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.
Liability to Sales Tax
Following
sectors are required to get registration for sales tax and charge sales tax on
their supplies/ services:
- Manufacturing
- Import
- Services
Distribution, Wholesale & Retail
stage.
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.
Registration
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.
Returns
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.
Maintenance of Records
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.
Refunds of Sales Tax
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.
Additional Tax
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 month;
However, in case of tax fraud, the
rate of additional tax shall be two percent per month.
Arrears
The
work regarding Arrears gets initiated in the following cases:
- Late or no
submission of the Returns
- Amount paid
is less than the tax amount payable
A demand raised after an audit/
scrutiny is upheld after adjudication.
