ER-

SCOPE OF TAX
SALES TAX [3(1)
The Sales Tax is charged, levied and paid at the rate of seventeen per cent (17%) of t
value of taxable supplies made by a registered person and of the value of goods import
into Pakisten irespective of their final destination in territories of Pakistan. The sales ta
being an indirect tax, is ultimately shifted towards the ultimate consumers of the goods. T:
in respect of imported goods is paid at the time of clearance of goods from the Custom
authorities. Tax for the taxable goods supplied in Pakistan is paid at the time of filing
"sales tax retum. Under this ca_e tax for a tax period is computed as under:
Output tax XX
Less: Input tax (adjustable against output tax) XXX
Tax payable/ (Refundable) for the tax period XXX
Example: 29.1
Trichmir Limited is a company registered under the Sales Tax Act, 1990. It has the following
transactions during a tax period. Compute its tax liability under the Sales Tax Act.
Purchases from registered persons Rs. 4,500,000
Purchases from non-registered persons 600,000
Import of raw material (value determined for sales tax) 900,000
Sales of goods to registered persons 7,500,000
Answer:
Output tax (Rs. 7,500,000 x 17%) 1,275,000
Less: Input tax:
Purchases from registered person (4,500,000 x 17%) 765,000
Import of goods (900,000 x 17%) 153,000 918.000
Net Tax payable 357.000
Note:A non-registered person cannot charge sales tax to his customers and is not enitedd
to issue a tax invoice. A person who has purchased goods from such person cann
claim the credit/refund of input tax because he has not paid any sales ta on

purchases.
TAX ON SUPPLIES TO NON-REGISTERED PERSONS [3(1A)
Tax
The FBR, with approval of the Federal Minister-in-charge, may [u/s 8(6) of the Sales ons.

Act, 1990] notify the goods which cannot be supplied to non-registered pe hase

Contravention to such directions will lead to inadmissibility of the 'input tax' paid on pur
of such goods.
S y n o p s i s

cope of Tax
[29-473
t hthe
Besides
Resides
e above provision, it is
enacted that a person making taxable
registered
persons charge and pay a further
shall
tax @3% of the supplies to non-
shall be charged in addition to the following taxes value of goods supplied.
This tax
payable under the Sales Tax Act:
Sales tax u/s 3(1) on the value of goods supplied;
Tax on production capacity or on fixed basis u/s 3(1B);
3. Tax on retail prce u/s 3(2) on goods specified in Third
Extra tax u/s 3(5);
Schedule:
5. Tax in lieu of nomal sales tax u/s 3(6); and
6. Zero rating u/s 4.
The Federal Government may notify the taxable
shall not be charged, levied and paid.
supplies in respect of which the further tax

Non-Applicability of Further Tax [SRO 648(1)/2013 dated: 09-07-2013, as modified by

SRO 487(1)y2016 dated 30-06-2016, SRO 585(0)/2017 dated 01-07-2017, SRO 780()/2018
dated 21-06-2018 & SRO692(|/2019 dated
29-06-2019]
Further tax shall not be applicable to the following
goods:
1. Electrical energy supplied to domestic and agricultural consumers.
2. Natural gas Supplied to domestic consumers and CNG stations.
3. Motor spirit, diesel oil, jet fuel, kerosene oil and fuel oil.
Goods sold by retailers to the end consumers.
5. uppty of goods directy to the end consumers including food and beverages,
fertilizers and vehices.
ems falling in the Third Schedule to the Sales Tax Act, 1990.
Second hand worn clothing and other worn articles falling under PCT heading
6309.0000.
Fertlizers.
under Chapter XIof
pplies by steel melters, re-rollers and ship breakers operating
Sales Tax Special Procedures Rules, 2007.
10. Tax Act, 1990.
Pes overed under the Fifth Schedule to the Sales
1 foam products for household us.
of foam and other
pplles or spring mattresses
regulatory bodies
12 madeto Government, semi government
and statutory
13.
13 ScS 1701.9920)
Supply of white crystalline sugar (PCT heading 1701.9910 and
Example: 29.2 compute the
sales tax
From the SUmmary of
transactions during a tax period,
ability of MWs. Abid
OW Rs. 3,000,000

urchase against taxLimited.

invoices
750,000

Murchase gainst commercial invoices 2,250,000

mport of goods
Synopsisof Taxes Sales Tax-Scope of Tax (29-174
Sales to registered persons 6,000,000
Sales to non-registered persons 750,000
Stock in trade 2,250,000
Answer:
Output tax
Sales to registered persons (6,000,000 x 17%) 1,020,000
Sales to non-registered persons: [N=1]
Sales tax (750,000 x 17%) 127,500
Further tax (750,000 x 3%) 22.500 150.000
1,170,000
Less: Input tax allowed [N-2] 892.500
Net Tax liability 277.500
N-1 In case of supplies to a non-registered person there will be charged a further tax
@3% of the value of supplies besides charging tax at the normal rate of sales tax.
N-2 Total input tax
Purchases against tax invoice (3,000,000 x 17%) 510,000
Purchase against commercial invoice [N-3]
Import of goods (2,250,000 x 17%) 382.500
Total input tax 892.500
N-3 Tax involce is issued by a registered
person whereas a commercial invoice is lssued
by a non-reglstered person, who cannot charge the Sales Tax. As the
companyn
not paid sales tax on purchases from
of input tax. non-registered persons, so it cannot daim
diou
SALES TAX RATES
The Federal Government has
specified different rates for different kinds of taxable suppi
made or goods imported. The table
showing the number of various schedules along wu
applicable rates of Sales Tax is given below.
Schedule Number Rate of Sales Tax
First Schedule
Second Schedule (Omitted)
Third Schedule (Omitted)
17% of Retail Price
Fourth Schedule
Fifth Schedule (Omitted)
Zero per cent
Sixth Schedule
Seventh Schedule Exempt from Sales Tax
Eighth Schedule (Omitted)
Speclal Tax Rates for Specified Goods
Ninth Schedule Fixed Tax on Mobile Phones,
Tenth Schedule etc.
Fxed Tax on Manufactures of Bricks
Eleventh Schedule Sales Tax Withholding Rates
Twelfth Schedule Value Addition Tax ales Tax
These schedules are elther disCUssed in this
portion of the book. chapter or glven at the end of the
Synopsis
[29-475)
Further, cetain.
in Statutory Regulatory Orders (SROs) also contain higher or Iower tax
Further
SoeCla
and mechanism for sales tax for specified goods or persons. rates or

TAX ON
IMPORTED GOODs [3(1)(b)
Sales tax on import of taxable goods is detemined and paid at the import stage. Tax rate is
value of goods, which is determined as below:
pplied at the
Customs duty
Value of goods for XXX
Customs duty on goods XXX
Add: Federal excise duty on goods
XXX XXX
Value of goods for sales tax XXX
Example: 29.3
Compute the Sales tax liability of a registered manufacturer who has the following
transactions during the tax period. Rs
Purchases from registered persons 9,750,000
Imports-Withfollowing details
Invoice value (converted into Pak Rupees) 1,800,000
Customs duty 450,000
Federal excise duty 75,000
Value detemined for customs duty 2,250,000
Sales to registered persons 12,000,000
Sales to non-registered persons 2,100,000

Exports 3,000,000
Answer:
Output tax: 2,040,000
12,000,000 x 17%
Sales to registered persons 2,100,000x (17%+3%) [N-1] 420,000
Sales to non-registered persons Nil
Exports (3,000,000 x 0 %) [N-2] 2,460,000
Total output tax 2.129.250
Less: Input tax allowed [N-3] 330.750
Net tax liability
be charged a further tax
non-registered person there will
s eof supplies to a rate of sales tax.
tax at the normal
7 of the value of supplies besides charging of zero percent.
N2
these are charged to tax at the rate
s are zero-rated supplies so
N.a
N3 Total Input tax 1,657,500
(9,750,000 x 17%) 471.750
Purchases from registered persons (2,775,000x 17%) [N-4
2.129,250
Imports
Total
lalue of Imported Goods for Sales Tax 2,250,000

Value for Customs duty 450,000 2.776.000

Customs duty 75.000

Federal excise duty
Synopsiso f T a r e s Sales Tax -

Scope of Tax
[29-477)
GOODS
TAXON GO SPECIFIED IN THIRD SCHEDULE [3(2)(a)]
Taxable
supplies nd import of goods specified in the Third
Taxabiaretail price. Where such supplies or imports Schedule
are also
shall be liable to tax
To
Schedule, ae goods shall be taxable at the rates specified in that specified in the Eigh
twe goods
Schedule instead
SCrate. The law requires that the
general rate. retail price and the amount of sales tax of the
shall be
9lDrominently and indelibly pnnted or embossed by the manufacturer or the importer,
in case of imported goods, on each article, packet, container, etc.

uRetail price" means a price fixed by the manufacturer or importer, inclusive of all charges
nd taxes (other thar sales tax) at which any particular brand or variety of any article should
be sold to the general consumer.
Notes:
1 The Federal Government may, by notification in the official Gazette, exclude any
taxable supply or import from or include any taxable supply or import in the Third
Schedule
2. Third Schedule is reproduced in chapter 35 of this book. Readers may refer the same
in order to have knowledge of the goods appearing therein.
Example: 29.4
Dilbahar Beverages Limited is engaged in the manufacture and supply of fruit juices. During
a tax period it supplied juices worth Rs. 6,000,000. As per nomal business practice, the
company sells the goods at a discount of 25% of the retail price.
Compute the amount of output tax of the person under the Sales Tax Act, 1990.
Answer:
Sales price of the goods Rs. 6,000,000
Discount rate 25% of retail price
elail price [i.e., sales price plus discount allowed] (6.000.000 x 100) Rs. 8,000,000
75
Sales tax (Retail pricex Tax Rate) = 8,000,000 x 1/7o 1.360,000Q
NoE Under this case the manufacturer shall pay the tax on the value at which these goods
are to be sold to the consumers.
mopsis f 1axes
Sales Tax -

Scope of Tax
[29-479
vment
of payment
of ttax
of due shall be the same
Time as specified in section 6 of the Sales
2 Tax Act.

The tax
so paid
so paid shall not be deductible against thee output tax
3
Durchaser orimport of these goods. payable by the
inout tax paid on the
input goods attributable to these
deductible for the tax payable under Ninth Schedule. goods shall not be

5. The FBR may prescribe further mode and manner of

payment of tax due under Ninth
Schedule.

EXTRA TAX 3(5)]

In addidon to any other tax leviable under the Sales Tax Act, 1990, the Federal Government
may levy and collect tax at such extra rate or amount not exceeding 17% of value of such
pods and on such persons as may be specified by the rules. While imposing this tax, the
Federal Govemment shall specify the mode, manner and time of its levy and collection. It
shall also speciy the conditions and limitations applicable in this regard. The extra tax is in
adlition to the standard rate of 17%. It is not adjustable. [8(1)%c)
Lavy of Extra Tax [SRO 509()/2013 as amended by SRO 787(/2013& SRO 693(1Y2019
ExtraTax 5% the total billed amount (excluding ámount of federal taxes) is levied on
Sppes of electric power and natural gas to persons having industrial or commercial
connections with the following conditions:
1. The monthly bill exceeds Rs. 15,000; and
2 The person has either not obtained sales tax registration number or is not on the
Active Taxpayers' List
in the rules shall apply to the
EXTa tax. ,
8rtr manner, conditions and limitations as prescribed
This extra tax shall not be
1.
applicable in case ol.
Supply of natural gas to CNG stations; and
2 electric power to Government, semi-govemment and statutory
reguiatory
p y of
bodies.
Example: 29.5
manufacturing of taxable goods.
saz Manufacturing Compar Limited is engaged in
Followinnaacturing Company
Following are the transactions for the month of December:
. 3,000,000

2.
Supplies to registered manufacturers 4,500,000

3. Supplies to non-registered retailers 2,250,000

Purchases from registered persons 1,500,000

5. Import of raw material 750,000

Misc. manufacturing xpenses
Reoequired: of the company
for the month
of December.

Compute hthee Sales

e
Sales Tax liability
au
 Sales Tax
-

Scope of Tax
Synopsisof Tares 29
Answer:

Output tax 3,000,000 x 17%

Sales to registered persons
Sales to non-registered person
4,500,000x (17% +3%) 51000
[N-1) 90,
Total 141006
Less input tax:
Purchases from registered persons
(2,250,000 x 17%) 382,500
Import of raw material
(1,500,000 x 17%) 255.000 63750
Tax liability for the tax period
will be
T1250
non-registered person there
of supplies to a charged a further a .

N-1 In case
besides charging tax at the normal rate of salestar
@3% of the value of supplies
Example: 29.6
A manufacturer, who is making taxable supplies, has the following transactions during a ta
period:
Purchases from registered persons Rs. 600,000
Purchases from non-registered persons 200,000
200,000
Manufacturing and other costs
Sales to registered persons 1,100,00
Sales to non-registered persons 500,000
400,000
Sales of exempted supplies
Sales tax on electricity bills paid to WAPDA 15,000

Required: Compute tax liability under the Sales Tax Act.

Answer:
Output tax 187,000
Sales to registered persons 1,100,000 x 17% 100,000
Sales to non-registered person 500,000 x (17% + 3%) [N-1]
Sales of exempted goods (400,000)
287,000
Total 93.600

Less input tax allowed [N-2

19340
Net tax payable
tax
ta
further
N-1 In case of supplies to a
non-registered a
person there will be charge
charged
sales i
@3% of the value of supplies besides rate of
charging tax at the normal rate or
sa
N-2 Input Tax Allowed:
Total input tax:
Purchases from registered persons (600,000 x 17%) 102,000
Purchases from non-registered persons [N-3]
Input tax paid to WAPDA [N-4] 15.000
117.000
Input tax allowed:
(Total input tax x Taxable supplies) Total
supplies
(117,000x 1,600,000)+2,000,000 =
93.600
 Dales Tax
S n o p s i s . o fT a x e s

Scope
cope of
of Tax
T
[29-481]
Note:
hen a registered person is
making both taxable as well as
NOthan credit of input tax is allowed in respect of taxable exempt supplies,
computed proportionately. supplies only. Amount is
Ae non-registered
N-3 As non-registere
a person cannot charge the sales tax on supplies made by him, so
cannot
stomer aim credit of input tax.
his
f atax
N-4 Input x Daid to WAPDA is available as credit against output tax liability of a
the
ristered person
reg if the electricity is being consumed for manufacturing such goods
which are subject to the sales tax.