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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:
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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