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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 and other goods
specified in Sixth Schedule to The Sales
Tax Act, 1990. |
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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 having
taxable turnover below five million
rupees and also utility bill below Rs.
Seven lac during the last twelve months
are exempted from registration and
payment of sales tax. Similar exemption
is also available to retailers having
total turnover below Rs. five million in
the last twelve months.
The rate for sales tax is 16% of value
of supplies. However, there are some
items which are chargeable to sales tax
at 18.5% or 21% of value of supplies
(see SRO 644(I)/2007 as amended by SRO
537(I)/2008 dated 11th June 2008)
The Registration Form(s) are submitted
to the Central Registration Office, FBR,
or Sales Tax Collectorates/ RTOs 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.
All registered persons are required to
file returns electronically and in such
cases the payment is to be made by the
15th and return can be submitted on
FBR’s e-portal by 18th.
Detailed procedure in this respect is
given in Sales Tax General Order no. 04
of 2007.
There are some sectors which are
required to file returns on quarterly
(tri-monthly) basis e.g. retailers
including dealers of specified electric
goods and CNG dealers.
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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 and half percent of tax due or the
part thereof per moth;
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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Late or no submission of the Returns
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Amount paid is less than the tax
amount payable
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A demand raised after an audit/
scrutiny is upheld after
adjudication
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