PAKISTAN TAX BAR ASSOCIATION PRESENTATION ON THE SALES TAX ACT,1990 PTBA SUMMER CAMP-2009

1. PAKISTAN TAX BAR ASSOCIATION PRESENTATION ON THE SALES TAX ACT,1990 PTBA SUMMER CAMP-2009 Organized BY PTBA ACADEMY OF TAXATION AT Pearl Continental Hotel-Bhurban By Rashid Malik, Advocate

2. SCOPE AND PAYMENT OF TAX • Scope of tax • Retail Tax • Collection of excess Tax, etc • Zero Rating • Chang in the rate of Tax • Time of Payment • Mode of Payment • Determination of Tax Liability • Levy and collection of tax on specified good on value addition

3. SCOPE AND PAYMENT OF TAX • Tax Credit not allowed A registered person shall not be entitled to reclaim or deduct input tax paid on: • The goods or services used or to be used for any purpose other than for taxable supplies made or to be made by him; • The goods or services in respect of which sales tax has not been deposited in the Government Treasury. • Fake invoices and • Purchase made by such registered person, in case he fails to furnish the information required by the Board • Joint and several liability of registered persons in supply chain where tax unpaid • Where a registered person receiving a taxable supply from another registered person is in the knowledge or has reasonable grounds to suspect that some or all of the tax payable in respect of that supply or any previous or subsequent supply of the goods supplied would go unpaid, such person as well as the person making the taxable supply shall be jointly and severally liable for payment of such unpaid amount of tax.

4. SCOPE AND PAYMENT OF TAX • Adjustable input tax • A registered person shall not be allowed to adjust input tax in excess of ninety per cent of the output tax for that tax period. • The tax charged on the acquisition of fixed assets shall be adjustable against the output tax in twelve equal monthly installments after the start of production of a new unit. • Board may, by notification in the official Gazette, exclude any person or class of persons from the purview of sub-section (1). • Board may allow refund or adjustment of input tax not allowed under section 8B(1) • If the value addition is less than 10% • For other persons subject to such conditions and restrictions as Board may specify.

5. SCOPE AND PAYMENT OF TAX • Debit and credit note • where a registered person has issued a tax invoice in respect of a supply made by him and as a result of any of the events specified in section 9 of the Sales Tax Act,1990, the amount shown in the tax invoice or the return needs to be modified he may issue debit or credit note. • Cancellation or return of supply • In case of registered person, if the supplies are cancelled or returned then the buyer or recipient shall issue a Debit Note (in duplicate); • In case of unregistered person, if the supplies are cancelled or returned then the supplier shall issue a credit note and keep a copy for record. • Change in value of supply or amount of sales tax • For any valid reasons the value of supply or the amount of sales tax mentioned in the invoice issued has increased, the supplier shall issue a Debit Note; • For any valid reasons the value of supply or the amount of sales tax mentioned in the invoice issued has decreased, the supplier shall issue a Credit Note; • The original copy of note shall be sent to the recipient and the duplicate shall be retained for record. • Adjustment of input and output tax • Destruction of goods

6. SCOPE AND PAYMENT OF TAX • Short paid amounts recoverable without notice • Where a registered person pays the amount of tax less than the tax due as indicated in his return, the short paid amount of tax along with default surcharge shall be recovered from such person by stopping removal of any goods from his business premises and through attachment of his business ban accounts, without giving him a show cause notice and without prejudice to any other action prescribed under section 48 of this Act. • Exemption • Supply of goods or import of goods specified in the Sixth Schedule shall, subject to such conditions specified by the Federal Government be exempt from tax under this Act. • Federal Government may by notification in official Gazette, exempt any taxable supplies made or any goods or class of goods, from the whole or ay part of the tax chargeable under this Act. • The Board may, by special order in each case stating the reasons, exempt any import or supply of goods of such description or class from the payment of the whole or any part of the tax chargeable under this Act.

7. REFUND • Refund of input tax • If the input tax paid by a registered person on taxable purchases made during a tax period exceeds the output tax on account of zero rated local supplies or export made during that tax period, the excess amount of input tax shall refunded to the registered person not later than forty-five days of filing of refund claim in such manner and subject to such conditions as the Board may specify. • Filing of refund claim • Monthly sales tax return file by a claimant shall be treated as a refund claim once all the supportive document including the requisite data in the format or software (RCPS), has been received. • There is a limit of one hundred and twenty days to refund the claim but it can further extended up to sixty days by the Collector of Sales Tax having jurisdiction, on the written request of Claimant . • Scrutiny and processing of refund claim • On submission of a refund claim, the Refund Receipt Section shall confirm that the claim is complete in all respects, after which it shall be loaded in the system for assigning the claim a unique identification number (UIN). • After the UIN the CREST will cross match the data and will generate analysis report. The processing officer shall forward the claim file along with the analysis report to in-charge officer. • CREST shall generate refund payment order for admissible amount in respect of refund claimed by manufacturers for export in zero rated sector

8. REFUND • Sanction and payment of refund claim • On receipt of analysis report or RPO the in-charge officer shall sanction the validated amount and issue the Refund Payment Order (RPO) accordingly after issuing the show cause notice for the amount found not admissible. • Scrutiny and processing of refund claims filed by manufacturers of specified goods • Refund of sales tax paid inputs used in the manufacture if goods, local supply of which has been zero-rated, shall be processed and sanctioned through the Fast Track Channel within fifteen days from the date of filing of refund claim. • The refund of sales tax paid on utilities and the goods imported directly by the claimant and the input tax incurred on acquiring furnace Oil for power generation and consumption thereof in the manufacture of zero-rated goods, shall be sanctioned upon validation by the automated system. • Scrutiny and processing of refund claims relating to commercial exporters • Refund of sales tax paid inputs used in the exports made by commercial exporters, shall be sanctioned only after verification of supportive documents and approval through CREST.

9. REFUND • Extent of payment of refund claim • Refund to the claimants under these rules shall be paid to the extent of the input tax paid on purchases or imports that are actually consumed in the manufacture of goods which have been exported or supplied at the rate of zero per cent. • Responsibility of the claimant • The claimant shall be responsible for any mis-declaration or submission of incorrect information and shall be liable for penal action besides recovery of the amount erroneously refunded along with default surcharge. • Post-sanction audit of refund claims • After disposing of the refund claim, the officer-in-charge shall forward the relevant file to the Post Refund Audit Division for post-sanction audit and scrutiny. • Action on inadmissible claims • Where the claim or any part thereof is found inadmissible on account of discrepancies pointed out by the RRAS, the officer-in-charge shall, at the time of issuing RPO, issue a notice requiring the claimant to show cause as to why the claim or as the case may be, part thereof should not be rejected and as to why the claimant should not be proceeded against under the relevant provisions of the Act.

10. REFUND • Supportive documents • The refund claimant shall submit the refund claim in computer diskette in the prescribed format or software along with the following document:- • Input tax Invoice, GD for import, Output tax Invoices (Summary of invoices for local zero rated goods) • Goods Declaration for Export, Copy of House and Master bill of lading, airway bill and railway receipt in token of verification • Statement of Tax Paid inputs, in respect of which refund is claimed.

11. RECOVERY OF ARREARS • Where any amount of tax is due from any person, the officer of Sales Tax may: • Deduct the amount from any money owing to person from whom such amount is recoverable and which may be at the disposal or in the control of such officer or any officer of Income Tax, Customs or Central Excise Department; • Require by a notice in writing any person who holds or may subsequently hold any money for or on account of the person from whom tax may be recoverable to pay to such officer the amount specified in the notice; • Stop removal of any goods from the business premises of such person till such time the amount of tax is paid or recovered in full; • Seal the business premises till such time the amount of tax is paid or recovered in full; • Attach and sell or sell without attachment any movable or immovable property of the registered person from whom tax is due; • For the purpose of recovery of tax, penalty or any other demand raised under this Act, the officer of sales tax shall have the same powers which under the Code of Civil Procedure, a Civil Court has for the purpose of recovery of an amount due under a decree.

12. MISCELLANEOUS • Sales of taxable activity or transfer of ownership • Liquidators • Power to make rules • Computerized System • Bar of suits, prosecution and other legal proceedings • Appearance by authorized representative • e-intermediaries to be appointed • Estate of deceased person • Estate in bankruptcy • Removal of difficulties • Services of order, decisions, etc • Correction of clerical errors, etc. • Liability for payment of tax in the case of private companies or business enterprises

13. MISCELLANEOUS • Tax paid on stocks acquired before registration • Power to deliver certain goods without payment of tax • Repayment of tax in certain cases • Drawback allowable on re-export • Drawback on goods taken into use between importation and re-exportation • Power to declare what goods are identifiable and to prohibit drawback in case of specified foreign territory • Exemption of tax not levied or short levied as a result of general practice • Refund to be claimed within one year • Delayed refund • Liability of the registered person for the acts of his agent

14. MISCELLANEOUS • Issuance of certificate & duplicate of Sales Tax documents • Computation of limitation period • Special procedures • Officers of sales tax to follow Board’s orders, etc • Certain transactions not admissible • Condonation of time-limit • Application of provisions of Act IV of 1969 to Sales Tax

15. SALES TAX RULES 2006 [S.R.O. No. 555(1)/2006]

16. TAXPAYER’S AUTHORIZED REPRESENTATIVES • Application • Persons authorized to represent a taxpayer • DisqualificationsProcedure to appoint authorized representative • Power to disqualify

17. ALTERNATE DISPUTE RESOLUTION • Application • Application for alternative dispute resolution • Appointment of Alternative Dispute Resolution Committee • Working of the Committee • Recommendation of the Committee • Recommendation by the Committee • Decision of the Board

18. ELECTRONIC INTERMEDIARIES • Application • Appointment of e-intermediary • Cancellation of appointment • Procedure to be followed by registered persons • Procedure to be followed by e-intermediary • Responsibility of e-declaration Administrator • Scrutiny of records

19. SALES TAX SPECIAL PROCEDURES RULES, 2007. [S.R.O. NO. 480(I)/2007]

20. PAYMENT OF SALES TAX BY RETAILERS • Application • Registration • Levy and rate of tax • Determination of sales tax liabilities • Payment of sales tax and filing of return • Issuance of invoice or cash memo • Use of Fiscal Electronic Cash Registers • Instruction by Board

21. COLLECTION AND PAYMENT OF SALES TAX ON ELECTRIC POWER • Application • Registration • Levy and collection of sales tax • Filing of returns and deposit of sales tax • Determination of sales tax liability in respect of WAPDA and KESC • Input tax adjustment for registered consumers • Record keeping and invoicing • penalty

22. COLLECTION AND PAYMENT OF SALES TAX ON NATURAL GAS • Application • Levy and collection of sales tax • Determination of tax liability • Record keeping and invoicing • Filing of monthly return • penalty

23. PERSONS PROVIDING OR RENDERING SERVICES SUBECT TO SALES TAX UNDER THE PROVINCIAL LAW • Application • Registration • Levy and collection of sales tax • Filing of returns and deposit of sales tax • Determination of tax liability • Invoicing • Specific Provision • Advertisement on Television and Radio • Customs Agents and Ship-Chandlers • Services Provided by Stevedores

24. PAYMENT OF SALES TAX BY IMPORTERS • Application • Payment of sales tax on account of minimum value addition • Tax not be refunded • Treatment of existing stocks of commercial importers • Filing of return and audit

25. PAYMENT OF SALES TAX BY WHOLESALE-CUM-RETAIL OUTLETS • Application • Rate and determination of sales tax • Filing of return, and payment of sales tax and maintenance of records • Supplies to diplomats and diplomatic missions and refund of tax collected • Miscellaneous

26. Sales Tax Special Procedure (Withholding) Rules, 2007 S.R.O 660(I)/2007 Amended through S.R.O 603(I)/2009

27. S.R.O 660(I)/2007 • These rules shall apply to taxable good and services as are supplied to following persons, hereby specified as withholding agents, for the purpose of deduction and deposit of sales tax, namely:-- • Federal and Provincial Government Departments • Autonomous Bodies • Public Sector Organizations; • Taxpayers falling in the jurisdiction of LTU for the purpose of Sales Tax, Federal Excise Duty or Income Tax; and • Recipients of Services of advertisement, who are registered for sales tax • A withholding agent, other than a person in the jurisdiction of LTU and a recipient of advertisement services, shall deduct an amount equal to one fifth of the total sales tax shown in the sales tax invoice issued by a registered person and make payment of the balance amount to him. • A withholding agent, including a person registered in a LTU and a recipient of advertisement services, who purchase goods and services form unregistered person, shall deduct sales tax at the applicable rte of the value of taxable supplies made to him from the payment due to supplier.

28. S.R.O 660(I)/2007 The sales tax so deducted shall be deposited by the withholding agent in the designated branch of National Bank of Pakistan under relevant head of account on sales tax return-cum-payment Challan by 15th of the month following the month during which payment has been made to supplier. Annexure to these rules, shall be prepared and deposited with the bank in triplicate and the bank shall send the original to the Collectorate of Sales Tax having jurisdiction, return the duplicate t the depositor and retain the triplicate for it own record. In case the withholding agent is also registered under the Sales Tax Act, 1990, or the Federal Excise Act, 2005, he shall file the return and deposit the with held amount of sales tax in the manner as provided under Chapter II of the Sales Tax Rules 2006, along with other tax liability and such person shall not be required to file the return in the term as set out in the Annexure to these rules:

29. S.R.O 660(I)/2007 • In case the withholding agent is not registered for sales tax or federal excise duty but holds a national tax number assigned under the Income Tax Ordinance, 2001 he shall file the return electronically and deposit the amount deducted at source in the manner as provided for persons filing returns electronically under rules 18 of the Sales Tax Rules, 2006: • A certificate showing deduction of sales tax shall be issued to the supplier by the withholding agent duly specifying the name and registration number of supplier, description of goods and the amount of sales tax deducted. • Responsibility of the Supplier: • The supplier shall issue sales tax invoice as stipulated in section 23 of the Sales Tax Act, 1990, in respect of every taxable supply made to a withholding agent. • The supplier shall file monthly return and shall adjust total input tax against output tax under sections 7, 8 and 8B of the Sales Tax Act, 1990, taking due credit of the sales tax deducted by the withholding agent.

30. S.R.O 660(I)/2007 • Responsibility of the Collector: • The Collector shall keep a list of all withholding agents falling in his jurisdiction and monitor payment of tax deducted by withholding agents falling in his jurisdiction and shall also ensure that the return prescribed under these rules is filed. • The Collector shall ensure that the return received from the bank is duly fed in the computerized system s referred to in clause (5AAA) of section 2 of the Sales Tax Act, 1990. • The Collector shall periodically ensure that the suppliers mentioned in the return filed by the withholding agents, as fall under his jurisdiction, are filing returns under section 26 of the Sales Tax Act, 1990, read with Chapter II of the Sales Tax Rules, 2006, and are duly declaring the supplies made to withholding agents. • Exclusions: The provision of these rules shall not apply to supplies and services made or rendered by the companies engaged in;- • Distribution of gas and electricity; and • Providing telephone services, including mobile phone services.