SCOPE OF SALES TAX

INTRODUCTION

Sales Tax is a tax levied by the Federal Government under the Sales Tax Act (1990), on sale
and supply of goods and services and on the goods imported into Pakistan.

RELEVANT PROVISION

Section.3 of Sales Tax Act, 1990

SALES TAX DEFINED U/S.2 (29-A)

“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;

CLASSIFICATION OF SALES TAX

Input Tax: It is the amount paid by the registered person on business purchases and imports.

Output Tax: It is the total amount of sales tax charged at current rate of sales tax on taxable
sales made during the month.

SCOPE OF SALES TAX-----U/S.3

Sales Tax applies to the following:

Goods: All goods are taxable except those that have been exempted under section
13 of the Sales Tax Act, 1990.

Goods include---every kind of movable property other than actionable claims, money,
stocks, shares and securities. See Section.2 (12)

Services: The following services have been brought under the sales tax regime through
respective Provincial Ordinances and Islamabad Capital Territory Ordinance. Any
person providing or rendering the following services should register with the sales tax
department and pay sales tax.

Services Provided or rendered by

a) Hotels,

b) Marriage Halls,

c) Lawns,

d) Clubs, and

e) Caterers.

Advertisements on Television and Radio

Exception

a) Advertisement Sponsored by Government for Health Education;

 b) Public Service Message

Services provided or rendered by persons authorized to transact business on behalf of

others;

Exception: Services on which Federal Excise duty is collected in the sales tax mode.
These are:

a) Telecommunication services,

b) Travel by air or rail ( A/C, 1st class only); and

c) Carriage of goods by air

Imports into Pakistan: All goods imported into Pakistan are liable to sales tax at the time
of import, except goods specifically exempted under section 13 as mentioned in Sixth
Schedule to the Act.

CONCLUSION

REGISTRATION FOR TAX PAYMENT

1. INTRODUCTION

2. RELEVANT PROVISIONS

 Section. 14, 21 of Sales Tax Act, 1990

 Rule. 4,5,6 of Sales Tax Rules, 2006

3. DEFINITION OF REGISTERED PERSON U/S.2 (25)

“Registered Person” means a person who is registered or is liable to be registered under

this Act

4. WHO IS TO BE REGISTERED

a) All Importers

b) All Wholesalers (including Dealers) and Distributers

c) Manufacturers not falling in cottage industry.

d) Retailers (having value of supplies of over 5 million rupees, in any tax period
during the last 12 months).

e) A person required under any Provincial or Federal Law to be registered

Examples: Hotels, Clubs, Customs agents, etc.

f) Persons making zero-rated supplies, including commercial exporter who

intends to obtain sales tax refund against his zero rated supplies.

g) A person who is required to be registered by virtue of aforesaid criteria, but still

avoids registration, can be compulsorily registered by the department, after
proper enquiry, under sub rule 1 of Rule 6 of Sales Tax Rules, 2006.

5. CLASSIFICATIONS OF REGISTRATION

 Voluntary Registration U/S.18

 Compulsory Registration U/S.19

6. PROCEDURE OF REGISTRATION

a) Application:

The application may be submitted electronically on Form STR-1 as well as either

through post or courier services to Central Registration Office (CRO).

Application can also be sent to Local Registration Office (LRO) in the form of
hard copy.

The LRO after proper scrutiny of documents and necessary editing of the
application and particulars electronically forwards the application to CRO.

b) Forms to be duly Filled

All the columns of the Forms have to be duly filled in as per instructions given
with the Form.

c) Issuance of Registration Certificate U/S.17

After verification, the Central Registration Office will issue a Registration

Certificate bearing registration number and mail the same to the Registered
Person, on a prescribed Form (STR-5).

7. WHERE A PERSON IS TO BE REGISTERED

 a) A corporate person (listed/ unlisted public company, private limited company)
has to be registered under the Collectorate where the registered office of the
business is located.

b) A non-corporate person is to be registered under the collectorate, where the

business is actually carried on.

c) In case of non-corporate person having single manufacturing unit and the

same is located in a different place than the business premises, in the
Collectorate having jurisdiction over the manufacturing unit.

8. CHANGE IN PARTICULARS OF REGISTRATION U/S.20

In case there is a change in the name address, or other particulars as stated in the
registration certificate, the registered person shall notify the change in the
prescribed form STR-2 to the CRO within fourteen days of such change.

The change in the business category shall be allowed after LRO has verified the
manufacturing facility and confirmed the status as industrial consumer of the
electricity.

9. TRANSFER OF REGISTRATION

In case a registered person intends to shift his business activity from the jurisdiction
of one Collectorate, to another Collectorate, he shall apply to the CRO for transfer
of his registration, along with form STR-2.

The return for the tax period in which the registration is transferred shall be filed in
the Collectorate from where the registration is transferred.

10. REVISED REGISTRATION CERTIFICATE

In case of multiple registrations, the registered person shall apply on Form STR-1 for
single registration to the CRO which after ascertaining tax liabilities from concerned
Collectorate shall issue revised registration certificate in which previous registration
number shall be merged.

11. DE_REGISTRATION U/S.21

A Registered Person Can be De-Registered

 Who ceases to carry on the business, or

 Whose supplies become exempt from sales tax, or

 Whose turnover becomes less than the threshold level

12. CONCLUSION

FILLING OF TAX RETURN

1. INTRODUCTION

A Sales Tax return is the taxpayer’s document of declaration through which taxpayer not
only furnishes the details of transactions during a tax period but also deposits his Sales Tax
liability.

2. RELEVANT PROVISIONS

 Section.26 through 29, 33 of Sales Tax Act, 1990

3. RETURN------DEFINED U/S.2 (29)

“Return” means any return required to be furnished under Chapter-V of this Act;
4. FILLING OF TAX RETURN

a) Every Registered Person Shall furnishes not later than the due date a true and
correct return.

b) Every Registered Person shall require furnishing such return in the manner
prescribed by the Board

c) Return Must Indicating the Purchases and Supplies made during a tax period

5. CLASSIFICATION OF TAX RETURNS

Monthly: A Registered Person is required to file Monthly Return by the 15th day of the month
following the period in which the supplies were made.

Quarterly: The importer, who imports taxable goods for business activity other than
industrial use, is required to file Return on Quarterly basis.

Annually: A private or public, Ltd Company is to file annual Sales Tax return, for a financial
year by the 30th September of the following financial year.

6. ELECTRONIC FILLING OF TAX RETURN

Facility of Electronic filing of Sales Tax return has also been made available to the following
categories of registered persons.

a) the registered persons falling in the jurisdiction of the Large Taxpayers Units, Karachi
and, Lahore

b) the private and public Ltd companies registered in any Collectorate of Sales Tax

c) Other taxpayers who may like to opt for electronic filing of sales tax returns.

7. FINAL RETURN U/S.28

If a person applies for de-registration in terms of section.21, he shall, before de-registration,

furnish a final return to the collector

8. RETURN FILLING BY REPRESENTATIVE U/S.29

A return purporting to be made on behalf of a person by his duly authorized representative

shall be deemed to have been made by such person or under his authority

9. PENALTIES

For Failure to file tax Return U/S.33

Where any person fails to furnish a return within the due date such person shall pay a
penalty of Rs5000/- (Provided that in case a person files a return within 15 days of the due
date, he shall pay a penalty of one hundred rupees for each day of default).

Default Surcharge U/S.34

If a registered person fails to deposit the correct amount of tax for two consecutive months
he/she will be deemed to have committed a tax fraud for which the penalty is Rs.10,000/-
or five percent of the amount of tax involved, whichever is higher, besides prosecution.

Exception Provided U/S.34-A

Federal Government may by Notification in official Gazette or Central Board of Revenue

by Special Order Published in Gazette for reasons to be recorded in writing, exempt any
person or class of persons from payment of the whole or part of the penalty or Default
Surcharge.

10. CONCLUSION
 PAYMENT OF TAX

1. INTRODUCTION

Sales Tax is a tax levied by the Federal Government under the Sales Tax Act (1990), on sale
and supply of goods and services and on the goods imported into Pakistan.

2. RELEVANT PROVISIONS

 Chapter-II Section.4,5,6,7,8-A of Sales Tax Act, 1990

3. SALES TAX-------DEFINED U/S.2 (29-A)

“Sales Tax” means:-

d) the Tax, additional Tax or default surcharge levied under this Act;

e) a fine, penalty or fee imposed or charged under this Act; And

f) any other sum payable under the provisions of this Act or the Rules made
thereunder;

4. SALES TAX RATES

Tax Rate under Table-1 of the SRO 466(1)/2007 dated 27-06-2007

Sales Tax is levied at the rate of 20% on the Import and Supply Seventy items as mentioned
in Table-1

Tax Rate under Table-2 of the SRO 466(1)/2007 dated 27-06-2007

Sales Tax is levied at the rate of 17.5% on the seven items mentioned in Table-2

Tax Rate on Remaining Goods or Services

The remaining goods or services are subject to the rate of 15%, unless they happen to be
exempt from sales tax under the sixth schedule to the Sales Tax Act, 1990.

5. ZERO RATING U/S.4

Zero rated goods are those goods on which the impact of tax paid is offset by
subsequently allowing refund or input adjustment equivalent to the tax already paid.

6. LIABILITY TO PAY THE TAX U/S.3(3)

a) In case of Supply of goods of the person making the supply

b) In case of goods imported into Pakistan, of the person importing the goods

7. TIME & MANNER OF PAYMENT U/S.6

a) Tax in Respect of Goods Imported into Pakistan

Shall be Charged and paid in the same manner and at the same time as if it were
a duty of customs payable under Customs Act,1969

b) Tax in Respect of taxable supplies made during a tax period

Shall be paid by the registered person at the time of filing the return in respect of
that period under chapter-V

c) Tax due on taxable Supplies

Shall be paid by any of the following modes

(1)-through deposit in a bank designated by the board; and

(2)-through such other mode or manner as may be specified by the board

8. CHANGE IN THE RATE OF TAX U/S.5

 If there is a change in the rate of tax

a) A taxable supply made by registered person shall be charged with such rate as is
in force at the time of supply

b) Imported Goods shall be charged with such rate as is in force

On the date on which a goods declaration is presented u/s.79 of Customs Act,

1969

On the date on which goods declaration for clearance of such goods is presented
under section 104 of the Customs Act, 1969

9. JOINT AND SEVERAL LIABILITY OF REGISTERED PERSONS IN SUPPLY CHAIN WHERE TAX UNPAID
U/S.8-A

Where a registered person receiving a taxable supply from another registered person is in
the knowledge or has reasonable suspect that some or all of the tax payable in respect of
supply or any previous or subsequent supply of goods would go unpaid, such person as
well as the person making the taxable supply shall be jointly and severally liable for
payment of such unpaid amount of tax.

10. ADDITIONAL TAX

If a registered person does not pay the tax within the specified time or claims a tax credit
or refund which is not admissible to him, or incorrectly applies the rate of zero percent to
the supplies made by him, he has to pay the additional tad at the following rates:

However, in case of tax fraud, the rate of additional tax shall be two percent per month.

11. CONCLUSION

TAX INVOICE

1. INTRODUCTION

In terms of section 23 of the Sales Tax Act, 1990 a registered person must provide a sales
tax invoice for all taxable supplies.

2. RELEVANT PROVISIONS

Section.23 of Sales Tax Act, 1990

3. SALES TAX-------DEFINED U/S.2 (29-A)

“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;

4. SALES TAX INVOICE----DEFINED U/S.2 (40)

“Tax invoice” means a document required to be issued under section 23

5. TAX INVOICE CONTAIN FOLLOWING INFORMATION

 a serial number

 name, address & registration number of the supplier;

 name, address & registration number of the buyer;

 date of issue of invoice;

  description / quantity of goods;

 value, exclusive of tax;

 amount of sales tax; and

 the rate of discount, if offered;

 Value inclusive of tax.

6. WHO IS UNDER AN OBLIGATION TO ISSUE TAX INVOICE

 A Registered Person

 Person Paying Turnover Tax

 Person Paying Retail Tax

7. POWER OF REVENUE BOARD TO MODIFY INVOICES FOR CLASSES OF PERSON

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

8. COMPOSITE INVOICE

If more than one type of goods or services such as zero rated, exempt and taxable is
included in the invoice, it must show the quantity, the amount payable, the rate of sales
tax and the amount of tax for each type.

9. ELECTRONIC INVOICING BETWEEN BUYERS & SELLERS

 Every registered person who wishes to use electronic invoicing system shall seek
prior authorization in writing, from the concerned collector, before issuing
electronic invoices.

 The registered person shall issue an electronic sale tax invoice for every taxable
supply made by him, containing such information as required under section 23 of
the Act.

 The registered person shall retain the record and document for a period of five
years on electronic media.

 A sales tax invoice may be generated and transmitted electronically where the
authenticity of the origin and integrity of the invoice data are guaranteed by
means of either an advanced electronic signature or electronic data interchange
or by any other means approved by the collector.

 The registered person shall simultaneously transmit a copy of all such electronically
issued invoices to the Collector of Sales Tax.

 Same shall apply to the buyer who receives electronic invoices from the registered
supplier.

10. CONCLUSION

SALES TAX REFUND

1. INTRODUCTION
2. RELEVANT PROVISIONS

Section.10, 66-67 of Sales Tax Act, 1990

3. SALES TAX-------DEFINED U/S.2 (29-A)

“Sales Tax” means:-

d) the Tax, additional Tax or default surcharge levied under this Act;

e) a fine, penalty or fee imposed or charged under this Act; And

f) any other sum payable under the provisions of this Act or the Rules made thereunder;

4. WHO CAN CLAIM REFUND

Refund of sales tax paid as input tax can be Claimed by Registered Persons

5. SITUATIONS WHERE REFUND CAN BE CLAIMED

 Registered manufacturer-cum-exporters and commercial exporters who zero rate

all or part of their supplies under section 4 of the Act;

 Registered persons who acquire tax paid inputs for use thereof in the manufacture
of goods chargeable to sales tax at the rate of zero percent under the Act or a
notification issued there-under.

 Registered persons claiming refund of the excess amount of input tax which could
not be consumed within three months;

 Registered persons who acquire tax paid inputs used in the export of goods, local
supply of which is exempt under the Act or any notification issued there-under.

 Refund can also be claimed if an amount of sales tax is paid inadvertently or by

mistake.

 Refund may also be claimed if an amount is paid on demand of the department,

but subsequently the demand is set aside by any competent authority, Tribunal or
Court.

6. REFUND TO BE CLAIMED WITHIN ONE YEAR U/S.66

No refund of tax claimed to have been paid or over paid through inadvertence, error or
misconstruction shall be allowed, unless the claim is made within one year of the date of
payment.

7. REFUND OF INPUT TAX U/S.10

If the input tax paid by a registered person on taxable purchases made during a tax period
exceeds the output tax on account of zero rated local supplies or export made during
that tax period, the excess amount of input tax shall be refunded to the registered person
not later than forty five days of filing of refund claim in such manner and subject to such
conditions as the board may, by a notification in the official Gazette specify

8. FILING OF REFUND CLAIM

Monthly sales tax return filed by a claimant shall be treated as a refund claim once all the
supportive documents including the requisite data in the format or software has been
received. No refund claim shall be entertained if the claimant fails to furnish the claim on
the prescribed software along with the supportive documents within sixty days of the filing
of return.

9. REQUIRED SUPPORTIVE DOCUMENTS FOR REFUND CLAIMED

I. In Case of Refund Claim in Computer Diskette

 Input tax invoices or as the case may be, goods declaration for import in respect
of which refund is being claimed;
  Output tax invoices and summary of invoices for local zero rated goods.

 goods declaration for export (quadruplicate copy) indicating Mate Receipt

number with date or airway bill or railway receipt or postal receipt besides the
examination report endorsed on the reverse side thereof by the customs officers;
in case of claims by persons other than manufacturer-cum-exporter of goods zero-
rated in a notification issued under section 4 of the Act.

II. In Case of Refund Claim Under Section.66

the claimant shall submit an application for refund indicating his name, address,
registration number, the amount of sales tax refund claimed and reasons for
seeking such refund along-with following documents, namely:---

 Input tax invoices in respect of which refund is claimed;

 Proof of payment of input tax claimed as refund; and

 Copy of the relevant order on the basis of which refund is claimed.

The refund claimed under section 66 of the Act shall be sanctioned after
Brochure 015 Sales Tax Guide 10 verifying that no adjustment or refund of input
tax has been claimed earlier and that the goods have been duly accounted
for in the inventory records and the invoices claimed are validated by the
CREST (Computerized Risk – Based Evaluation of Sales Tax) System.

10. REFUND OF AMOUNT OVERPAID

If a registered person has over paid sales tax because of error, he/she may request a
refund of the overpaid amount from the tax authorities within one year after the payment
is made or after the decision or order causing the refund is announced from the end of
the period for which a claim is made.

11. CONCLUSION

Sale Tax Authorities

1. Preliminary Note:

Sale Tax is indirect form of tax which is paid to the government .Such tax is collected by seller from
consumer and then paid to the Government.

2. Relevant Provision:

3. Cross Reference:

Finance Act 2014

4. Sales Tax as Indirect Tax:

Sale tax is an indirect tax as it is paid as following

i. It is paid on sale of goods

ii. It is paid by seller

iii. It is paid to the government

iv. It is charge from Government

v. It is bearded by Government

4. Sale Tax – Statutory Definition:

U/Sec: 29 (A)

“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;

5. Sale tax Authorities:

U/Sec: 30 Sale Tax

i. Chief Commissioner inland revenue

ii. Commissioner of Inland Revenue

iii. Commissioner inland Revenue (Appeal)

iv. Additional Commissioner inland revenue

v. Deputy Commissioner inland Revenue

vi. Assistant Commissioner inland Revenue

vii. Inland revenue officer

viii. Superintendent Inland revenue

ix. Inspector Inland revenue

x. Directorate General

xi. Directorate General internal audit

xii. Directorate General training and audit

xiii. Directorate of valuation

xiv. Directorate Post clearing audit

6. Appointment of Sale Tax Authorities

The Board of revenue may appoint in relation to any area person or class of person

As sale tax officer.

7. Powers of Sale Tax Authorities:

U/Sec: 31

i. An officer appointed under this Act shall exercise all or any of the powers conferred
upon him

ii.He shall be competent to exercise all powers and discharge all duties conferred upon
any officer subordinate to him

8. Delegation of Powers by Sale Tax Authorities:

U/Sec: 32

The officer to whom any powers are delegated shall not further sub delegate his
powers.

9. Limitations on Powers Of sale tax Authorities:

Sec: 32

By general or special Order Board may impose limitations or conditions on the exercise
of powers and discharge of duties.

Procedure of Appeals

(Sec: 45-48 Sales Tax Act 1990)

1. Appellate Authorities:

Commissioner Appellate Tribunal High Court

2. Appeal To Commissioner

U/Sec: 45 B

A person not satisfied with the order of sale tax department he may file appeal to

Commissioner Inland Revenue appeal.

3. Procedure of Appeal To Commissioner:

U/Sec 45 B

i. Appeal shall be filed within 30 days to commissioner Appeal

ii. Payment of fees of 1000/-

iii. Notice to other Party

iv. Hearing of Parties

v. Satisfaction of commissioner

vi. Passing of Order

vii. Order should be passed within 120 days

4. Appeal to Appellate Tribunal

U/Sec:46

A person aggrieved with order of commissioner inland revenue may file appeal to
appellate tribunal.

5. Procedure of Appeal to Appellate Tribunal:

U/Sec: 46

i. Appeal may be filed within 60 days from the order of Commissioner (Appeal)

ii. Admission of appeal by tribunal

iii. Hearing of Appeal

iv. Disposal Of Appeal

v. Disposal in Manner as Appellate tribunal may think fit

6. Reference to High Court:

U/Sec: 47
A person aggrieved with order of commissioner appellate tribunal may file refrence to
high court.

7. Procedure of Filing Reference:

i. Reference shall be filed within the period of 120 days

ii. It shall state the law which is to be determined

iii. Hearing of Reference

iv. Hearing by special bench of High court

v. Bench shall consist of not less than 2 judges of High Court

vi. Bench shall pass the judgment

vii. Judgment shall be delivered to party

viii. The court may up hold, modify or set aside award of Appellate tribunal

ix. Cost of filing reference shall be the discretion of court