Sales Tax Special Procedures Rules, 2007

1. Sales Tax Special Procedures Rules, 2007 SRO.480(I)/2007, Dated 09 June 2007 16 February 2008

2. Key features • Objectives of separate set of Special Procedure Rules [SPR] • History [Several notifications merged effective 01 July 2004] • SPR withdrawn / merged effective 01 July 2007 • Preamble to SPR – Important considerations • Applies on specific business segments / categories of registered persons

3. Business segments / categories of RP under SPR [11] • Retailers • Electric power • Natural gas • Sugar [Supplies to Trading Corporation of Pakistan only] • Service providers under Provincial Sales Tax Ordinances • Oil marketing companies [Joint installations at Mahmoodkot] • Vehicle dealers • Cotton ginners [Sales tax refund] • Commercial importers • Steel melters, re-rollers and ship breakers • Biscuit confectioners and snacks manufacturers

4. Retailers • Frequent changes in regime and low compliance level • Applies on retailers & jewellers but not wholesalers-cum-retailers • Proviso for wholesalers-cum-retailers: Not relevant • Registration threshold – Annual sales exceeding Rs.5 million [Sixth Schedule] • Slab table for collection of sales tax and income tax on collective basis – Final tax • Corporate sector retailers allowed adjustment of WIT against final income tax liability • Rates are applicable on all supplies including exempt, zero-rated and retail price items • Slab table not applicable for retailers of mild steel products [MVA of Rs.1330 PMT] • No input tax adjustment / refund • Deposit of taxes and filing of sales tax return on quarterly basis • Invoices / cash memos for each supply are mandatory, not necessarily through FECR

5. Slab table for Retailers

6. Electric Power • Applies on NEPRA’s licensed companies including dealers and agents or any other person. Generally applicable on IPPs, public & private sector projects; Captive Power Projects, WAPDA & KESC • For WAPDA / KESC, CPP, persons other than IPPs: Sales tax rate is 15% of value of supply including all charges other than late payment surcharge, rents, commissions, duties & taxes. • For IPPs including private sector projects: 15% on EPP component only • Certificate of WAPDA / KESC deemed to be a credit note for S-9 purpose • Deposit of sales tax on accrual basis, when billed • Due dates for filing of returns [21st , 25th and 15th of the following month] • Input tax adjustment - Immunity from S-8B & SRO.660 • Conditions for claiming input tax by buyers • Registration No. to be printed on sales tax invoices

7. Natural gas • Applies to gas well-head, gas transmission and distribution companies [DISCOs], distributors, dealers, agents, retailers of CNG & LPG • Value of supplies excludes late payment surcharge billed by DISCOs • Rate of sales tax is 15% generally, however supply of natural gas to CNG stations by DISCOs is subject to sales tax at 24% i.e. 9% value addition rate. • No liability towards sales tax on CNG stations • Input tax admissible – Immunity from provisions of S-8B & SRO.660(I)/2007 • Gas invoice should reflect ST registration number & address of business premises for validity of input tax of the registered buyers • Daily stock and sales tax to be maintained by suppliers other than DISCOs • Due date for filing of sales tax return by DISCOs is 15th of second month following the month of supply.

8. Sugar manufacturers – Supplies to TCP • Applies on registered sugar mills for supply of sugar to TCP • TCP pays value of sugar to the mill at the time of successful grant of tender against commercial invoice issued by the mill • In case of delivery for exports, mill will issue zero-rated tax invoices • TCP pays sales tax on removal of quantity from the mill against sales tax invoice • Report supplies when invoice is issued • Monthly statement to be filed by TCP with the Collector – Annexure ‘A’ of SPR

9. Service providers under Provincial Ordinances • Applies to hotels, clubs, caterers, TV / radio advertisers, customs agents, ship chandlers, stevedores, courier. • No registration threshold for service providers • Differentiate between restaurants and hotels providing room services in addition to restaurants • Time of service when completed or payment is received, whichever is earlier • Invoicing at the end of month in case of credit facility • Specific special procedures for advertisers, customs agent and stevedores

10. Service Providers – Advertisements • Applies to broadcasting of advertisements other than exempt advertisements • Value of service is gross amount received • How to claim input tax by registered clients – Routed invoice prescribed under Annexure ‘B’ of SPR • Payments be made through banking channel verifiable readily

11. Service providers – Customs agent & ship chandlers • Value of supply for customs agent excludes certain charges which are reimbursable – No minimum values of services effective 01 July 2007 • Sales tax registration and license number of customs agent are required to be mentioned on GD / duty drawback / refund claim • Value of supply for ship chandler also defined and exclusive of certain charges paid on behalf of the clients

12. Service provider - Stevedores • Who are stevedores: Container terminal operators, commercial tank terminal operator, bulk terminal operator, other service providers engaged in discharge and loading of cargo from / to vessels • SP re-enacted and rates enhanced vide SRO.678 of 6 July 2007 • No input tax adjustment allowed – Fixed assets are exempt • Invoice is compulsory

13. Sales tax rates applicable for stevedores

14. Vehicle dealers • Applies to manufacturers, importers & dealers of local or imported vehicles, new or used • Liability on manufacturers to furnish vehicle wise amounts of commission payable to dealers • Manufacturer or importer required to mention full particulars of dealers and buyers in booking documents with exception to imports under Baggage, Transfer of Residence, Gift schemes • Invoices issued by manufacturer – in the name of dealer or directly to customer • Invoice of motorcycle compulsorily to be issued to dealer by the manufacturer • Sales tax is payable by manufacturer in normal course @ 15% • Dealer shall pay sales tax to on commission received, if not already charged by manufacturer or importer. • In case of exchange of vehicles between two dealers, sales tax is payable on actual sale

15. Cotton ginners – Refund claims • Applies to refund claims filed by cotton ginning and pressing units – Zero-rated supplies • Input tax refunds admissible on electricity and other inputs – fixed rates • Monthly statement of production and sales by cotton ginning units to be filed with Collector – Annexure D of SPR • Notices on commencement & closure of activity to be given by ginning unit to the Collector • Final statement of cessation of ginning activity within 15 days – Annexure E of SPR

16. Commercial importers • Commercial importers but not the manufacturers • SRO.645/2007 of 27 June 2007 specifies sales tax rate applicable for commercial imports i.e. 2% ad-valorem plus 15%. Ambiguous whether final discharge of liability as per SRO.645 and Rule 58B of SPR or otherwise • Sales tax @ 15% applies on locally purchased goods if traded by commercial importer • 58C binds commercial importer to restrict sales tax amount in invoices in accordance with actual incidence of sales tax at import stage • Option provided in STGO No.03/2007, dated 30 July 2007 to charge sales tax on invoice value and discharge of sales tax liability accordingly • Immunity from requirement of audit if actual sales tax not charged in invoices • Quarterly sales tax returns by 15th day of following the end of quarter • 2% sales tax should not be included for withholding income tax purpose • Immunity from Section 8B but not from SRO.660 [Withholding of Sales Tax]

17. Options available to commercial importer

18. Steel melters, re-rollers and ship breakers • Applies to steel melting, steel re-rolling, ship breaking units and PSMCL, PSM • To pay sales tax @ Rs.4.75 per unit of electricity consumed for production of steel billets, ingots and mild steel [MS] products – Final discharge of sales tax liability • Payment through electricity bills if mentioned or through monthly return if not mentioned in the electric bill • Rule 58Ha inserted effective 03 October 2007, which prescribes rates of sales tax for steel melters and re-rollers producing electricity with gas generators – Gill bills • Rate for ship breakers is Rs.3500 PMT of re-rollable scrap • Steel mills shall pay sales tax under normal regime • Various amounts of sales tax prescribed for disclosure in sales tax invoices – Rule 58I • Due date for filing of return is 28th day of the month following the tax period to which electricity bill relates • Values of steel products to be assessed for sales tax purpose – Table provided

19. Minimum values for sales tax - Steel products

20. Biscuits, confectionery and snacks • Applies to manufacturers paying sales tax on retail price basis under Third schedule with exception of cheese balls [19.04] • Sales tax is levied in two phases: -- @ 15% on ex-factory price -- @ 15% on MVA of 12% on ex-factory price • Printing of retail price, declaration of MRP to Collector • No sales tax liability on distributors and wholesalers

21. Thank you.