DISCLAIMER: All information has been given in good faith; however, the Readers must see actual text from Officials Websites of the Dept. and Libraries.
FAQs and Practical Illustrations
Questions & Answers and Practical Illustrations
Mr. Ahsan Gillani purchased some goods on credit from a shop keeper. Will he pay the sales tax on credit and value of goods? or Is mark-up on credit sales included in the value of goods being sold to the customers?
It is noted that value of supply (goods) has been defined in clause 46 of the Section 2 of the Sales Tax Act, 1990. Credit and Value of goods are two different things. The sales tax is leviable on the value of goods and it is collected from the end-user. Mr. Ahsan who has purchased some goods on credit from a shopkeeper on credit, he will pay sales tax on the actual value of the goods. He will not pay sales tax on the value of mark-up on credit.
SSupposed, Mr. Ahsan purchased a Pipe on credit.
Value of Pipe Rs.1000
(Excluding sales tax)
Mark up @ 10% on credit Rs.100
Rate of Sales Tax 16% of the value Rs.160
Mr. Ahsan will pay Rs.1260
CBR has also clarified in Sales Tax General Order No. 3/2004 dated 12-06-2004 that on the question as to whether or not the mark up on credit sales be included in the assessable value for the purpose of assessment of sales tax, it is clarified that the mark up on credit salesshould not be taken into account for arriving at the assessable value for the purpose of assessment of sales tax.
ILLUSTRATION OF ZERO RATED SUPPLY
Ms. Zahra Gillani is doing business of exports and local supply. Her annual turnover is Rs.70,00,000. If sales include exports of Rs.20,00,000. Calculate sales tax payable by her for the month of August 2011. Her taxable purchases stands at Rs.1200000/-
Solution
Total sales including exports Rs.70,00,000
Less Exports (Charged as zero rated tax supply) Rs.20,00,000
Local taxable sales Rs.50,00,000
Taxable Purchases. Rs.12,00,000
Sales tax chargeable
Output tax
Local taxable sales Rs.50,00,000 @17% Rs.850,000
Input tax adjustment
Taxable purchases
(Rs.12,00,000 x 17) = Rs.204000
100
Total sales taxfor the month of August 2016 Rs.6,46,000
ILLUSTRATION OF INPUT TAX ADJUSTMENT
Q.1 Ms. Zainab Gillani is engaged in manufacturing water-pumps. She is registered with sales tax as manufacturer. Data regarding her business during July 2016 is given below:
Total local sales made to registered persons are Rs. 60,00,000.
Total taxable purchases Rs.15,00,000.
Calculate sales tax chargeable and payable?
Sales tax chargeable
Output tax
Total local sales to registered person Rs.60,00,000
Sales Tax payable @ 17% on local supply Rs. 10,20,000
Input tax
Sales Tax paid on the purchase of raw material
Taxable purchases / Raw material Rs.15,00,000
Input Tax (Rs. 15,00,000 x 17)=Rs. 2,55,000
100
Input tax adjustment
Sales Tax payable = Output Tax – Input Tax
Sales Tax payable =10,20,000 – 2,55,000 = 7,65,000
Q.2 Mr. Arslan is manufacturing of certain chemicals which are taxable. His total turnover during last 12 months is Rs. 70,00,000 (it also includes Rs. 17,00,000 of zero-rated supplies). Whether Mr. Arslan is liable to be registered or not? If he is liable to be registered, calculate sales tax chargeable to him.
Solutions:-
Mr. Arslan is liable to be registered, because total turnover is more than five million during the last 12 months. Zero-rated supplies will also be considered as mentioned under Section 4 of the Sales Tax Act, 1990.
Total turnover Rs. 70,00,000
Less Zero-rated supplies Rs. 17,00,000
Taxable turnover Rs. 53,00,000
Sales Tax Chargeable
Taxable turnover Rs. 53,00,000 @16%
(In case the manufacture has made all supply to registered persons)
Zero-rated supplies Rs. 17,00,000
Sales Tax on zero-rated supply Rs.17,00,000 x @ 0% Rs. 00.00
Sales Tax on taxable supply Rs.53,00,000 x @ 16% Rs. 8,48,000
Total sales tax chargeable Rs. 8,48,000
Sales Tax paid on raw material will be adjusted.
Supposed if Sales Tax Rs.600000 paid on raw material
Total payable sales tax will be Rs. 2,48,000
Q.3 Mrs. Farah Naz is engaged in export business and her annual turnover is Rs.7 million from export business. Is she liable to be registered or not and if yes, what will be her liability?
Mrs. Farah Naz is not legally bound to get herself registered with Sales Tax Department, because she is engaged in export activities and her supply is zero-rated. However, for availing duty draw back from Customs Department and refund against her input tax from Sales Tax Department, Mrs. Farah Naz should get herself registered with Sales Tax Dept. Because without registration, she cannot get refund from the Sales Tax Dept. She is engaged in export activities and therefore, her liability of Sales Tax stands zero.
Q.4 Mrs. Fozia is engaged in export business and her annual turnover and other data regarding her business is given below:
Total goods exported during the year:
(a) Rs. 2.5 million (b) Rs. 4.5 million (c) Rs. 8.5 million
Local taxable purchases are 1.5 million. Whether Mrs. Fozia is liable to be registered or not?
If she is liable to be registered, calculate sales tax chargeable to her.
Answer:Mrs. Fozia is not liable to registration in Sales Tax Department because she is engaged in export business. But she may get himself registered with sales tax authority to get refund of her input tax paid against her purchases and duty-draw back from Customs Department.
Mrs. Fozia will get refund against her purchases that comes to Rs.240000 against the taxable purchases of Rs.1.50 million subject to Sales Tax rate is 16 per cent.
Export of goods is regulated by Export Policy issued vide Notification SRO 482(I)/2000 dated 11th July, 2000 under section 3(1) of the Import and Export (Control) Act, 1950. The said policy does not lay down any condition on the Exporters. They do not need to be registered with any government department. Exporters are only required to get NTN Certificate from the Income Tax Department. There is no mandatory requirement for the Exporters to get themselves registered with Sales Tax Department, however, if they want to claim input tax adjustment or refund or duty draw back or rebate from the Government, they should be registered with the Sales Tax Department.
No sales tax liability because she is engaged in export business. Being a registered person Mrs. Fozia is entitled to get refund of her input tax paid on purchases.
Q.5 Ms. Zahra Gillani, a manufacturer cum exporter is engaged in export business and her annual turnover and other data regarding her business is given below:
(i) Goods manufactured and locally sold Rs.7 million
(ii) Goods manufactured & exported Rs. 6 million
In the above two questions, in which case she is liable to be registered.
Calculate sales tax chargeable in each case as per data.
In all the above cases a manufacturer-cum-exporter is liable to be registered with sales tax department under the Sales Tax Act, 1990. Manufacturer-cum-exporter means a registered person who has a manufacturing facility, whether owned or leased and makes zero-rated supplies.
Sales Tax Chargeable:
Total goods manufactured locally sales/supply
(Rs. 70,00,000 @15%) Sales Tax: Rs. 10,50000
(b) Total goods manufactured and exported
(Rs. 60,00,000 @ 0%) Sales Tax nil
Sales tax liability because she is engaged in local supply and export business. Being a registered person she is entitled to get refunds of input tax paid on purchases/ raw material. After Adjustment of input tax, she will either pay tax or get refunds. However, in the present case she is to pay sales tax as noted above.
-------
ILLUSTRATION OF INPUT TAX ADJUSTMENT
Ms. Zainab Gillani is engaged in manufacturing water-pumps. She is registered with sales tax as manufacturer. Data regarding his business during January 2011 is given below:
Total local sale made to registered persons is
Rs. 60,00,000.
Total taxable purchases Rs. 15,00,000.
Other tax liability Rs. 1,20,000.
Calculate sales tax chargeable and payable?
Sales Tax chargeable
Output Tax
(Total local sales to registered persons)
(Rs. 60,00,000 @ 16%) Rs. 9,60,000
Input tax adjustment
Taxable purchases
(Rs. 15,00,000 x 16) Rs. 2,40,000
100
Out put tax Rs. 9,60,000 – Input Tax Rs. 2,40,000 = Rs. 7,20,000
Payable sales tax = Rs. 7,20,000
Other tax liability = Rs. 1,20,000
Total sales tax payable = Rs. 8,40,000
ILLUSTRATION OF VALUE ADDITION.
Payment of Sales Tax on value addition.--(1) A commercial importer shall pay sales tax on supplies of imported goods, at the rate specified in sub-section (1) of section 3 of the Act, on a value addition of not less than ten percent, through a challan in triplicate, at the same time as making payment of customs duty and sales tax in the Goods Declaration (GD) for such imported goods, calculated as shown in the Example:
Provided that in case the value addition of such commercial importer during any period in the preceding year was higher than ten percent, he shall pay sales tax on supplies of imported goods on such higher value addition, in the manner specified in this sub-rule.
EXAMPLE
|
(a) |
Value of imported goods determined under section 25 of the Customs Act, 1969 |
=Rs. 100.00 |
|
(b) |
Customs duty e.g. (@20%) |
= Rs. 20.00 |
|
(c) |
Assessed import value ( = a + b ) |
= Rs. 120.00 |
|
(d) |
Sales tax (@16% payable on bill of entry |
= Rs. 19.20 |
|
(e) |
Value of supplies, with value addition of 10% [ = c + ( c x 10 100) ] |
= Rs. 132.00 |
|
(f) |
Value addition on which sales tax is payable (= e – c)
|
= Rs. 12.00 |
|
(g) |
Sales tax on value addition (= f x 16100 ) (payable on treasury challan) |
= Rs. 1.92 |
What do you understand by“value addition”. Calculate the sales tax liability and Sales Tax on value addition?
Value Addition. It means the difference between the assessed import value and the value of supply for which the goods in the same state are supplied, expressed as a percentage over the assessed import value.
Payment of Sales Tax on Value Addition.
An importer shall pay sales tax on supplies of imported goods at the rate of 16%, on a value addition of not less than 10%. While paying the customs duties and other taxes, sales tax on value addition is also paid accordingly. It is common practice in Customs Department, that they deducts Sales Tax on Value Addition alongwith other duties and taxes.
However, since fiscal year 2007, the Government has imposed 2% extra sales tax on imports instead of Sales Tax on value addition.
Output tax
Taxable supplies to registered persons
(Rs. 20,00,000 @ 16%) Rs.3,20,000
Total output tax Rs.3,20,000
Input Tax Adjustment
Taxable imports .
(Rs. 600000 Sales Tax @ 20%) = Rs.120000
Taxable purchases
(Rs. 300000 Sales Tax @ 16%) = Rs.48000
Total Rs.168000
Payable Sales Tax (Output Tax – Input Tax)
(320000 – 168000) Total Sales Tax Rs.152000
Assessed import value +
value addition @ 10%
600000 @ 10% = 60000
Sales tax on value addition
16% (Rs. 60,000 x 16) = Rs.9600
100
Total Sales Tax chargeable Rs.161600
ILLUSTRATIONS OF REFUND.
Mr. Zeshan Gillani is engaged in manufacturing water-pumps. He is registered with sales tax as manufacturer-cum-exporter. Data regarding his business during June, 2011 is given below:
Total export made Rs. 60,00,000.
Local supply Rs. 20,00,000.
Total taxable purchases Rs. 30,00,000.
Determined liability to Sales Tax Rs. 5,000.
Calculate sales tax and refund amount?
Sales tax chargeable on exports
Output tax
(Total export made)
(Rs. 60,00,000 @ 0%) nil
(Local supply)
Rs. 2000000 @ 16% (Output tax) Rs. 320,000
Because his total turnover including
Export is over five million and therefore
He will have to pay sales tax on local supply.
Input tax adjustment
Taxable purchases
(Rs. 3000000 x 16) (Input tax) Rs. 4,80,000
100
Refund (Output Tax- Input Tax) (300000 – 480000) Rs. 1,80,000
Less liability of Sales Tax Dept. Rs. 5,000
Net refundable amount Rs. 1,75,000
QUESTIONS & ANSWERS IN RESPECT OF REFUND.
Q: Which categories of taxpayers can claim refund?
Ans: Refund of sales tax paid as input tax as defined under section 2(14) can be claimed under section 8B of Adjustment of Input Tax or Section 10 of Refund of Input Tax and by the following registered persons in the respective situations:
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.
It is further noted that refund can be claimed under section 66 of the act, if any person mistakenly do not claim the refund of any part of input tax. The higher Court declares the ‘Input tax’ is a sacred trust which the taxpayer shifts to the Government and till its adjustment; it cannot be treated as Government Revenue.
Q: What is the procedure for claiming a refund and what supportive documents are required for refund claim?
Ans: The refund claimant shall submit to the Refund Division of the concerned Collectorate, RTO (Regional Tax Office) or LTU (Large Taxpayer Unit), as the case may be, the refund claim in computer diskette in the prescribed format or software along-with the following documents, namely:-
(a) Input tax invoices or as the case may be, goods declaration for import in respect of which refund is being claimed;
(b) output tax invoices and summary of invoices for local zero rated goods.
(c) 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.
Provided that in case of imports or exports processed through PACCS, submission of goods declaration shall not be required and cases shall be processed by cross-matching of the declarations with the data available in the system.
(d) copy of House and Master bill of lading and airway bill or as the case may be, railway receipt in token or verification of the goods taken out of Pakistan; and
(e) statement of the tax paid inputs, in respect of which refund is claimed by the claimants other than the manufacturers of the goods zero-rated for supplies.
(2) In addition to the documents specified above, a commercial exporter shall submit bank credit advice issued by the concerned bank and copy of the duty drawback order, if issued by the customs authorities.
(3) Where the refund claim is filed under section 66 of the Act, 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:---
(a) input tax invoices in respect of which refund is claimed;
(b) proof of payment of input tax claimed as refund; and
(c) copy of the relevant order on the basis of which refund is claimed.
(d) The refund claimed under section 66 of the Act shall be sanctioned after verification
(e) copy of the relevant order on the basis of which refund is claimed.
(4) The refund claimed under section 66 of the Act shall be sanctioned after 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.
Problems and Solutions
Note: Questions & Answers have been given about Charging Section 3, Refund Sec. 10, Records Sec. 22-25, Return Sec. 26 and Penalty & Additional Tax (Default Surcharge Sec. 33 and 34.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Q: What is Sales Tax and elaborate its Scope?
R: 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. As per constitutional amendments, the right of imposing the sales tax on services has been given to the Provincial Governments. So far Sindh Government has enforced his laws of sales tax imposition on services and its recovery from the registered persons.
Scope of the Tax.
Sales tax applies to the following:
Goods:-
All goods are taxable except those that have been exempted under section 13 of the SalesTax Act, 1990. For sales tax purposes goods include every kind of movable property otherthan actionable claims, money, stocks, shares and securities.
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 hotels, marriage halls, lawns, clubs and caterers.
sponsored by a Government Agency for health education;
Advertisements on Television and Radio excluding advertisements;
public service messages if telecast on television by World Wildlife Funds for Nature or UNICEF.
Services provided or rendered by persons authorized to transact business on behalf of others;(i) custom agents; (ii) ship chandlers; (iii) stevedores.
Courier Services
Beside these services there are three excisable services on which Federal Excise duty is collected in the sales tax mode. These are:
Telecommunication services;
Travel by air or rail ( A/C, 1st class only); and
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.
Q: Do you thinkthere is any sales tax on free of cost samples of medicines.
R: In order to bring a supply within ambit of sales tax, there must be a taxable supply by registered person in consideration of money or kind and sales must be made during course or in furtherance of any taxable activity---Supply of medicines by company “free of cost” without receiving any “Consideration in money or kind “ could not be termed as taxable supply, thus, would not be liable to levy of sales tax. It is noted that there is no sales tax chargeable on the medicines given as free-of-cost as samples to various Doctors or Medical Stores. The FBR has issued Circular No.C.No.19-STT/2002, dated 22-3-2002.
Q: Who is to be registered under Sales Tax Act, 1990 with Sales Tax /Inland Revenue Department?
R:a. All importers
b. All wholesalers (including dealers) and distributors
c. Manufacturers not falling in cottage industry. {Cottage industry is defined as having annual turnover below Rs.5 million and whose annual utility bill (including electricity , gas and telephone) does not exceed rupees six hundred thousand}.
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 for purpose of any duty or tax collected or paid as if it were a levy of sales tax, e.g. service providers like hotels, clubs, caterers, customs agents, ship chandlers, stevedores, courier services etc.
f. Persons making zero-rated supplies, including commercial exporters who intend 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.
Q: What is the Procedure of Registration?
R. 1.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.
2. All the columns of the Forms have to be duly filled in as per instructions given with the Form.
3. 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)Office (CRO) normally verifies the contents from the data available with it, but has an authority to get an enquiry conducted through Local Registration Office, to verify contents of declaration by a person. The CRO may reject the application within fifteen days from the date, the complete application is received in CRO, under intimation to the applicant, specifying the reasons for such rejection.
Q: Where a person is to be registered?
R. A corporate person (listed/ unlisted public company, private limited company) has to be registered under the Collectorate, LTU (Large Taxpayers Units) or RTO (Regional Tax Office) where the registered office of the business is located.
A non-corporate person is to be registered under the Collectorate, LTU or RTO, where the business is actually carried on.
In case of non-corporate person has a 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. A corporate person has the option of transferring his registration to the place of business.
Q: I want to be registered under sales tax law. What documents do I am to furnish alongwith my application for registration?
R. Following information is required to be furnished in the registration form.
Complete business name
Business nature, main / activity or service;
Complete address of Head Office and all business units, godowns, outlets mentioning, phone, fax, e-mail, electricity, gas consumer no. etc.
All Bank account numbers, with name and address.
NTN (National Tax Number)
NIC (National Identity Card Number) of the owner, partners or directors of the business (passport number in case of foreigner).
In case of a company, registration number and date of incorporation.
Every director / member of AOP has to fill in STR – 1 (A) Form.
Date of commencement of business and initial capital employed.
The mode of maintenances of business records should also be mentioned.
Q: I intend to change the address of my business premises. How can I get my registration record amended?
R. 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 and gas distribution companies.
Q. As I have shifted my business to another city, I want to get my sales tax registration transferred to the other respective Regional Tax Office (RTO) having jurisdiction in over my new business address. Please tell me the procedure how to get my registration transferred to another Regional Tax Office (RTO) .
R. In case a registered person intends to shift his business activity from the jurisdiction of one RTO, to another RTO, or as the case may be to an LTU, or he has any other valid reason for such transfer, he shall apply to the CRO for transfer of his registration , along with form STR-2. The CRO may subject to such conditions, limitations or restrictions as it may deem fit to impose, by an order, transfer the registration of a registered person from the jurisdiction of one RTO, to another RTO, or as the case may be to the LTU. The return for the tax period in which the registration is transferred shall be filed in the RTO from where the registration is transferred.
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 RTO/LTU shall issue revised registration certificate in which previous registration number shall be merged.
Q. What is the penalty for not applying for Sales Tax Registration?
R. Any person who is liable to be registered under Section 14 of the Sales Tax and rules made thereunder (i.e. Chapter I, Sales Tax Rules, 2006) do not apply for registration shall have to face the punishment under Section 33 (Chapter VII)of the Sales Tax Act, 1990. The said chapter explains the offences and penalties of various acts of commission and omission. The punishment for not applying sales tax registration has been mentioned against Srl. No.7 of section 33of the Act as given below:-
“Any person who is required to apply for registration under this Act fails to make an application within the specified period shall pay a penalty of ten thousand rupees or five per cent of the amount of tax involved, whichever is higher.
Provided that such person who is required to get himself registered under this Act, fails to get registered within sixty days of the commencement of taxable activity, he shall further be liable, upon conviction of a Special Judge to imprisonment for a term which may extend to three years, or with fine which may extend to an amount equal to the amount or tax involved or with both”.
It is further noted that the Commissioner after inquiry if deems necessary can register any person with RTO/Sales Tax Department under Rule 6 of Sales Tax Rules, 2006 after issuing notice to such person.
Please elaborate the punishment of the Sales Tax registered person who does not notify the changes in nature of taxable activity and particulars of registration.
Section 33 Srl No.4 explains the penalties of offence of not notifying the changes in nature of taxable activity as under:-
Any person who fails to notify the changes of material nature in particulars of registration of taxable activity. Such person shall pay a penalty of five thousand rupees.
Whether a person exclusively deals in import of exempt goods is liable to sales tax registration?
R. A person deals in the import of exempt goods as mentioned in Sixth Schedule is not liable to sales tax registration as clarified by CBR in its letter C.No. 3(62) STP/98/Pt.IV, dated 31st December, 1998. However the importer give the undertaking to the ministry of Commerce that he deals in import of exempt goods and Ministry of Commerce will endorse “valid for the import of only such goods as are exempt from sales tax”.
Q. Mr. Ashiq Hussain Shah is selling Newspapers, Journals and Books. Should he get Sales Tax registration?
R. No, Mr. Ashiq Hussain Shah is not required Sales Tax Registration, because Newspaper, Books, Journals excluding directories all sorts, are exempt as per Sixth Schedule of Sales Tax Act, 1990. However, the persons making or printing such exempt goods are liable to registration.
It has been clarified in CBR’s Letter No.3(2)STP/99, P.T. dated 2nd April,1999 in following words:-
Persons dealing exclusively in “newspapers, books, journals, and periodicals (excluding directories of all sorts)” are not required to be registered under section 14 of the Sales Tax Act, 1990, as aforesaid goods do not constitute taxable supplies being exempt under SI.21 of the Sixth Schedule to the Sales Tax Act, 1990.
However, persons engaged in making supplies of taxable goods (along with the exempt items mentioned above) is required to get themselves registered under the Sales Tax Act,1990, and also to issue the prescribed tax invoices and to file the prescribed Return-cum-Payment Challans. It is pertinent to mention that items like pens, pencils, stationery, calculators, colour boxes, geometries boxes, calendars, posters, exercise books, etc. are not exempt from sales tax.
Q. What do you suggest to importer of newspaper?
R. Newspaper is used in printing newspaper or periodicals etc. are exempt under Sixth Schedule of the Sales Tax Act, 1990. CBR is of the view in its letter No.3(62)STP/97. PT, dated 12th March, 1998. The Board’s point of view is that requirement of registration is not mandatory as newspapers are not engaged in making taxable supplies”
Q. What advice you will give to an Importer about his registration in Sales Tax department? Explains the status of importers who are not conducing any taxable activity at post importation stage.
R. An importer who deals in taxable goods, he should get him registered with Sales Tax Dept. It is clarified by the board in Sales Tax Ruling/Instruction No.14/2003--C.B.R’s Letter C.No.3 (62) STP/1997(Pt-1) dated 27th May, 2003 as under: -
“A question has been raised whether exemption from registration can be accorded to those importers who are not making any taxable supplies of imported goods to any other person in the course of furtherance of taxable activity subject to tax under section 3 of the Sales Tax Act, 1990.
The Central Board of Revenue has examined the matter in consultation with the Law & Justice Division. It is clarified that in terms of section 3 read with section 2(33), 2(41) and 2(35) of the Sales Tax Act, 1990 importers who are engaged in importing goods taxable at the import stage are required to be registered under section 14(1)(iii) of the Sales Tax Act,1990 irrespective of the fact whether or not they are conducing any taxable activity at post importation stage. Thus such importers of taxable goods who are importing/purchasing goods not for further sale or business or non-business use are required to get registered under section 14(1)(iii) of the Sales Tax Act,1990 and pay sales tax on computed value addition on supply of goods made to themselves in terms of section 2(33)(a) read with section 3 of the Sales Tax Act,1990”.
Q. Mr. Zeshan Gillani is running a medical store. Should he get Sales Tax registration?
R. If Mr. Zeshan Gillani is selling the medicines and drugs exempted from Sales Tax, he does not require the Sales Tax Registration. However, if he is supplying taxable goods. He should get registration.
It has been clarified by the Central Board of Revenue vide his letter C.No.3 (2) STP/99, dated 29th January, 1999, as reproduced below:-
Medicaments and Drugs registered under the Drugs Act,1976 and as specified at entries at Serial Nos.12 and13 of the Sixth Schedule of the Sales Tax Act, 1990 are exempt from sales tax. Accordingly, person dealing “exclusively” in these exempt goods is not required to be registered under the Sales Tax Act, 1990. However, filled infusion solution, infusion sets, scrubs (washing preparations), soft soaps, adhesive, plasters, surgical tapes, liquid paraffin, disinfectant (e.g Dettol, savlon etc.) medicated shampoos, absorbent cotton wool and disposable syringes are liable to sales tax and its suppliers are liable to sales tax registration and should issue tax invoices.
If any drug/medical store is making supplies of taxable items (other than those contained in the said Sixth Schedule), it would be liable to registration under the sales tax law but shall pay sales tax on the taxable goods only.
Q. Whether a person importing goods for his own consumption is liable to Sales Tax Registration?
R. No. A person importing goods for his own consumption will be treated as a general consumer and a consumer is to pay Sales Tax but he is not necessary to get himself registered with Inland Revenue Services (IRS). However, if he is importing such goods for furtherance of taxable activities, then he will have to get himself registered with IRS.
It has been clarified by the Central Board of Revenue in its letter No. 3(2)STP/99, dated 8th November,1999 as given below:-
Since Karachi Port Trust imports goods for their own consumption and no further they make taxable supply/activity. Therefore, they are not liable to registration under section 14 of the Sales Tax Act,1990, till such time that they engage themselves in making taxable supplies (including zero-rated supplies) in Pakistan or engage themselves in any taxable activity as defined in section.2(35) of the said Act.
Q. Explain what is status of registration of persons making supplies to FATA/PATA from FATA/PATA?
R. This issue has been explained by the CBR in letter No.2(38)STP/97, dated 15th April, 1999. While it is a fact that the Sales Tax Act,1990, has not yet been extended to the Tribal Areas, the benefits of non-application are restricted and confined only to the production in FATA/PATA and its subsequent sale/consumption also in the FATA/PATA.
The registered person in Pakistan, making taxable supplies (other than the zero-rated exports), has to charge sales tax even on its supplies to FATA/PATA and issue tax invoices accordingly.
The persons located in FATA/PATA if making supplies of taxable goods in Pakistan (outside tribal areas) is also required to get registered. If he wants to get into business of taxable supplies in Pakistan, he has the option of voluntary registration under the Sales Tax Act,1990, and then he should issue prescribed tax invoices and charge sales tax.
Government/semi-government/defence departments, autonomous Corporations, even when purchasing taxable goods from suppliers located in Tribal Areas should ensure that the purchase such goods only from such suppliers as are registered (whether voluntarily or compulsorily) under the Sales Tax Act,1990, and that too against the prescribed tax invoices to be issued by them. [C.B.R’s Letter]
Q. What you will suggest to Government/Semi Government Organizations from whom they should purchase taxable goods?
R. It is very clear that Government/Semi Government Organizations and local bodies should purchase taxable goods from the persons registered under Section 14 of Sales Tax Act, 1990 against prescribed sales tax invoice. It has been clarified by the board in its Letter C.No.4(47)-Stb/98 (Vol.I), dated 31st March,2000 as given below:-
As per Cabinet’s decision dated 23-8-1997 circulated vide Finance Division’s Circular No.F.5(1)-TR.1/96, dated 21.05.1998 read with Circular No.F.4(11)/98-Coord-II, dated 18.04.1998, all Government departments and public sector organizations are required to purchase taxable goods only from registered persons against valid tax invoices. In this regard, the guidelines already issued by the Board in its letter C.No.4/47-STB/98, dated 13.3.1999 may please be followed and in case of purchase made from manufacturer-cum-suppliers located in FATA/PATA, the procedure prescribed in Board’s letter C.No.3(13)STP/98, dated 17.11.1998, may please be applied. The Sales Tax Act,1990, is applicable to Northern Areas w.e.f. 27.12.1999.
Q. Please explain whether suppliers of sales taxable goods to Government/semi government or autonomous bodies should have registration and also explain the status of wholesaler and dealer.
R. It is noted that suppliers of sales taxable goods to Government/semi government or autonomous bodies must have Sales Tax Registration and also issue sales tax invoice while supplying goods.
It is further mentioned that wholesaler or a dealer must have sales tax registration. Threshold of 0.5 million does not applicable for wholesalers or dealers. It has been clarified in the C.B.R’s, Letter C.No.3(47)STB/98, dated 5th January,1999 which is being reproduced below:-
“Supplies” of sales taxable goods to Government/semi-government/defence departments, autonomous corporation, etc., are included in the definition of the term “wholesaler including a dealer” under section 2(47) of the Sales Tax Act, 1990, and is distinct from the definition of “retailer” under section 2(28) thereof. While the annual turnover threshold of Rs.5 million applies to the “retailers” only, there is no turn-over threshold for “wholesaler, dealer, distributors and suppliers”. Accordingly, all such wholesaler, dealers, distributors and suppliers of sales taxable goods are liable to sales tax registration irrespective of their annual turnover. No such certificate (for purposes of exemption) is acceptable in relation to such suppliers of sales taxable goods to the Government/semi-government/defence departments, autonomous corporations. Banks, DFIs, Limited Companies and other such persons authorised to deduct advance tax under section 50(4) of the Income Tax Ordinance,1979. [C.B.R’s, Letter C.No.3(47)STB/98, dated 5th January,1999]
The Central Board of Revenue further clarified in its letter C.No.3(72)/STP/97 (PT-I) dated 3rd April,1999 as under:-
The supplies of sales taxable goods to institutions which are authorised to deduct advance tax under section 50(1)of the Income Tax Ordinance,1979, are not covered by term “Retailers” but are covered by the term “wholesaler includes a dealer.
Please explain whether registration of a dealer who sell goods on behalf of Principal (Manufacturer) for commission is must according to Sales Tax Law.
R. It is simplified in these words that there is two types of category of services being rendered by the dealers. If the Manufacturer is directly supplying the taxable goods to buyer through dealer (Commission Agent). Then there is no need of Registration of the dealer.
However, if dealer himself is providing taxable goods to buyer, then he will have to get himself registered with Sales Tax Department and he will issue the invoice as prescribed by the CBR.
However, the CBR has clarified this issue in the following words through C.B.R’s, Letter No,3(62)STP/97 (Pt-I), dated 2nd October, 1999
The issue has been clarified by the CBR as under.--
Category 1,-- If dealer is engaged only with the sale of vehicles on behalf of some principal (manufacturer) and gets any commission in the sale/purchase of vehicles which is made directly by the seller and purchaser then the dealer is providing service only and that does not come under the ambit of taxable activity as services are still exempt from payment of tax. However if the same dealer is also providing after sale service in the shape of the sale of parts (even those purchased from the principal) then sale of parts is a taxable activity and he has to be registered with the department, keep necessary records, charge sales tax and pay to the Government.
Category 2,-- In this case too if the car is sold by the seller to buyer, and only services of a dealer are hired against some commission, no registration or payment of sales tax on that commission amount is required. However if the invoice is issued by the dealer, then it is a taxable activity and he has to register himself, charge sales tax and pay the same to the Government.
Do you think that Registration is mandatory for industrial importer manufacturing exempt products and also explain some persons who are not liable to Sales Tax Registration?
R. Registration is not mandatory for industrial importer manufacturing exempt products. The C.B.R. clarified this issue in its letter No.3(62)STP/97/PT, dated 12th March,1998 in the following words:-
The issue regarding Machinery/Equipment/Spares have been imported by an industry for their own use on which sales tax is leviable at the import stage. The industry is manufacturing products which are exempt from the levy of sales tax. The Board’s point of view is that if an industry is manufacturing exempt products and has imported machinery/equipment/spares and raw material etc. as an industrial importer, the requirement of registration is not mandatory.
Sales Tax Registration is not mandatory on import of diagnostic reagents for patients.
As said in C.B.R’s Letter No.3(62)STP/97,PT, dated 12-03-98.
Sales Tax Registration is not mandatory on import of spares by Foreign contractors
As stated in C.B.R’s Letter No.3(62)STP/97,PT, dated 12-03-98.
Sales Tax Registration is not required on import of tickets etc. by Airlines.
As explained in C.B.R’s Letter No.3(62)STP/97,PT, dated 12th March,1998.
Sales Tax Registration is not required on temporary import.
As noted in C.B.R’s. Letter No.3(62)STP/97, dated 12th March,1998.
Registration is not mandatory for import of raw material for fertilizer.
As quoted in C.B.R’s Letter No.3(62)STP/97.PT, dated 12th March,1998.
Registration is not mandatory on import of raw material for tank terminal for storage.
As clarified by C.B.R vide its Letter No. 3(62)STP/97. PT, dated 12th March,1998.
ST Registration is must on import of Surgical and Medical Equipments.
As narrated in C.B.R’s Letter No.3(62)STP/97. PT, dated 12th March,1998.
ST Registration is not mandatory on import of spares for pipelines for transferring liquid petroleum. As expressed in C.B.R’s Letter No.3(62)STP/97. PT, dated 12th March,1998.
Q. What is your opinion about Sales Tax Registration of Commercial Importer and a bank?
R. Commercial Importers should get registered himself with Sales Tax Department. However, a bank is not required to registered with Sales Tax Department even it is importing something for his use.
It has been clarified by the Board in C.B.R’s Letter No.3(62)STP/97, PT, dated 12th March,1998 as under
“The issue that the goods have been imported against the owner’s name instead of in the name of the industry. The industry is however registered with sales tax department. The Board’s point of view is that since the importer is a commercial importer, his separate registration is required”.
It has been further clarified by C.B.R’s Letter No.3(62)STP/97. PT, dated 12th March,1998 in the following words:-
“The issue that imports made by a bank. The Board’s point of view is that since banks are not engaged in making any taxable supplies, and are rendering services only, registration is not required.
Q. What suggestion you will give to the person who imports Kiryana items?
R. The Importer of Kiryana items is liable to sales tax registration. It has been mentioned in CBR’s Letter No. 3(62)STP/97. PT dated 12-03-1998, given below: -
The issue that the Kiryana items like Copra, Tea, Paper, Cinnamon etc. which are not subject to further processing after import. However these are liable to sales tax at import stage. The Board’s point of view is that since these are commercial imports and their supplies, after importation in Pakistan, are taxable, requirement of registration is must.
Mr. Hasnain, Ms. Zainab, Ms. Zahra and Mrs. Fozia are manufacturers of steel chairs and their business activities are taxable and what they should do when their annual turn over is as under:-
Mr. Hasnain Rs. 40,00,000
Ms. Zainab Rs. 49,00,000
Mr. Zahra Rs. 50,10,000
Mrs. Fozia Rs. 70,00,000
R. Mr. Hasnain manufacturer is liable to be registered if his turnover is more than five million in any of last 12 months. Therefore Mr. Hasnain and Ms. Zainab are not liable to be registered in Sales Tax Department because their annual turnover is below than five million and they are exempt from payment of Sales Tax. However, in Finance Bill, 2007, a condition of Electricity Bill upto Rs.6000/- has been introduced.
Sales Tax chargeable is to Ms. Zainaband Ms. Zahra as follow:
Mr. Zahra Rs. 50,10,000 @ 15% = Rs 751500
Mr. Fozia Rs. 70,00,000 @ 15% = Rs. 105000
Q. Syed Hasnain Raza Gillani has to import a consignment of Rs.120, 000. Whether he should be registered with Sales Tax Department? Explain.
R. Syed Hasnain Raza Gillani is required to get himself registered with Sales Tax Department because it is compulsory under Section 14 of Sales Tax Act, 1990, for an importer to get registration with Sales Tax Department and get his Sales Tax Registration number that is to be mentioned on the Bill of Entry. Sales Tax at the time of import will be calculated on the total value of consignment of Rs.120,000 and deducted before clearing from the Customs. He will have to pay Sales Tax @ 15% i.e. Rs.18000. If he is a Commercial Importer, then he will have to pay Sales Tax and value addition on the value of Sales Tax @ 10%.
It is noted that Special Procedure of Payment of Sales Tax by Commercial Importers of The Sales Tax Special Procedure Rules, 2006 has been repealed now through the Finance Bill 2007.
Instead of 10% value addition on the value of Sales Tax, Government has introduced 2% further tax besides the 15% Sales Tax on commercial imports through various notifications.
Q. Syed Ahsan Mujtaba Gillani is operating a general store with effect from July 2004. What will be his status regarding registration if his average monthly turnover is Rs. 300,000. Calculate sales tax chargeable to him?
R. Total turnover of the last 12 months is (12 x 300000 = Rs.3600000) that is below to Rs.5 million threshold introduced by the Government and therefore, Mr. Ahsan is not liable to be registered. Nil sales tax is chargeable to him.
Q. Mr. Hasnain Raza Gillani is dealing in wholesale business in Judia Bazar Karachi. Is he required to be registered?
R. Mr. Hasnain Raza Gillani is bound under the Sales Tax Act, 1990 to get himself registered with IRS. Because the wholesalers irrespective of their total turnover, are must to be registered.
Q: Sajjad is a retailer with annual sales less than Rs.2 million. Is Sajjad liable to be registered?
Retailers (having value of supplies of over 5 million rupees, in any tax period during the last 12 months) are liable to be registered with Inland Revenue Department. Because, Sajjad is retailer with annual sales lest than Rs.2 million and therefore, he is not required to be registered with Sales Tax/Inland Revenue Service.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Q. Under sales tax law what record a taxpayer is supposed to maintain?
R. Chapter IV “Book Keeping and Invoicing Requirements” of the Sales Tax Act, 1990 and its sections 22, 23 and 24 explains various requirements of maintaining the record. Under section 25, the Sales Tax Department has been given access to record and documents of Sales Tax. A registered person must keep a record in English or Urdu of all the goods and services supplied, purchased or imported in the course of business, in the following manner.
The record of sales should indicate the following details of goods supplied or services rendered:
description;
quantity;
value;
name and address of the customer, and
amount of tax charged.
At the end of each month, a registered person must add up the sales tax shown in these records, and transfer the total to sales tax account as output tax.
Record of Purchases and imports
The record of purchases and imports should indicate the following details of goods purchased or received or services hired:
description;
quantity;
value;
name, address and registration number of the supplier,
amount of tax paid on purchases.
Record of Payments/Receipts
All payments or receipts of amount of sales tax on purchases or supplies above Rs. 50,000 (except utility bills) should be made through bank instruments indicating specified bank accounts of both the persons i.e., sellers and purchasers. It is recommended that records/ photocopies of all bank instruments through which payments of sales tax are made or received must be kept along with bank statements for the purpose of compliance of section 73 of the Act and to avoid audit complications.
Other Records
A registered person should also keep record of
Zero-rated and exempt supplies,
Record of invoices, credit notes, debit notes, bank statements, inventory records,
Utility bills, salary and labor bills, rental agreements, sale purchase agreements and lease agreements.
Q: Under the sales tax law for how much time a taxpayer is required to maintain the record?
R: A registered person is required to maintain a record and documents for a period of five years after the end of the tax period to which such record and documents relate.
Comments about AUDIT of Records and Sales Tax Documents
Audit is derived from a Latin word "audire". It means "to hear". Old times businessmen appoint a person to hear about frauds. On their reports they set the priorities and limits of their business relations. With passage of time Audit become an integral part of the business.
Definition, Scope and Legal Provisions:- Auditing is concerned with verification of accounting data with determining the accuracy and viability of accounting statement and record”. (R.K. Moutz, Fundamental of Auditing).
Pakistan has given constitutional cover to Audit & Accounts by introducing Articles 168, 169, 170 and 171 of Constitution of Pakistan 1973. These four articles relate to appointment of Auditor General of Pakistan; Functions and Powers of Auditor; Power of Auditor General to give directions; and Reports of Auditor General.
There are thirty-two Standards containing all the information regarding the objects of audit, audit plan, computers assisted audit techniques, frauds and errors. These standards provides guidelines about auditing, but Laws of Land such as Companies Ordinance, 1984 and Banking Companies Ordinance, 1962 and Partnership Act, 1932 give practical guidelines for conducting audit. Pakistan (Audit & Accounts) Order 1973 and Pakistan Order No. 21 (1973) are comprehensive substance for Auditing.
In supersession of SRO 800(1)/87 dated 06-10-87, an SRO issued under Pakistan (Audit and Account) Order 1973 (President’s Order No. 21 of 1973), Auditor General of Pakistan is authorized to conduct audit of the following heads and report to the President of Pakistan:-
|
(a)0110000 Taxes on Income. |
(b) 0120000 Property and Wealth Tax |
|
(c)0140000 Capital Gains Tax |
(d)0160000 Workers Welfare Tax |
|
(e)0170000 Tax on profession, Trades and Callings. |
(f) 0180000 Capital Value Tax |
|
(g) 0210000 Customs |
(h)0220000 Sales Tax |
|
(i)0230000 Federal Excise |
(j)0240000 Fed. Excise on Natural Gas |
|
(k) 0290000 Other indirect taxes |
|
Under Companies Ordinance 1884, each registered Company with SECP (Security Exchange Commission of Pakistan) is bound to get his accounts audited quarterly, half-yearly or yearly. Now, under the law, Auditor General is completely authorized to conduct audit of any of government receipts and revenue.
In taxation laws, there is provision of auditing and accounting. Under sections 120(1A) and 177 Income Tax Ord. 2001, the Commissioner may select any taxpayer for audit. After Universal Self-Assessment Scheme, the need of conducting Audit has increased manifolds. However, under sections 32A, 38, 38A and 38B of the Sales Tax Act, 1990, Audit related powers have been given to FBR and Sales Tax Dept. How Audit will be conducted, some instructions and guidelines we may study in Part IV of STGO 3/2004 dated 12-06-2004 and Chapter VI of Sales Tax Rules, 2006. The said STGO 3/2004 also empowers the Sales Tax Dept. of conducting the investigative audit at any time. However Superior Courts declared “notices without disclosing reasons of Audit are illegal and void” [PTCL 2006 CL 407]
Conducting the Audits:-
Examining and checking of accounting records.
Comparing evidence, records and financial statements.
Ensuring the validity of records by an independent opinion.
Documents required for sales tax audit:- On 30.10.2001, the representatives of Auditor General of Pakistan, FPCCI and CBR unanimously agreed that only the following documents will be requisitioned by the Officers of Sales Tax and DRRA from registered persons.
For Importers, Manufacturers, Commercial Exporters and Manufacturer-cum Exporters the following documents may be demanded:-
Bills of Entry, Input & output registers, Sales & Purchase Invoices, Stock Registers, Monthly returns and bank statements, Monthly production reports, raw material consumption certificates, Analysis certificates and Bank Credit Advices.
[CBR No. 5(49)ST-Int-Audit/01 dated 17-11-2001]
Auditor: A senior judge says, “Auditor is a watch dog but not a blood hound”. (Kingston Cotton Mills 1896). Auditor works starts when an accountant confirms that financial statements and records are ready for checking. It means that Audit work follows the account work. Where there is no accounting there is no auditing. Audit is conducted according to period of conduct, scope of work, nature of work, legislative control and confinement of duties. Sales Tax Department, Income Tax Authority, SECP and SBP are statutorily auditors.
Qualities of the Auditor.
Independence, Integrity and Honesty.
Objectivity, Professional competence and Professional behavior.
Detection of errors and frauds.
Knowledge of the business (company of whose he is carrying out audit).
Ability to plan and foresighted.
Initiative and creative, sincere leadership and reliability.
Snapshots of filing of the Sales Tax Return
Q. Is it possible to file a sales tax return annually?
R. Monthly Return
Under the standard procedure 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, in the designated branches of National Bank of Pakistan. In case of certain categories as mentioned below procedure has been devised to file return on monthly and quarterly basis.
Quarterly Return
The taxpayers falling exclusively in the category of commercial importer, i.e the importer who imports taxable goods for business activity other than industrial use of such goods or manufacturing by himself, is required to file the return on quarterly basis.
Annual Return
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.
Q. What is the penalty for filing a sales tax return beyond the prescribed period?
R. It is noted that punishment or penalty for not filing the return in time or short payment etc. has been mentioned under section 33 of the Act and default surcharge has been mentioned under Section 34 of the Act. Under these two sections, penalty and default surcharge can be imposed. However, under section 34A, the Government or Board may exempt any person from whole or part of Penalty and Default Surcharge.
If a return is not filed within 15 days after the end of the relevant tax period, a registered person will be liable to a penalty besides additional tax at the rate of Rs100/- per day. If the delay is beyond 15 days , a penalty of Rs. five Thousands is payable.If full amount due is not paid, any outstanding balance will also attract additional tax and a penalty.
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.
Q. I am an individual tax payer. Do I have the facility to file my sales tax return electronically?
R. 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..
b) the private and public Ltd companies.
c) other taxpayers who may like to opt for electronic filing of Sales Tax returns.
As per announcement of FBR, from 1st July 2008, electronic filing shall be made mandatory for all the categories of taxpayers.
Q: What is the procedure to opt for electronic filing?
R: The procedure for e-filing has been laid down in the Sales Tax General Order No.4/2007.A registered person shall obtain a unique identifier, PIN code and a secure password by visiting FBR’s web portal at e.fbr.gov.pk. He can then file the return by selecting declaration “sales tax” from the web portal. The return data shall be filled in a web form and directly transferred to FBR’s server.
Q: Please give the stepwise hands on procedure for electronic filing.
R:
To file the return, the registered user shall logon at e.FBR.gov.pk
by using assigned User ID. Following steps will be followed:
− Select Declaration -> Sales Tax -> Sales Tax Return
− Select the Tax Period [Month, Year] from the drop down list
− Click the Monthly Return link
− Return form will be displayed which will be filled in
accordance
with the instructions in the Sales Tax Rules, 2006.
− E-filing can be completed in following stages:
Preparation:
The user shall fill in all the relevant fields. (The return can be
saved at any time during preparation process to avoid data loss)
Verification: The return can be verified by the person having access to PIN code. He shall press the Verify Button given at the bottom of form and follow the instructions.
Payment: Payment can be made by selecting either of two options provided in the form as below:
Payment Challan: This option is to be utilized by persons who want to deposit tax amount in a branch of National Bank which is not online with FBR. The payment challan shall be printed and taken to the bank where payment shall be made and CPR no. shall be obtained. This number shall be fed in the System using the ‘Feed CPR’ button.
(ii) e-Payment: This option can be availed by persons opting to deposit tax amount in an NBP branch which is online with FBR server. After verifying the return, e-Payment button can be clicked and a payment slip number shall be generated which can be taken to the bank and amount deposited against the same. The bank shall accept the payment and provide an acknowledgement.
Submission:
The user shall click the Submit button and a message shall appear at the top stating that your return has been submitted. Return Submission Certificate can be printed by clicking the Print Certificate button. It can also be saved on user’s computer in PDF/Excel format.
Q: How can a person who is already not registered , avail the option of e-filing after their registration?
R. Persons, not already registered, shall visit the FBR’s web portal or Computerized System at https://e.fbr.gov.pk and select “registration -> e-enrolment” option from the menu and provide basic information as required. They shall be then required to fill in a form containing the particulars already available in the System. The intending user shall also be able to correct or update the particulars/ details already in the System. The name of an authorized person shall be mentioned on the form. The form shall be printed and signed by the competent person. The authorized person shall visit the Tax Facilitation Centre of respective Collectorate alongwith the printed form and his original Computerized National Identity Card. The officer incharge of the Facilitation Centre/ Division, not below the rank of an Assistant Collector, shall verify the particulars on the form with those in the System and after being satisfied in this respect shall approve the allocation of user ID, which shall be sent to the address provided. The Board, however, can waive any of the aforesaid requirements.
Q: How an electronic return is to be filed in case of no business activity?
R. In case of no business activity during the relevant period i.e. when there are no sales, purchases etc. and no payment is due, the user shall click the ‘Null Return’ button and then can proceed for submission of the printing the return without following through all the steps provided above.
Q. What do you understand about penalty and additional tax? What will you suggest to a taxpayer facing penalty and additional tax?
R. It is noted that punishment or penalty for any offence has been elaborated in the Chapter VII of the Sales Tax Act, 1990. Under section 33, the Sales Tax Department may impose penalty in case of offences listed under the section. The Sales Tax Department may also impose additional under section 34 in case of violation of Sales Tax charging section 3 of the act, short payment or delayed payment or any instructions issued through notifications (SROs) and rules etc. Any persons who wrongly adjusts the input tax or takes refund wrongly may face the penalty and additional tax.
While imposing additional tax [now default surcharge
the following points should be kept in mind.
Levy of additional tax [now default surcharge] in case of falling under Section 11 and Section 36 of the Sales Tax Act, 1990: Please readSales TaxCircular No. 4 of 1994 dated 14th April, 1994.]
Sub: Clarification with regards to Sec. 34 [ST Circular No. 7 of 1994 Dated 9th May 1994]
Appellate Tribunal has the jurisdiction to waive or remit [default surcharge] or penalty: Lahore High Court, Lahore.
The additional tax or penalty should not invariably be imposed for the only reason that it is legal to do so. Lahore High Court, Lahore.
The tribunal has discretion to waive/remit additional tax and penalties. [Lahore High Court Multan Bench: ADCvs. M/s. Nestle Milk Pak Ltd., Kabirwala PTCL 2005 CL-304]
Where an issued regarding deposit of sales tax, basically cropped up due to interpretation of provision of law the additional tax and penalty is not justified. [Appellate Tribunal:Cherat Cement vs. Collector (Adj.) Rwp. 2006 PTCL CL.209]
Where there is no willful evasion of tax imposition of additional tax or penalty is not justified. [Appellate Tribunal: M/s Cherat Cement vs. Collector (Adj.) Rwp. PTCL May-06 CL.209]
No additional tax is leviable on Additional Tax.
Assessing officer is obliged under the law to apply his mind to the imposition of penal interest. Schazoo Lab; Lt. vs.CIT, Lahore [1977] 35 Tax 15 (HC Lah.)1976 PTD 361.
If demand is stayed by the High Court or the Supreme Court, no 1[additional tax] is chargeable for the period of stay. – PLD 1991 SC 308,
Where in consequence of appeal, tax is reduced; additional tax shall be reduced accordingly [Sec. 205(2) of the I.T. Ord. 2001].
Where installments are allowed to the taxpayer, additional tax shall be calculated in respect of each installment from the due date to the date on which installment is paid.
Additional tax should not levied for unwillful default. DG Khan Cement Company ltd. vs. Fed. of Pakistan [2004 PTD 1179].
It has consistently been held that in case a person fails to deduct tax on payments made by him and the tax is subsequently paid by the recipient of such payment then no action can be taken in respect of the said payments. (2003 87 Tax 23 (Trib.).
Additional Tax is not mandatory, imposition only where willful default exists. Muree Brewery vs. Naseem PLJ 1994 Lah. 508.
If a person does not act with mala fide intention, the imposition of penalty or the additional charge is not justified.[Lone China vs. Adl. Secretary PTCL1995 CL 415]
Suggestions to Taxpayers:-
Under sections 33 & 34, penalty and default surcharge are imposed. However, under section 34A, the Government or Board may exempt any person from whole or part of Penalty and Default Surcharge. I would suggest the taxpayer facing the penalty and additional tax that he should apply to Board through concerned Collectorate for waiver of penalty and additional tax under section 34A.
ILLUSTRATION OF DEFAULT SURCHARGE & PENALTY
Mr. Zeshan Gillani is a registered person as Manufacturer with Sales Tax Department. He sold his items of Rs.20,00,000 during the month of July 2010, but he did not pay the Sales Tax in time. He paid Sales Tax after one month. Calculate the Tax due.
Mr. Zeshan Gillani should have paid the Sales Tax of the month of July by 15 August 2010. But now is he going to pay sales tax after one month i.e. in September. Mr. Zeeshan Gillani is defaulter of non-filing the Sales Tax Return-cum-Payment Challan. Now he should pay Sales Tax @ 15% plus Default Surcharge @ 1% of the tax involved, and penalty of Rs.5000 for not filing the return in time as elaborated in the Sections 33 and 34 of the Sales Act, 1990.
Calculation of Sales Tax and Default Surcharge.
2Taxable Supply Rs.20,00,000 @ 15%
Sales Tax payable Rs.300,000
Default Surcharge @ 1% per month
Rs.300000 x 1% Rs.30,000
Penalty of Rs.5000 for not filing the return
in time Rs.5,000
Total default surcharge & penalty Rs.35,000
Principal Amount of Sales Tax Rs.300000
Total liability Rs.335000
How to file reference in the High Court?.
Notification (Sales Tax) No. S.R.O. 524(I)/2005 dated 06-06-2005.-- In exercise of the powers conferred by sub-section (1) of section 47 of the Sales Tax Act, 1990, the Central Board of Revenue is pleased to prescribe the following form of application to refer to the High Court any question of law arising out of the order of the Customs, Excise and Sales Tax Appellate Tribunal:--
FORM OF REFERENCE APPLICATION
UNDERSUB-SECTION (1) OF SECTION 47
OF THE SALES TAX ACT, 1990
Year
Before the High Court of ___________________________.
Sales Tax Reference Application No.______________________of 20___.
APPELLANT……………………………………………………………………..
VERSUS
RESPONDENT …………………………………………………………………..
Title and number of appeal which gives rise to the reference_____________________
The applicant (s) state (s) as follows: -
1. That the appeal noted above was decided by the_________Bench of the Customs, Sales Tax & Central Excise Appellate Tribunal on _______
2. That the order under sub-section (5) of section 46 of the Sales Tax Act, 1990 was served on the applicant on ________________.
3. That the facts which are admitted and/or found by the Tribunal, the determination of the Tribunal and the question (s) of law which arises out of its order have been truly stated in the attached statement of the case.
4. That the following questions of law arise out of the order of the Tribunal: -
(1)
(2)
(3)
5. That the following documents are attached with this application:
(1) Statement of the case signed by the Appellant.
(2) Certified copy of the order of the Appellate Tribunal from which the question(s) of law stated above arises.
(3) Order-in-Appeal by the Collector (Appeals).
(4) Order-in-Original or any other order.
6. That other document (s) or copies thereof, as specified below (the translation in English of the documents, where necessary are annexed with the statement of the case.
Signed
(Appellant)
________________________
Signed
(Authorized Representative, if any)
N.B:-
1. The application must be made in triplicate.
2. The application made by taxpayer must be accompanied by a fee of one hundred rupees. The fee be deposited in the Treasury or a Branch of the National Bank of Pakistan or the State Bank of Pakistan alongwith the payment challan (in quadruplicate) and one copy of the challan be attached with the application.
This form circulated by the Government
VideSRO 524(I)/2005 dated 06-06-2005
PRINCIPLES OF FILING
THE REFERENCE TO HIGH COURT.
After studying of different leading case laws,
following principles emerges more prominent:-
Any person submitting reference application before the High Court under the direct tax law or indirect tax law is required to formulate the questions of law and no vague reference application is to be submitted.
The question of law formulated should arise out of the order of Tribunal meaning thereby that it was raised, pressed, argued, and decided by the Tribunal or it was considered and finding was given by the Tribunal.
If any question of law is not raised before the Tribunal it could not be raised for the first time before the High Court.
If a question of law is raised before the Tribunal but it could not pressed it shall be deemed as if it was never raised.
The Tribunal is final fact finding authority and all the findings involving factual controversy attain finality with the decision of the Tribunal and no point involving factual controversy can be subject-matter of reference application before the High Court only.
If a point of law is not raised before the Tribunal but is raised in the reference application only it is not to be entertained and considered by the High Court.
The question of law raised before the High Court should involve substantial point of law requiring interpretation by the High Court and the points of law answer to which is clear and obvious, are not to be raised in reference application.
Once a question of law is admitted to regular hearing then the jurisdiction of High Court is confined to answer the point of law involved in said question and no other point of law is to be raised or entertained.
While dealing with the reference application the High Court exercises advisory jurisdiction which is very limited in scope, as compared to the constitutional jurisdiction and the appellate jurisdiction.
The reference application should contain the statement of facts as decided by the Tribunal. No new facts are to be inserted in the reference application which were not raised before the Tribunal and were not considered and decided. The opinion in exercise of advisory jurisdiction is to be given on the basis of facts, as decided by the Tribunal until and unless a question of law is raised on the point that the finding itself was violative of any provision of law.
No. reference application is to be entertained on the points of law which already stand decided by the High Court or Honourable Supreme Court. [SHC: (2006) Vol. 94 Tax 263]
-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-
The judgment is reported as Pakistan State Oil Co. Ltd. vs. Collector of Customs 2006 SCMR 425. The Supreme Court reiterated that a question of law does not require investigation of facts and thus, the question involving factual inquiry into facts or to which answer cannot be given without going into facts is not a question of law.
This point was lastly considered by the Honourable Supreme Court …. SCMR 526. The Honourable Supreme Court again upheld the view that if question of law was not raised, argued or decided by the Tribunal if could not be said to have arisen out of the order of Tribunal and therefore, any such point of law is not to be entertain answered by the High Court.
DISCLAIMER:
All information, material or text as noted above have been given in a good faith, however, they cannot be challenged or produced in any court of law. If readers feel any inconvenience, they should consult books on tax laws of Government or renowned writer.
11 “Additional Tax” is called now default surcharge. Rate of tax has become 17%.
22 Rate of default surcharge and penalty vary according to time and magnitude.
