Sales Tax 360 Degree Question for March 2024

Good Luck Pakistan Limited (GLPL), a manufacturer of home appliances, foods, beverages, and
other items, is registered under Sales Tax Act 1990. The following information has been extracted
from the records for the month of January 2024:

Rupees
Sales
Supplies to Registered Person 40,000,000
Supplies to Unregistered Person 10,000,000
Exempt Supplies 1,000,000
Supplies to retailers 800,000
Zero-rated Supplies 20,000,000
Purchases
Registered person 30,000,000
Unregistered person 1,000,000
Exempt supplies 500,000

1. Supplies to registered persons includes:

a. Goods amounting to Rs. 125,000 sold to “Lahore the Pawa Akthar Law” (LPAL) on 15
January 2024.LPAL started business in December 2024 and filed an application for
registration under the Sales Tax Rules 2006 on 5th January 2024. However, no sales
tax registration number was issued till 31 January 2024. (Will be treated as supplies to
unregistered)
b. Free sample distributed to registered customers during the month Rs 550,000. (No
adjustment required)
c. Goods having a market value of Rs. 400,000 were supplied to Sheeda Limited, an
associated company, for Rs. 100,000. (Diff will added to supplies)
d. A special discount of 40% was offered to one of registered customer. Discounted price
of supplies was Rs 285,000. (Gross up amount will be treated as supply, and discounted
amount will be deducted)
e. Goods supplied to Moye Moye Limited for Rs 525,000 during the month of January
2024. As Moye Moye paid the amount early Rs 25,000 was offered as settlement
discount which is inconformity with trade norm. (No adjustment is required as trade
discount is not allowed in sales tax)
2. Purchases from registered persons includes:
a. Purchase two air-conditioners for Rs. 300,000 installed in the new marketing office.
(Input tax not allowed)

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 b. An invoice of Rs. 200,000 dated 22 January 2024 issued by ATC. However, ATC was
blacklisted by the Commissioner on 28 January 2024. (input disallowed)
c. An amount of Rs. 1,200,000 paid for purchase of raw material. However, only 60% of
the goods were supplied during Jan 2024; sales tax invoiced was received for total
amount. (40% will be deducted)
d. An amount of Rs.1,500,000 paid for purchase of raw material. Only 20% of the goods
were supplied during Jan 2024, for which the supplier issued sales tax invoices. (No
adjustment is required as Sales tax invoice is issued only for 20%).
e. Goods worth Rs. 250,000 purchased in cash. (Input not allowed)
f. Goods worth Rs. 400,000 against which the CREST has indicated a discrepancy.
g. Purchase of building material for Rs 1,200,000. (Input not allowed)
h. Invoice of Rs 125,000 is declared as a fake invoice by CREST. (Input tax not allowed)
i. Goods worth Rs. 75,000 purchased from Imran Traders. The supplier did not declare
the sale of these goods in its tax return for the month of January 2024. Full payment
through the banking channel has been paid. (Input tax not allowed)
j. Materials worth Rs. 296,000 were exclusively used for manufacturing exempt
supplies. (Input tax not allowed)
k. Paint for Rs. 500,000, of which 20% is used in taxable supplies, and 80% is used in
factory buildings. (80% will be disallowed)
3. Supplies to Unregistered persons include:
a. Sales of Rs. 250,000 to end consumers. (Further tax @ 4% will not be charged)
b. Supplies to cottage industries Rs. 475,000. (Further tax @ 4% will not be charged)
4. Goods worth 2,000,000 were auctioned by the bank in connection with loan recovery as
the bank has charge over these goods. (Treated as supply).
5. Advances of Rs.1,000,000 received against taxable goods to be supplied in March 2024.
(Not treated as supply due to time of supply def. As the phrase include is not used)
6. Supply of 3rd Schedule items to different registered customers included in supplies Rs
1,250,000. The retail price of these printed-on products is Rs 1,500,000. (Diff will be added
in supplies at Retail price)
7. Sales tax credit brought forward from December 2022 amounted to Rs. 250,000. This
amount was inclusive of an input tax of Rs. 100,000 paid on a chemical that could not be
used before the expiry date and was, consequently, destroyed in Jan 2024. (b/f amount
will be adjusted by Rs. 100,000).
8. Goods worth Rs. 325,000 are made available to the registered customers but will be
delivered after 31st Jan 2024. No payment was received against these goods. (Added to
supplies as phrase includes not used- Time of Supply)

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9. Certain goods, having a value of Rs. 375,000, were destroyed after following the due
process under the Sales Tax Rules, 2006. Input tax on these goods was claimed in
November 2022. (Input tax will be disallowed).
10. Three Missing Invoices which could not be claimed as input tax during the relevant period
were found in Jan 2024. Invoice No. 1122 for Rs 230,000 relates to June 2023, and Invoice
No. 3132 for Rs 425,000 relates to July 2023. Third Invoice No. 7576 for Rs 250,000 relate
to November 2023, which was paid in cash during December 2022. (Only the July invoice
could be claimed)
11. Goods worth Rs.425,000 were sold under a hire purchase agreement having five equal
monthly installments of Rs 100,000 each. The agreement was signed on 31st January
2024, but the first installment will be received on 4th February 2024. Goods will be
delivered after payment of the first installment. (Rs. 425,000 recorded as supplies as
phrase includes not used- Time of supply)
12. Sales return of Rs. 520,000 against proper Debit & credit notes. (Deducted from supplies)
13. Miscellaneous supplies worth Rs. 2,000,000 were supplied to diplomats, diplomatic
missions, privileged persons, and organizations. (Added to zero-rated supplies)
14. Taxable goods worth Rs 250,000 were donated to charitable organizations registered with
FBR. (Treated as supply)
15. Electric cables purchased from the registered person for Rs 1,400,000. One-fourth of
cables are used in making taxable supplies, and the remaining is used in building. (1/4 will
be added in purchases as the phrase includes is not used)
16. Supplies of raw materials, components, and goods worth Rs 1,500,000 to manufacturer
of goods in the Export Processing Zone. (Added to zero-rated supplies)
17. New plant was purchased on 15th January 2024 for Rs. 2,500,000. Production from this
plant may be started in March 2024. (Input will be claimed in Jan 2024 through Fixed
Assets)
18. Taxable goods worth Rs. 275,000 used in factory building. (Will be treated as supply)
19. Credit purchases of taxable supplies of Rs 150,000 could not only be paid within 180 days,
completed on 10th Jan 2024. This payment is still pending. Input tax has been adjusted at
the time of purchase. (Input tax will be disallowed).
20. Electronic cash registered was purchased for Rs. 500,000. (Input will be allowed through
fixed assets).
21. The electricity bill paid in January 2024 includes a sales tax of Rs. 1,000,000. 70% of the
electricity used in factory building and 30 % in office building. (70% will be added in input
tax)
22. Debit note of Rs.450,000 dated 20 Jan 2024 issued to supplier against invoice dated 15th
November 2022. (Purchase return.)

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23. Perishable food items worth Rs. 750,000 having an expiry date are returned on account
of becoming unfit for consumption and are destroyed in accordance with the procedure.
These items were sold 18 months ago. Buyer has issued debit note against these supplies.
(Sales return of food items allowed even after 180 days)
24. Debit note of Rs.500,000 dated 15 Jan 2024 issued by registered customer against invoice
dated 15th March 2022. (Sales return but not allowed after 180 days)
25. GLPL issued a debit note of Rs. 135,000 to one of registered customer to rectify a mistake
in sales invoice. The invoice was initially raised in November 2022. (Issuance of debit note
by seller means increase in sale value. Add in Sales to registered customer)
26. GLPL issued a Credit Note of Rs. 150,000 to one of registered customer to rectify a mistake
in sales invoice. The invoice was initially raised in September 2022. (Issuance of Credit
note by seller means decrease in sale value. Less from Supplies to registered customer)
27. GLPL issued a Credit note of Rs. 50,000 to one of unregistered customer, Lahore the Pawa
Akthar Law; the invoice was initially raised in December 2022. (Issuance of Credit note by
seller to unregistered customer means Sales return by unregistered customer. Less from
Sales to unregistered customer)
28. Debit note of Rs.500,000 dated 22 Jan 2024 issued by supplier against invoice dated 15th
November 2022. (Increase in value of Purchase. Add in purchases)
29. Credit Note of Rs.200,000 dated 25 Jan 2024 issued by supplier against invoice dated 25th
November 2022. (Decrease in value of Purchases. Less from purchases)
30. Debit Note of Rs.250,000 dated 20 Jan 2024 issued to supplier against invoice dated 25th
March 2022. (Purchase return but not allowed as after 180 days)
31. Raw material worth Rs 432,000 was donated to some non profit organisation. ( Input tax
will be disallowed. Not to be added in supplies)
32. Raw material worth 575,000 belonging to 9 May Private limited was processed against
processing charges of Rs 75,000 and made available for delivery, however processed
material has not been delivered till 31st January 2024. (Not to be treated as supply as raw
material belonging to other person has not been supplied during tax period)
33. Distribution of free samples of exempt goods worth 500,000 (added to exempt supplies)
34. Free replacement of defective parts costing Rs. 400,000 relating to goods which were sold
under two year warranty. The market value of such parts was Rs. 550,000. (No treatment
as warranty is already tax in original sales)
35. Free replacement of defective parts costing Rs. 200,000 relating to goods which were sold
to new industrial customer without warranty. As a goodwill gesture these are replaced
free of cost. The market value of such parts was Rs. 300,000. (Market value is treated as
supply because not covered under warranty)

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 36. During the month, GLPL paid Punjab Sales Tax worth Rs. 18,500 on franchise services.
Under the Punjab Sales Tax Laws, such tax is not an admissible credit. (Input tax not
allowed but ignore as already not included)
37. Home appliances worth Rs 750,000 sold to end consumers. (treated as sales to
unregistered person but further tax @ 4% will not be charged)
38. Taxable goods worth Rs. 150,000 were used in the business meeting during January 2024.
(treated as supply)
39. Own manufactured appliances worth Rs. 575,000 was installed and used for
manufacturing of taxable supplies. (treated as supply)
40. Purchases from registered person includes goods worth 520,000 and 250,000 which were
exclusively used in manufacturing of exempt and zero rated supplies respectively. (Deduct
from common Input and add as specific input in working 3)
All the above figures are exclusive of sales tax, except where it is specified otherwise. Sales tax is
payable at the rate of 18%.
Required:
In the light of the provisions of the Sales Tax Act, 1990 and Rules made thereunder, compute the
amount of sales tax payable by or refundable to GLPL and input tax to be carried forward, if any,
for the tax period January 2024.

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 Good Luck Pakistan Limited
Computation of sales tax payable / refundable
For the tax period January 2033

Output Tax - W-1 9,945,900

Less Input tax - lower of
Input Tax-W-3 3,655,016
Add b/f from previous month 250,000-100,000 150,000
3,805,016
90 % 0f Output tax 8,951,310 (3,805,016)
Less Input tax on fixed assets - W-3 (371,786)
Add Further tax on supplies to unregistered person @ 4% (w-1.1) 8,600,000 344,000
Tax payable along with return 6,113,098
Input tax c/f to nex tax period -
Input tax refundable against zero rated supplies 1,757,603

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W-1: Calculation of Output Tax Rs.
Supplies to registered person- as per question 40,000,000
Supplies to unregistered person- as per question 10,000,000
Supplies to Retailers/distributor/whole seller 800,000
Add if already not included in supplies/ ignore if already added
Transactions are also referred
1(a) Sales to LPAL will be treated sales to unregistered person for further tax -
1(b) Free sample - treated supply -
1(c) Sales to associated company [400,000 - 100,000] 300,000
1(d) Supplies at special discount [285,000/ 0.6 -285,000] 190,000
1(e) Early settlement discount -
4 Auction by bank to recover loan 2,000,000
5 Advances from customer Rs 1,000,000- Time of supply -
6 Supply of Third Schedule items [1,500,000 - 1,250,000] 250,000
8 Goods made available to customers 325,000
11 Sales under hire purchase agreement 425,000
12 Sales return (520,000)
14 Goods donated to charitable organization 250,000
18 Taxable good used internally 275,000
23 Debit note issued by customer after 180 days but allowed (750,000)
24 Debit note issued by customer after 180 days not allowed -
25 GLPL issued Debit Note- Increase in sales value 135,000
26 GLPL issued Credit Note- Decrease in sales value (150,000)
27 GLPL issued Credit Note to unregistered customer- Sales return (50,000)
34 Free replacement under warranty -
35 Free replacement without warranty 300,000
37 Sales to end consumers 750,000
38 Taxable goods used internally 150,000
39 Supplies 575,000
Net Sales 55,255,000
Sales tax @ 18% 9,945,900

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W - 1.1 Summery of Sales Zero rated Exempt Unregistered
As per question 20,000,000 1,000,000 10,000,000
Transaction
ref
13 1a 2,000,000 125,000
3a (250,000)
3b (475,000)
27 (50,000)
16 & 33 & 37 1,500,000 500,000 (750,000)
23,500,000 1,500,000 8,600,000

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W-2: Calculation of Common Input Tax
Purchases from registered person - as per question 30,000,000
Transaction
Ref
2.a Purchase of air conditions (300,000)
2.b Purchases from ATC- Black listed (200,000)
2.c Purchases not received 1,200,000 x 40% (480,000)
2.d 20% of good received and added in purchases -
2.e Purchases paid in cash (250,000)
2.f Discrepancy by CREST (400,000)
2.g Purchase of building material (1,200,000)
2.h Purchases through fake invoice (125,000)
2.i Purchases which supplier has not declared in return (75,000)
2.j Material exclusively used in exempt supplies (296,000)
2.k Purchase of paint Rs. 500,000 x 80% (400,000)
9 Goods destroyed under rules- Not used part of supply (375,000)
cannot claimed after 6
10 Invoice No 1122 230,000 months -
Invoice No 3132 425,000 Can be claimed 425,000
paid in cash cannot be
Invoice No 576 250,000 claimed -
15 Purchase of electric cables Rs. 1,400,000 x 1/4 350,000
19 Credit purchases not paid in 180 days (150,000)
22 Debit Note issued to supplier (450,000)
28 Debit Note issued by Supplier 500,000
29 Credit Note issued by Supplier (200,000)
30 Debit Note issued to supplier after 180 days -
36 Punjab sales tax not allowed. Ignore as not added -
40 Goods exclusively used in exempt supplies (520,000)
40 Goods exclusively used in zero rated supplies (250,000)
Net Purchases 25,604,000
Sales Tax @ 18% 4,608,720
21 Sales Tax on electricity 70% 700,000
Common Input 5,308,720

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W2.1- Calculation of Common input on plant & machinery
Cost Sales Tax
17 Purchase of plant 2,500,000 450,000
20 Electronic cash register 500,000 90,000
540,000
W-3 Apportionment of Input Common Specific
Tax Turnover Input Input Fixed Assets Total
Taxable Supplies- W-1 55,255,000 3,655,016 - 371,786
Zero-rated Supplies- W1.1 23,500,000 1,554,482 45000 158,121 1,757,603
Exempt Supplies- W1.1 1,500,000 99,222 93600 10,093
Total 80,255,000 5,308,720 540,000
W-2 W-2.1

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