Professional Documents
Culture Documents
On Scope and Payment of Tax
On Scope and Payment of Tax
Sales Tax
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THIRD SCHEDULE
ST is charged @ 17% (or at a reduced rate as specified in 8th Schedule) in respect of goods falling under
this category on the recommended retail price which shall be legibly printed on the label etc. along
with the amount of ST. After charging / paying such ST, the same amount of ST will be charged on
subsequent supply.
THIRD SCHEDULE
House gas appliances, including cooking range, ovens, geysers and gas heaters
Foam products including spring mattresses for house hold use.
Paint, distempers, enamels etc. sold in retail packing.
Lubricants oils, brake fluid etc. sold in retailed packing.
Auto parts in retailed packing, storage batteries, tyres and tubes excluding sold to automotive
manufacturer or assemblers.
Motor cycles and auto rickshaws
Biscuits in retail packing with brand name
Tiles
Note to Student:
Further tax is not applicable on 3rd schedule items.
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Goods falling under this category are chargeable to ST at 0%. It means that their output tax is 0%
however, their corresponding purchases may not necessarily zero rates and therefore, input tax
would be suffered which is reclaimable as input tax.
Export goods fall under this category other than the following:
- Export to any country as notified by the Federal Government [Examples are: certain specified goods
vide (i) SRO 1232 dated 1.12.1990 for export to Afghanistan, Iran or China; and (ii) SRO 190 data
02.04.2002 export to Afghanistan by land route]
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No output tax shall be charged and collected on both zero rated and exempt supplies but input tax,
if leviable, can be reclaimed only in respect of zero rated supplies.
Serial 09 of the 5th Schedule specially provides that export of exempt goods by a manufacturer shall
be zero rated. Therefore input tax paid, if any, can be re-claimed.
Supply of raw material and components for further manufacture of goods in EPZ.
Supply of locally produced plant, machinery and equipment in EPZ subject to certain conditions
including that the purchaser in EPZ shall submit an indemnity bond that the machinery shall not be
sold or otherwise removed from EPZ without permission form commissioner.
Import or supplies made to Gwadar Special Economic Zone excluding vehicles [vehicles imported by
china Overseas Port Holding Company Ltd and its operating companies for use Gawadar are exempt
for a period of 23 year – Clause 100C Part I 6th Schedule.
Supply to exporters under Duty and Tax Remission Rule 2001 (DTRE) – refer specific issues area.
Supply of Store and provisions for consumption abroad conveyance proceeding outside Pakistan e.g.
international flight or ship [However, items used in the port areas e.g. welding electrodes are not
the items of such conveyance and therefore cannot be zero rate – instructions 33 of 2002.
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Other items subject to certain conditions including bicycles, pencils, pens etc.
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
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Where a registered person has issued a tax invoice and the tax return or tax invoice
need to be modified as a result of:
cancellation of supply;
return of goods;
change in the nature of supply;
change in the value of supply; or
any other such event
within 180 days then the registered person may issue a debit / credit note indicating
specified information and make adjustment accordingly. [period 180 days may be
extended for special reason]
Note:
A non-registered person cannot charge sales tax to his customers and is not entitled to issue a tax
invoice. A person who has purchased goods from such person cannot claim the credit/refund of
input tax because he has not paid any sales tax on purchases.
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These schedules are given at the end of the Sales Tax portion of the book.
Further, certain statutory Regulatory Orders (SROs) also contain higher or lower tax rates or
special rates and mechanism for sales tax for specified goods or persons.
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-With following details
Invoice value (converted into Pak Rupees) 1,800,000
Customs duty 450,000
Federal excise duty 75,000
Value determined 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
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Answer:
Output tax:
Sales to registered person 12,000,000 x 17% 2,040,000
Sales to non-registered persons 2,100,000 x (17% + 3%) [N-1] 420,000
Exports (3,000,000 x 0%) [N-2] Nil
Total output tax 2,040,000
Less: Input tax allowed [N-3] 2,129,250
Net tax liability 330,750
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 Exports are zero-rated supplies so these are charged to tax at the rate of zero percent.
N-3 Total input tax
Purchases from registered persons (9,750,000 x 17%) 1,657,500
Imports (2,775,000 x 17%) [N-4] 471,750
Total 2,129,250
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Debit and Credit Note and Destruction of goods: Chapter III of the Sales Tax Rules 2006
(a) Where a registered person has issued a tax invoice and the tax return or tax invoice needs to be
modified as a result of:
o Cancellation of supply;
o Return of goods;
o Change in the nature of supply;
o Change in the value of supply; or
o Any other such even.
Within 180 days then the registered person may issue a debit / credit note indication specified
information and make adjustments accordingly. [Period of 180 days may be extended for any special
reason].
Notes For Students:
(a) Where tax liability increases as a result of issuance of debit note then the time limit of 180 days
shall not apply.
(b) Where a registered person has deposited tax on advance against supply then the time limit for
the issuance of debit or credit note shall not apply – ST General Order 1 to 2006.
EXAMPLE:
Mr. A, a registered person, supplied goods of Rs. 100,000 to Mr. B who is also a registered person and
received Rs. 117,000 from Mr. B (including sales tax of Rs. 17,000). Goods returned to Mr. A. Mr. B will
now issue a debit note.
Mr. A: Mr. A has already received Rs. 17,000 from Mr. B and paid to FBR as his output tax. Now he will
pay back Rs. 17,000 to Mr. B and reclaim this amount from FBR.
In the Case, Mr. A is allowed to deduct Rs. 17,000 from his output tax.
Mr. B: Mr. B has already paid Rs. 17,000 to Mr. A and reclaimed this amount from FBR as his input tax.
Now he will receive Rs. 17,000 from Mr. A and he is required to pay the said amount to FBR.
In this case, Mr. B is required to deduct Rs. 17,000 from his input tax.
(b) The debit / credit note shall show the following particulars:
i. Name and NTN of the recipient and the supplier
ii. Number and date of the original sales tax invoice including quantity, value and the amount of sales
tax
iii. The reason of issuance of the note
iv. Signature and seal of the authorized person issuing the note
v. Quantity being returned or the supply of which has been cancelled (in case of return of goods or
cancellation of supply)
vi. Original, revised and difference in the value and sales tax (in case of change of value)
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(c) Where the buyer and supplier both are registered persons and sales tax liability is reduced as
a consequence of credit note then the adjustment is allowed only where the other party
accepts the credit note by issuing corresponding debit note.
However, if a corresponding debit note is not issued by the other party then provisional
adjustment would be allowed to the registered person by the automated system of FBR and he
would be advised by the FBR to contact and persuade the other party to issue corresponding debit
note. If it is not done then input tax allowed earlier provisionally would be adjustment or
recovered.
(d) If the other party is unregistered then adjustment shall be made only by the registered person
on the basis of credit / debit note issued by him.
(e) Where such goods are subsequently supplied then sales tax shall be charged in the normal
manner.
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Withholding Sales Tax – section 3(7), 11th Schedule and rules 150ZZH to 150ZZK of the Sales
Tax Rules 2006.
Purchases of taxable goods
These provisions are applicable for the following in the capacity of a withholding agent (the
agent):
- Federal and provincial government department;
- Autonomous bodies;
- Public sector organizations;
- Companies as defined in the Income Tax Ordinance;
- Registered person making payment on account of advertisement services; and
- Registered person purchasing cane molasses.
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