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OVERVIEW
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Sales Tax was a
provincial subject at the time of
partition. It was being administered in
the provinces of Punjab & Sindh as
provincial levy. Sales tax was declared
a federal subject in 1948 through the
enactment of General Sales Tax Act, 1948
and in 1952, this levy was transferred
permanently to the Central Government.
Sales tax was levied at the standard
rate of 6 pies per rupee at every stage
whenever a sale was effected. The
trading community protested against this
system, and this resulted in the
enactment of Sales Tax Act 1951.
A system of licensed manufacturers &
wholesalers was instituted whereby they
were allowed to purchase goods free of
sales tax from each other and pay tax on
sales to unlicensed traders. Imports
were chargeable to Sales Tax but the
licensed manufacturers & wholesalers
were allowed to import goods without the
payment of Sales Tax. Later on Sales Tax
became chargeable on locally produced &
imported goods at the time of their
sales & import, respectively. The sales
tax, was collected under the Finance
Ordinance, 1956, on goods which were
chargeable to Central Excise Duty, as if
it were a duty of Central Excise. In
April 1981, by virtue of an amendment in
the Sales Tax act, 1951, the collection
of Sales Tax on non-excisable goods was
also entrusted to the Central Excise
Department.
In the late eighties the government
decided to replace Sales Tax with the
Value Added Tax in the country as a part
of its structural adjustment program
which was undertaken to correct
anomalies & distortions both in our tax
& non-tax regimes. Accordingly new
enactment titled Sales Tax Act 1990
replaced Sales Tax Act 1951 with effect
from 1-11-1990. |
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Liability to Sales Tax
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Following sectors are
required to get registration for sales
tax and charge sales tax on their
supplies/ services:
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Previously it was
being charged at the manufacturing &
import stage, and its scope has been
extended now to remaining sectors.
Sales Tax is chargeable on all locally
produced and imported goods except
computer software, poultry feeds,
medicines and unprocessed agricultural
produce of Pakistan. |
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REGISTRATION
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Every person in
sectors mentioned above, who makes a
taxable supply in Pakistan is required
to be registered under the Sales Tax
Act. However, manufacturers and
retailers having turnover below five
million rupees during the last twelve
months are exempted from registration
and payment of sales tax.
The rate for sales tax is 15% of value
of supplies. However, there are some
items which are chargeable to sales tax
at 17.5% or 20% of value of supplies
(see SRO 644(I)/200)
The Registration Form(s) are submitted
to the Sales Tax Collectorates or
Central Registration Office, FBR, for
the allotment of a Registration Number
by the persons liable to be registered
under the Sales Tax Act. The taxpayer is
then issued a Certificate of
Registration. |
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RETURNS
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As per law each
registered person must file a return by
the 15th of each month regarding the
sales made in the last month.
Sales Tax Monthly Returns cum Payment
Challan are submitted in the designated
branches of National Bank of Pakistan
and are then sent to the concerned
Collectorates.
There are some sectors which are
required to file returns on quarterly
(tri-monthly) basis e.g. retailers and
commercial importers.
It is mandatory for public and private
limited companies and those persons
falling in the jurisdiction of Large
Taxpayers Units to file returns
electronically. |
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MAINTENANCE OF RECORDS
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All registered
persons are required to maintain records
at their business premises of the goods
purchased and supplied made by them. All
the records are required to be kept for
a period of 5 years. |
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REFUNDS OF SALES TAX
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In cases where the
Input Tax exceeds the Output Tax due
from the registered person in respect of
a tax period because of exports or other
zero-rated supplies, the excess amount
of input is refunded back to the
taxpayer within 45 days. In all other
cases of excess input tax, the Board can
specify the procedure for refund. |
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ADDITIONAL TAX
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If a Registered
person does not pay the tax within the
specified time or claims a tax credit or
refund which is not admissible to him,
or incorrectly applies the rate of zero
percent to the supplies made by him, he
has to pay the additional tad at the
following rates:
One percent of tax due or the part
thereof during first six months and
one and half percent of tax due or the
part thereof for the succeeding months.
However, in case of tax fraud, the rate
of additional tax shall be two percent
per month. |
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ARREARS
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The work regarding
Arrears gets initiated in the following
cases:
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