods or part thereof shall be transferred to the new owner through a zero-rated invoice and the sales tax chargeable thereon shall be accounted for and paid by the registered person to whom such taxable activity or part thereof is transferred.

  • Sales Tax Act 1990: Vast recovery powers of IR officers

    Sales Tax Act 1990: Vast recovery powers of IR officers

    KARACHI: The officers of Inland Revenue have vast powers under sales tax laws to recover outstanding amount from taxpayers.

    Section 48 of updated Sales Tax Act, 1990 issued by Federal Board of Revenue (FBR) explained the powers of IR officers for recovery of outstanding amount from taxpayers.

    Section 48: Recovery of arrears of tax.

    Sub-Section (1): Subject to sub-section (1A), 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;

    (c) 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;

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

    (e) 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.

    Sub-Section (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.

    Sub-Section (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.