The

Sales Tax Act, 1990

 

The Sales Tax Act, 1990, is a significant piece of legislation in Pakistan that governs the imposition, collection, and administration of sales tax on the supply of goods and services. This act is designed to regulate and generate revenue from the sales tax, which is a crucial component of Pakistan’s taxation system.

An Act to consolidate and amend  the

law relating to the levy of a tax on the sale, importation, exportation, production,

manufacture or consumption of goods.

WHEREAS it is expedient to consolidate and amend the law relating to the levy of a tax on the sale, importation, exportation, production, manufacture or consumption of goods;

It is hereby enacted as follows:–

Chapter – I

Preliminary

 

1. Short title, extent and commencement.
   (1) This Act may be called the Sales Tax Act, 1990.
   (2) It extends to the whole of Pakistan.
   (3) It shall come into force on such date as the Federal Government may, by notification in the official Gazette, appoint.

 

2. Definitions. – In this Act, unless there is anything repugnant in the subject or context,–

(1) “Appellate Tribunal” means the Customs, Excise and Sales Tax Appellate Tribunal constituted under section 194 of the Customs Act;

(2) “appropriate officer” means an officer of Sales Tax authorised by the Board by notification in the official Gazette to perform certain functions under this Act;

(2A) “arrears” includes the un-paid amounts of tax, default surcharge additional tax, further tax, extra amount of tax, fines, penalties, fees or any other sums, however described, as have been assessed, adjudged or demanded under this Act,

(3) “associated persons” means any two or more persons who are close relatives to each other or who are interconnected with each other in the following way, namely:–

(i) if the persons, being companies or undertakings, are under common management or control or one is the subsidiary of the other;

(ii) if a person who is the owner or partner or director of a company or undertaking, or who, directly or indirectly, holds or controls twenty per cent shares in such company or undertaking, is also the owner, partner or director of another company or undertaking, or, directly or indirectly, holds or controls twenty per cent shares in that company or undertaking;

Explanation. : —  For the purpose of this clause, the expression It close relatives” mean the family, parents, brothers, sisters and dependents of registered person;

(4) “Board” means the Central Board of Revenue constituted under the Central Board of Revenue Act, 1924 (IV of 1924);

(5) “Collector” means the Collector of Sales Tax appointed under section 30;

(5A) “common taxpayer identifier” means the identification number allocated under section 20 of the Finance Act, 1999 (IV of 1999)

(6) “Customs Act” means the Customs Act 1969 (IV of 1969), and where appropriate all rules and notifications made under that Act;

(6A) “defaulter” means a person and, in the case of company or firm, every director, or partner of the company, or as the case may be, of the firm, of which he is a director or a partner or a proprietor and includes guarantors or successors, who fail to pay the arrears;

(6B)      “Default Surcharge” means the surcharge payable by a defaulter at the rate specified in section 34 of this Act;

(7) “distributor” means a person appointed by a manufacturer, importer or any other person for a specified area to purchase goods from him for further supply and includes a person who in addition to being a distributor is also engaged in supply of goods as a wholesaler or a retailer;

(8) “document” includes any electronic data, computer programmes, computer tapes, computer disks, micro-films or any other medium for the storage of such data;

(9) “due date”, in relation to the furnishing of a return under section 26 means the 15th day of the month following the end of the tax period, or such other date as the Federal Government may, by notification in the official Gazette, specify;

(10) “establishment” means an undertaking, firm or company, whether incorporated or not, an association of persons or an individual;

(11) exempt supply” means a supply which is exempt from tax under section 13;

(12) “goods” include every kind of movable property other than actionable claims, money, stocks, shares and securities;

(13) “importer” means any person who lawfully imports any goods into Pakistan;

(14) “input tax”, in relation to a registered person, means the tax –

(a) levied under this Act on the supply of goods received by that person;

(b) levied under this Act on goods imported, entered and cleared under section 79 or section 104 of the Customs Act, by that person;

(c) levied under the Sales Tax Act, 1990 of Pakistan as adapted in the State of Azad Jammu and Kashmir, on the supply of goods received by that person.

(15) “Local Sales Tax Office” means the office of Superintendent of Sales Tax, or such other office as the Board may, by notification in the official Gazette, specify;

(16) “manufacture” or “produce” includes –

(a) any process in which an article singly or in combination with other articles, materials, components, is either converted into another distinct article or product or is so changed, transformed or reshaped that it becomes capable of being put to use differently or distinctly and includes any process incidental or ancillary to the completion of a manufactured product;

(b) process of printing, publishing, lithography and engraving; and

(c) process and operations of assembling, mixing, cutting, diluting, bottling, packaging, repacking or preparation of goods in any other manner;

(17) “manufacturer” or “producer” means a person who engages, whether exclusively or not, in the production or manufacture of goods whether or not the raw material of which the goods are produced or manufactured are owned by him; and shall include –

(a) a person who by any process or operation assembles, mixes, cuts, dilutes, bottles, packages, repackages or prepares goods by any other manner;

(b) an assignee or trustee in bankruptcy, liquidator, executor, or curator or any manufacturer or producer and any person who disposes of his assets in any fiduciary capacity; and

(c) any person, firm or company which owns, holds, claims or uses any patent, proprietary or other right to goods being manufactured, whether in his or its name, or on his or its behalf, as the case may be, whether or not such person, firm or company sells, distributes, consigns or otherwise disposes of the goods;

(18) “Officer of Sales Tax” means an officer appointed under section 30,

(19) “open market price” means the consideration in money which that supply or a similar supply would generally fetch in an open market;

(20) “output tax” in relation to any registered person means the tax charged under this Act in respect of a supply of goods made by that person;

(21) “Person” includes a company, an association, a body of individuals whether incorporated or not, a public or local authority, a Provincial Government or the Federal Government;

(22) “Prescribed” means prescribed by rules made under this Act;

(23) “registered office” means the office or other place of business specified by the registered person in the application made by him for registration under this Act or through any subsequent application to the Collector;

(24) “registration number” means the number allocated to the registered person for the purpose of this Act;

(25) “registered person,” means a person who is registered or is liable to be registered under this Act;

(27) “retail price”, with reference to the Third Schedule, means the price fixed by the manufacturer, inclusive of all charges and taxes (other than sales tax) at which any particular brand or variety of any article should be sold to the general body of consumers or, if more than one such price is so fixed for the same brand or variety, the highest of such price,

(28) “retailer” means a person, not being a manufacturer or producer or an importer, supplying goods to general public for the purpose of consumption;

(28A) “retail tax” means tax levied under section 3AA;

(29) “return” means any return required to be furnished under Chapter V of this Act;

(30) “Schedule” means a Schedule appended to this Act;

(31) “similar supply”, in relation to the open market price of goods, means any other supply of goods which closely or substantially resemble the characteristics, quantity, components and materials of the aforementioned goods;

(31A) “special audit” means an audit conducted under section 32A;

(32) “Special Judge” means the Special Judge appointed under Section 185 of the Customs Act;

(33) “supply” includes sale, lease or other disposition of goods in the course or furtherance of business carried out for consideration and also includes –

(a) putting to private, business or non-business use of goods acquired, produced or manufactured in the course of business;

(b) auction or disposal of goods to satisfy a debt owed by a person;

(c) possession of taxable goods held immediately before a person ceases to be a registered person; and

(d) such other transaction as the Federal Government may, by notification in the official Gazette, specify;

(34) “tax” means the sales tax, retail tax, and includes default surcharge or any other sum payable under any of the provisions of this Act or the rules made thereunder;

(35) “taxable activity” means any activity which is carried on by any person, whether or not for a pecuniary profit, and involves in whole or in part, the supply of goods to any other person, whether for any consideration or otherwise, and includes any activity carried on in the form of a business, trade or manufacture;

(36) “tax fraction” means the amount worked out in accordance with the following formula: a/100 + a
(“a” is the rate of tax specified in section 3):

(37) “tax fraud” means knowingly, dishonestly or fraudulently and without any lawful excuse (burden of proof of which excuse shall be upon the accused) –

(i) doing of any act or causing to do any act; or

(ii) omitting to take any action or causing the omission to take any action; or

(iii)  falsifying the sales tax invoices,

in contravention of duties or obligations imposed under this Act rule or instructions issued thereunder with the intention of understating the tax liability or overstating the entitlement to tax credit or tax refund to cause loss of tax;

(38) “tax identification number (TIN)” means the registration number or any other number allocated to a taxable person;

(39) “taxable goods” means all goods other than those which have been exempted under section 13;

(40) “tax invoice” means a document required to be issued under section 23;

(41) “taxable supply” means a supply of taxable goods made in Pakistan by an importer; manufacturer, wholesaler (including dealer), distributor or retailer other than a supply of goods which is exempt under section 13 and includes a supply of goods chargeable to tax at the rate of zero per cent under section 4;

(43) “tax period” means a period of one month or such other period as the Federal Government may, by notification in the official Gazette, specify;

(44) “time of supply” means a supply made in Pakistan shall be deemed to have taken place at the earlier of the time of delivery of goods or the time when any payment is received by the supplier in respect of that supply:

Provided that where any part payment is received –

(a) for a supply in a tax period, it shall be accounted for in the return for that tax period; and

(b) in respect of an exempt supply, it shall be accounted for in the return for that tax period during which the exemption is withdrawn from such supply:

Provided further that –

(a) where any goods are supplied by a registered person to an associated person and the goods are not to be removed, the time of supply shall be the time at which these goods are made available to the recipient; and

(b) where the goods are supplied under hire purchase agreement, the time of supply shall be the time at which the agreement is entered into;

(45) “turnover tax” means tax levied under section 3A of this Act.”

(46) “value of supply” means; —

(a) in respect of a taxable supply, the consideration in money including all Federal and Provincial duties and taxes, if any, which the supplier receives from the recipient for that supply but excluding the amount of tax:

Provided that:

(i) in case the consideration for a supply is in kind or is partly in kind and partly in money, the value of the supply shall mean the open market price of the supply excluding the amount of tax; and

(ii) in case the supplier and recipient are associated persons and the supply is made for no consideration or for a consideration which is lower than the open market price, the value of supply shall mean the open market price of the supply excluding the amount of tax;

(b) in case of trade discounts, the discounted price excluding the amount of tax,. provided the tax invoice shows the discounted price and the related tax and the discount allowed is in conformity with the normal business practices;

(c) in case where for any special nature of transaction it is difficult to ascertain the value of a supply, the open market price;

(d) in case of imported goods, the value determined under section 25 or 25B of the Customs Act, including the amount of customs-duties and central excise duty levied hereon;

(e) in case where there is sufficient reason to believe that the value of a supply has not been correctly declared in the invoice, the value determined by the Valuation Committee comprising representatives of trade and the Sales Tax Department constituted by the Collector ; and

(f) in case the goods other than taxable goods are Supplied to a registered person for processing, the value of supply of such processed goods shall mean the price excluding the amount of sales tax which such goods will fetch on sale in the market;

Provided that, where the Central Board of Revenue deems it necessary, it may, by notification in the official Gazette, fix the value of any taxable supplies or class of supplies and for that purpose fix different values for different classes or description of same type of supplies:

Provided further that where the value at which the supply is made is higher than the value fixed by the Central Board of Revenue, the value of goods shall be value at which the supply is made;

(g) in case of a taxable supply, with reference to retail tax, the price of taxable goods excluding the amount of retail tax, which a supplier will charge at the time of making taxable supply by him, or such other price as the Board may, by a notification in the Official Gazette, specify.

(47) “wholesaler” includes a dealer and means any person who carries on, whether regularly or otherwise, the business of buying and selling goods by wholesale or of supplying or distributing goods, directly or indirectly, by wholesale for cash or deferred payment or for commission or other valuable consideration or stores such goods belonging to others as an agent for the purpose of sale; and includes a person supplying taxable goods to person deducting advance tax under sub-section (4) of section 50 of the Income Tax Ordinance, 1979 (XXXI of 1979), and a person who in addition to making retail supplies is engaged in wholesale business; and

(48) “zero – rated supply” means a taxable supply which is charged to tax at the rate of zero per cent under section 4.

 

3. Scope of tax. : — (1) Subject to the provisions of this Act, there shall be charged, levied and paid a tax known as sales tax at the rate of fifteen per cent of the value of—

(1A) Where taxable supplies are made in Pakistan to a person other than a registered person there shall be charged, levied and paid a further tax at the rate of three per cent of the value -in addition to the rate specified in sub-section (1), clause (c) of sub-section (2), and sub-section (4) and (5):

Provided that the aforesaid three per cent further tax shall not be charged, levied and paid if the said taxable supplies are made. : —

• by a person registered as a retailer; or

(2) by any registered person to a person whose income is not liable to tax under the Income Tax Ordinance, 1979 (XXXI of 1979) but has deducted income tax at source under sub-section (4) of section 50 of the said Ordinance;

(3) by a registered person on the supply of-

(i) electrical energy;

(ii) natural gas;

(iii) petroleum gases including liquified petroleum gas; and

(iv) petroleum products.

(2) Notwithstanding the provisions of sub-section (1),

(c) taxable supplies specified in the Third Schedule shall be charged to tax at the rate of fifteen per cent of the retail price which alongwith the amount of sales tax shall be legibly, prominently and indelibly printed or embossed by the manufacturer on each article, packet, container, package, cover or label, as the case may be;

(3) The liability to pay the tax shall be,–

(a) in the case of supply of goods in Pakistan, of the person making the supply, and

(b) in the case of goods imported into Pakistan, of the person importing the goods.

(3A) Notwithstanding anything contained in clause (a) of sub-section (3), the Federal Government may, by a notification in the official gazette, specify the goods in respect of which the liability to pay tax shall be of the person receiving the supply.

(4) The Federal Government may, in addition to or in lieu of levying and collecting the tax under sub-section (1), levy and collect such fixed amount of tax on any goods or class of goods to be payable by any registered person or class of registered persons, supplying such goods or class of goods, in such mode, manner and at time, and subject to such conditions and limitations as it may specify by a notification in the Official Gazette.

(5) The Federal Government may, in addition to the tax levied under sub-section (1) and (1A), clause (c) of sub-section (2) and sub-section (4), levy and collect such extra amount of tax not exceeding fifteen per cent of the value of such goods or class of goods and on such persons or class of persons, in such mode, manner and at time, and subject to such conditions and limitations as it may, by rules, prescribed.
 

 

Chapter – II

Scope and Payment of Tax

 

3A. Turnover tax. : — (1) Subject to the provisions of this section, there shall be charged, levied and paid turnover tax at the rate of two per cent of the taxable turnover by any manufacturer or producer and retailer who is making taxable supplies in the course or furtherance of any taxable activity carried on by him, provided that total turnover of that manufacturer or producer and that retailer does not exceed two and a half million rupees and five million rupees, respectively, in any period during the last twelve months:

Provided that the provisions of this section shall not apply to :-

• a manufacturer or producer who is making zero rated supplies; and
• a manufacturer or producer or retailer who is a limited company itself or is owned by a limited company:

Provided further that the Federal Government may, by notification in the Official Gazette, fix any amount of annual total turnover for the application of turnover tax under this rule.

Explanation. : —  For the purposes of this section, “taxable turnover” means the total value of all taxable supplies of goods other than goods taxable at the rate of zero per cent.

(2) Any person who is liable to pay turnover tax under sub-section (1) shall apply for enrollment. The application for enrollment as turnover tax-payer shall be made to the Collector in such form and such manner as may be specified by the Board.

(3) Notwithstanding the provisions of sub-section (1), a manufacturer or producer and a retailer whose taxable turnover does not exceed two and a half million rupees or five million rupees, respectively, may, after voluntary registration under section 18, opt for paying tax under section 3 instead of paying turnover tax under this section subject to the condition that he shall not there after be entitled to be deregistered until the expiry of two years from the date of such registration.

(4) Subject to such modifications as the Board may specify, all provisions of this Act shall apply to the charge, levy, payment, collection and enforcement of the turnover tax, as if it were sales tax under section 3.

 

3AA. Retail tax. : — (1) Subject to the provisions of this section, and such conditions and procedures regarding the mode, manner and time of payment, and from such date as may be specified by the Federal Government, there shall be charged levied and paid retail tax at the rate specified in section 3, by a retailer who is making taxable supplies in the course or furtherance of any taxable activity carried by him.

Provided that the Federal Government may, subject to such conditions and restrictions as it may impose, by notification in the official Gazette, declare that in respect of any goods or class of goods imported into or produced or any taxable supplies made by a registered retailer or class of registered retailers, the tax shall be charged, collected and paid in such manner and at such higher or lower rate or rates as may be specified in the said notification.

• Subject to such modifications as the Board may specify, all provisions of this Act shall apply to the charge, levy, deduction of input tax, payment, collection and enforcement of the retail tax, as if it were sales tax under section 3.
• The application for registration as tax payer of retail tax shall be made to the Collector in such form and manner as may be specified by the Board.

(4) Omited

3AAA Omited

 

3B. Collection of excess sales tax etc. : — (1) Any person who has collected or collects any tax or charge, whether under misapprehension of any provision of this act or otherwise, which was not payable as tax or charge or which is in excess of the tax or charge actually payable and the incidence of which hag been passed on to the consumers, shall pay the amount of tax or charge so collected to the Federal Government.

(2) Any amount payable to the Federal Government under sub-section (1) shall be deemed to be an arrears of tax or charge payable under this act and shall be recoverable accordingly and no claim for refund in respect of such amount shall be admissible.

(3) The burden of proof that the incidence of tax or charge referred to in sub-section (1) has been or has not been passed to the consumer shall be on the person collecting the tax or charge.

4. Zero rating. : — Notwithstanding the provisions of section 3, a supply of the following goods shall be charged to tax at the rate of zero per cent:

(a) goods exported, or the goods specified in the Fifth Schedule ;

(b) supply of stores and provisions for consumption aboard a conveyance proceeding to a destination outside Pakistan as specified in section 24 of the Customs Act, 1969; and

Provided that nothing in this section shall apply in respect of a supply of goods which –

• are exported, but have been or are intended to be re-imported into Pakistan; or
• have been entered for export under Section 131 of the Customs Act, 1969 (IV of 1969), but are not exported; or
• have been exported to a country specified by the Federal Government, by Notification in the official Gazette :

Provided further that the Federal Government may, by a notification in the official Gazette, restrict the amount of credit for input tax actually paid and claimed by a person making a zero-rated supply of goods otherwise chargeable to sales tax.

 

5. Change in the rate of tax. : — If there is a change in the rate of tax—

(a) a taxable supply made in Pakistan by a registered person shall be charged to tax at such rate as is in force at the time of supply;

(b) imported goods shall be charged to tax at such rate as is in force;

(i) in case the goods are entered for home consumption, on the date on which goods declaration is presented under section 79 of the Customs Act, 1969 (IV of 1969); and

(ii) in case the goods are cleared from warehouse, on the date on which a goods declaration for clearance of such goods is presented under section 104 of the Customs Act, 1969 (IV of 1969);

Provided that where a goods declaration is presented in advance of the arrival of the conveyance by which the goods are imported, the tax shall be charged as is in force on the date on which the manifest of the conveyance is delivered:
            Provided further that if the tax is not paid within seven days of the presenting of the bill of entry goods declaration under section 104 of the Customs Act the tax shall he charged at the rate as is in force on the date on which tax is actually paid.

 

6. Time and manner of payment. : — (1) The tax in respect of goods imported into Pakistan shall be charged and paid in the same manner and at the same time as if it were a duty of customs payable under the Customs Act, 1969 and the provisions of the said Act including section 31A thereof shall so far as they relate to collection, payment and enforcement of tax under this Act on such goods where no specific provision exists in this Act, apply.

(2) The tax in respect of taxable supplies made in Pakistan during, a tax period shall be paid by the registered person at the time of filing, the return in respect of that period under Chapter-V :

Provided that the Board may, by a notification in the Official Gazette, direct that the tax in respect of all or such classes of supplies (other than zero-rated supplies) of all or such taxable goods, as may be specified in the aforesaid notification, shall be charged, collected and paid in any other way, mode, manner or at time as may be specified therein.

• The tax due on taxable supplies made in Pakistan shall be paid by any of the following modes: –
• through deposit in a bank designated by the Board; and
  (ii) through such other mode and manner as may be specified by the Board.

7. Determination of tax liability. : — (1) For the purpose of determining his tax liability in respect of taxable supplies made during a tax period, a registered person shall be entitled to deduct input tax, paid during the tax period for the purpose of taxable supplies made, or to be made, by him from the output tax that is due from him in respect of that tax period and to make such other adjustments as are specified in section 9.

Provided that the taxpayer may adjust input tax paid on the purchases in the immediate twelve preceding tax periods from the output tax subject to the condition that the taxpayer specifies the reasons for such delayed input tax adjustment in the revised sales tax return for such period or in the return for the immediately succeeding tax period.

(2) A registered person shall not be entitled to deduct input tax from output tax unless,

(i) in case of a claim for input tax in respect of a taxable supply made in Pakistan, he holds a tax invoice in respect of such supply for which a return is furnished;

(ii) in case of goods imported into Pakistan, he holds the bill of entry duly cleared by the customs under section 79 or section 104 of the Customs Act, 1969 (IV of 1969);

 

7A. Levy and collection of tax on specified goods on value addition.— 1)   Notwithstanding anything contained in this Act or the rules made thereunder, the Federal Government may specify, by notification in the official Gazette, that sales tax chargeable on the supply of goods of such description or class shall, with such limitations or restrictions as may be prescribed, be levied and collected on the difference between the value of supply for which the goods are acquired and the value of supply for which the goods, either in the same state or on further manufacture, are supplied.

(2)   Notwithstanding anything contained in this Act or the rules made thereunder, the Federal Government may, by notification in the official Gazette, and subject to the conditions, limitations, restrictions and procedure mentioned therein, specify the minimum value addition required to be declared by certain persons or categories of persons, for supply of goods of such description, or class as may be prescribed, and to waive the requirement of audit or scrutiny of records if such minimum value addition is declared.

 

8. Tax credit not allowed. : — (1) Notwithstanding anything contained in this Act, a registered person shall not be entitled to reclaim or deduct input tax paid on –

(a) the goods used or to be used for any purpose other than for taxable supplies made or to be made by him;

(b) any other goods which the Federal Government may, by a notification in the official Gazette, specify; and

(c) on the goods under sub-sections (1A) and 5 of section 3.

(2) If a registered person deals in taxable and non-taxable supplies, he can reclaim only such proportion of the input tax as is attributable to taxable supplies in such manner as may be specified by the Board.

(3) No person other than a registered person shall make any deduction or reclaim input tax in respect of taxable supplies made or to be made by him.

(4) No person engaged in taxable activity specified in section 3A shall make any deduction or reclaim input tax, nor shall this tax be creditable as input tax for the taxable activity of any other registered person;

(5) Notwithstanding anything contained in any other law for the time being in force or any decision of any Court, for the purposes of this section, no input tax credit shall be allowed to the persons who paid fixed tax under any provisions of this Act as it existed at any time prior to the first day of December, 1998.

 

9. 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 cancellation of supply or return of goods or a change in the nature of supply or change in the value of the supply or some such event the amount shown in the tax invoice or the return needs to be modified, the registered person may, subject to such conditions and limitations as the Board may impose, issue a debit or credit note and make corresponding adjustment against output tax in the return.

 

10. Excess amount to be (***) refunded.― (1) Subject to the provisions of sub-section (2), if in relation to a tax period, the total deduction of input tax and other adjustments as specified in section 9 exceed the output tax, the excess amount shall be refunded to the registered person:

Provided that any excess amount of tax shall be refunded to the registered person subject to such conditions, restrictions and limitations as the Board may, by notification in the official Gazette, specify:

Provided further that the Board may, by notification in the official Gazette, restrict or regulate the amount of refund claimed by a registered person as input tax credit to such extent and in such manner as it may specify therein;

(2) Notwithstanding anything contained in sub-section (1), the input tax incurred in connection with a zero-rated supply shall be refunded not later than thirty days of filing of return in such manner and subject to such conditions as the Board may, by notification in the official Gazette, specify.

3)         If a registered person is liable to pay any tax, default surcharge or penalty payable under any law administered by the Board, the refund of input tax shall be made after adjustment of unpaid outstanding amount of tax or, as the case may, default surcharge and penalty.

(4) Where there is reason to believe that a person has claimed input tax credit or refund which was not admissible to him, the provisions regarding time limit shall not apply till the investigation, including the verification of the deposit of tax claimed as refund, is completed and the claim is either accepted or rejected.

 

11. Assessment of Tax.― (1)           Where a person who is required to file a tax return fails to file the return for a tax period by the due date or pays an amount which, for some miscalculation is less than the amount of tax actually payable, an officer of Sales Tax shall, after a notice to show cause to such person, make an order for assessment of tax, including imposition of penalty and default surcharge in accordance with section 33 and 34:

Provided that where a person required to file a tax return files the return after the due date and pays the amount of tax payable in accordance with the tax return alongwith default surcharge and penalty, the notice to show cause and the order of assessment shall abate.

(2) Where a person has not paid the tax due on supplies made by him or has made short payment or has claimed input tax credit or refund which is not admissible under this Act for reasons other than those specified in sub-section (1), an officer of Sales Tax shall make an assessment of sales tax actually payable by that person or determine the amount of tax credit or tax refund which he has unlawfully claimed and shall impose a penalty and charge default surcharge in accordance with section 33 and 34.

(3)       (* * * )

(4)       No order under this section shall be made by an officer of Sales Tax unless a notice to show cause is given to the person in default specifying the grounds on which it is intended to proceed against him and the officer of Sales Tax shall take into consideration the representation made by such person and provide him with an opportunity of being heard:

            Provided that order under this section shall be made within ninety days of issuance of show cause notice or within such extended period as the Collector or, as the case may be, Collector (Adjudication) may, for reasons to be recorded in writing, fix provided that such extended period shall in no case exceed ninety days.

5) Notwithstanding anything in sub-section (1), where a registered person fails to file a return, an officer of Sales Tax Department, not below the rank of Assistant Collector, shall subject to such conditions as specified by the Central Board of Revenue, determine the minimum tax liability of the registered person.

 

11A. Short-paid amounts recoverable without notice.—  Notwithstanding any of the provisions of this Act, where a registered (***) person pays the amount of tax less than the due tax as indicated in his return, the short-paid amount of tax shall be recovered without giving a show cause notice to such person provided that no default surcharge or penalty shall be charged unless a show cause notice is given to such person.

 

12. Omitted

 

13. Exemption. : — (1) Notwithstanding the provisions of section 3, supply of goods or import of goods specified in the Sixth Schedule shall, subject to such conditions as may be specified by the Federal Government, be exempt from tax under this Act:

Provided that the Federal Government may, by notification in the official Gazette, withdraw any exemption granted under the Sixth Schedule to the extent specified in the notification:

Provided further that the aforesaid power to withdraw an exemption shall not be construed to include the power to revive or to restore the exemption so withdrawn.

(4) Where a person does not desire to avail any tax exemption, he may, after voluntary registration, opt to pay sales tax at the rate applicable to such supplies under the provisions of section 3 subject to condition that he shall not thereafter be de-registered till the expiry of two years from the date of such registration.

(5) Notwithstanding the omission of sub-section (2), the Federal Government may, by notification in the official Gazette, rescind a notification issued by it or by the Board under sub-section (2) prior to the first day of December, 1998.

 

 

 

Chapter – III

Registration

14. Requirement of registration- (1) The following persons engaged in making of taxable supplies in Pakistan (including zero-rated supplies) in the course or furtherance of any taxable activity carried on by them, if not already registered, are required to be registered under this Act, namely:-

(i) a manufacturer whose annual turnover from taxable supplies made in any period during the last twelve months ending any tax period exceeds two and half million rupees;

(ii) a retailer whose value of supplies in any period during the last twelve months ending any tax period exceeds five million rupees;

(iii) an importer; and

(iv) a wholesaler (including dealer) and distributor:

Provided that buyers or importers of taxable plant and machinery who intend to make taxable supplies in due course and wish to claim any credit or refund of tax paid on the said plant and machinery shall also be required to be registered under this Act

15. Omitted
16. Omitted
17. Omitted
18. Omitted
19. Omitted
20. Omitted

 

Omitted Sections 15-20 were as under:
15. Application for Registration. : —
(1) A person required to be registered under this Act shall make an application in the prescribed form to the Collector Before making taxable supplies.
(2) An application to register shall be made to such Collector as the Board may, by notification in the official Gazette, specify.

16. Registration of branches, divisions etc. : —
A registered person, or a person liable for registration who conducts his taxable activity through distinct different branches, divisions or manufacturing units located in different Collectorates may make an application for registration in accordance with section 15 for such branches, divisions or manufacturing units separately, subject to such conditions and in such manner as the Board may, by notification in the official Gazette, specify.

17. Certificate of Registration. : —
If the Collector or such other officer as may be authorised by him in this behalf is satisfied that the application for registration is complete in all respects, he shall register the applicant and issue a certificate of registration in such form as the Board may, by notification in the official Gazette, specify.

18. Voluntary Registration. : —
(1) A person who makes or intends to make taxable supplies but is not required to be registered under this Act, may make an application for registration in such form and manner as the Board may, by notification in the official Gazette, specify.
(2) A person registered in pursuance to application made under subsection (1), shall not be de-registered before expiry of two years from the date of registration.
(3) A retailer making taxable supplies may, on his own accord, apply for registration in accordance with the proviso of sub-section (1):
Provided that on registration, notwithstanding anything contained in this Act, such distributor, wholesaler or retailer shall not be entitled to be de-registered before expiry of two years from the date of registration.

19. Compulsory Registration. : —
If a person who is required to be registered under this Act does not apply for registration and the Collector or such other officer as may be authorised by him in this behalf, after such inquiry as he thinks fit, is satisfied that such person was required to be registered, the Collector or such other officer shall register that person and that he shall be deemed to have been registered from the date he became liable for registration.

20. Change in the particulars of registration. : —
In case there is a change in the name, address or other particulars as stated in the registration application, the registered person shall notify the change to the Collector or the local Sale Tax Office within fourteen days of such change.

 

21. De-registration, blacklisting and suspension of registration.— (1)   The Board or any officer, authorized in this behalf, may subject to the rules, de-register a registered person or such class of registered persons not required to be registered under this Act.

(2)   Notwithstanding anything contained in this Act, in cases where the Collector is satisfied that a registered person is found to have issued fake invoices (***) or has otherwise committed tax fraud, he may blacklist such person or suspend his registration in accordance with such procedure as the Board may, by notification in the official Gazette, prescribe.

 

 

 

 

 

Chapter – IV

Book Keeping and Invoicing Requirements

 

22. Records- (1)    A registered person making taxable supplies shall maintain and keep at his business premises or registered office in English or Urdu language the following records of goods purchased, imported and supplies (including zero-rated and exempt supplies) made by him or by his agent acting on his behalf in such form and manner as would permit ready ascertainment of his tax liability during a tax period –

(a)    records of supplies made shall indicate the description, quantity and value of goods, name and address of the person to whom supplies were made and the amount of the tax charged;

(b)    records of goods purchased shall show the description, quantity and value of goods, name, address and registration number of the supplier and the amount of the tax on purchases;

(c)    records of goods imported shall show the description, quantity and value of goods and the amount of tax paid on imports;

(d)    records of zero-rated and exempt supplies;

(e)    invoices, credit notes, debit notes, bank statements, banking instruments in terms of section 73, inventory records, utility bills, salary and labour bills, rental agreements, sale purchase agreements and lease agreements; and

(f)    such other records as may be specified by the Board:

provided that the persons paying (***) retail tax shall keep such record as may be specified by the Board.

 

(2)    The Board may, by notification in the official Gazette, specify for any class of taxable persons or

any other person registered under this Act to keep such other records for the purposes of this Act.

 

(2A)  The Board may, by notification in the Official Gazette, specify for any class of taxable persons

registered under this Act to use such electronic fiscal cash registers as are approved by the Board

in the manner as may be prescribed.

 

(3)    The Board may, by notification in the official gazette, prescribe the procedure or  software for

electronically maintenance of records, filing of sales tax returns or refunds and for any other matter or

approve any software for electronic maintenance of records and filing of returns or refunds by a person

or class of such persons.

 

23. Tax Invoices.-  (1)    A registered person making a taxable supply shall issue a serially numbered tax invoice at the time of supply of goods containing the following particulars, namely:-

(a)    name, address and registration number of the supplier;

(b)    name, address and registration number of the recipient;

(c)    date of issue of invoice;

(d)    description and quantity of goods;

(e)    value exclusive of tax;

(f)    amount of sales tax; and

(ff)   (***)

(g)    value inclusive of tax:

            Provided that the Board may, by notification in the official Gazette, specify such modified invoices for different persons or classes of persons:

Provided further that not more than one tax invoice shall be issued for a taxable supply.

(2)    No person other than a registered person or a person paying (***) retail tax shall issue an invoice under this section.

(3)    A registered person making a taxable supply may, subject to such conditions, restrictions and limitations as the Board may, by notification in the official Gazette, specify, issue invoices to another registered person electronically and to the Board as well as to the Collector, as may be specified.

 

24. Retention of record and documents for three years.-  A person who is required to maintain any record or documents under this Act, shall retain the record and documents for a period of three years after the end of the tax period to which such record or documents relate.

 

25. Access to record, documents, etc.-  (1)    A person who is required to maintain any record or documents under this Act or any other law shall, as and when required by an officer of Sales Tax, produce record or documents which are in his possession or control or in the possession or control of his agent; and where such record or documents have been kept on electronic data, he shall allow access to such officer of Sales Tax and use of any machine on which such data is kept.

(2)       The officer of Sales Tax, on the basis of the record, obtained under sub-section (1), may, once in a year, conduct audit:

          Provided that in case the Collector has information or sufficient evidence showing that such registered person is involved in tax fraud or evasion of tax, he may authorize an officer of sales tax, not below the rank of Assistant Collector, to conduct an inquiry or investigation under section 38.

(3)       The Assistant Collector (Audit), shall issue audit observation pointing out the contraventions of the Act or rules, as the case may be, and the amount of tax evaded therein, on the basis of scrutiny of such records, as prescribed under the Act or rules or in any other manner by the Board. The registered person may, within a period of fifteen days of the receipt of audit observation, submit his point of view in writing.

(4)       If, within the period prescribed in sub-section (3), no reply is received or the reply furnished by the registered person is found unsatisfactory, the Assistant Collector shall issue an audit report specifying the amount of tax or charge that has not been levied or has been short levied or has been erroneously refunded or any other violation of any provision of Act or rules made thereunder.

(5)       Notwithstanding the penalties prescribed in section 33, if a registered person wishes to deposit the amount of tax short paid or amount of tax evaded along with default surcharge voluntarily, whenever it comes to his notice, before receipt of notice of audit, no penalty shall be recovered from him:

Provided if a registered person wishes to deposit the amount of tax short paid or amount of tax evaded along with default surcharge during the audit, or at any time before issuance of show cause notice in lieu of the audit report, he may deposit the evaded amount of tax, default surcharge under section 34, and twenty five per cent of the penalty payable under section 33:

Provided further that if a registered person wishes to deposit the amount of tax short paid or amount of tax evaded along with default surcharge after issuance of show cause notice, he shall deposit the evaded amount of tax, default surcharge  under section 34, and full amount of the penalty payable under section 33 and thereafter, the show cause notice, shall stand abated.

 

25A. Drawing of samples.-  Where an authorized officer of sales tax considers it necessary to take a sample of any goods or raw materials, for the purpose of determining their liability to sales tax or for the purpose of establishing their value or for any other reason, he may remove a minimum quantity of goods or raw materials sufficient to enable a proper examination or analysis to be made. At the time of taking the sample the person in possession of the goods shall be informed and given the opportunity to sign the representative samples, so drawn, and take a corresponding sample for his record. Any sample taken under this section shall be taken against a proper receipt a copy each of which shall be kept in the record by the registered person and the collectorate.

 

 

 

 

 

Chapter – V

Returns

 

26. Monthly Return.- (1)    Every registered person shall furnish not later than the due date a true and correct return in the prescribed form to a designated bank specified by the Board, indicating the purchases and the supplies made during a tax period, the tax due and paid and such other information, as may be prescribed.

(2)    If there is a change in the rate of tax during a tax period, a separate return in respect of each portion of tax period showing the application of different rates of tax shall be furnished.

(3)    A registered person may file a revised return to correct any omission or wrong declaration made in a return filed under sub-section (1) or sub-section (2).

(4)    Notwithstanding the penalties prescribed in section 33, if a registered person wishes to file revised return voluntarily along with deposit of the amount of tax short paid or amount of tax evaded along with default surcharge, whenever it comes to his notice, before receipt of notice of audit, no penalty shall be recovered from him:

Provided that in case the registered person wishes to deposit the amount of tax as pointed out by the officer of sales tax during the audit, or at any time before issuance of the show cause notice in lieu of the audit report, he may deposit the evaded amount of tax, default surcharge under section 34, and twenty-five per cent of the penalty payable under section 33 along with the revised return:

Provided further that in case the registered person wishes to deposit the amount after issuance of show cause notice, he shall deposit the evaded amount of sales tax (***), default surcharge under section 34, and full amount of the leviable penalty under section 33 along with the revised return and thereafter, the show cause notice, shall stand abated.

(5)    The Board may, by notification in the official Gazette, require any person or class of persons, for any goods of such description or class, to furnish such summary or details or particulars pertaining to the imports, purchases and supplies during any tax period or periods, in such format as may be specified.

 

26A. Omitted

 

26AA. Retail Tax Return.-  (1)    Every registered retailer making taxable supplies shall furnish not later than due date a true and correct return in the prescribed form to the designated branch of the bank specified by the Board.

(2)    If there is a change in the rate of tax during a tax period, a separate return in respect of each portion of tax period, showing the application of different rates of tax, shall be furnished.

(3)     A registered retailer may file a revised return to correct any omission or wrong declaration made in a return filed under sub-section (1) or sub-section (2).

(4)     Notwithstanding the penalties prescribed in section 33, if a registered retailer wishes to file a revised return voluntarily along with deposit of the amount of tax short paid or amount of tax evaded along with default surcharge, whenever it comes to his notice, before receipt of notice of audit, no penalty shall be recovered from him:

            Provided that in case the registered retailer wishes to deposit the amount of tax as pointed out by the officer of Sales Tax during the audit, or at any time before issuance of the show cause notice in lieu of the audit report, he may deposit the evaded amount of tax, default surcharge under section 34, and twenty-five per cent of the penalty payable under section 33 along with the revised return:

Provided further that in case the registered retailer wishes to deposit the amount after issuance of show cause notice, he shall deposit the evaded amount of sales tax (***), default surcharge under section 34, and full amount of the leviable penalty under section 33 along with the revised return and thereafter, the show cause notice, shall stand abated.

 

27. Special Returns.-  In addition to the return specified under section 26—

(a)    a person registered (***) under this Act shall furnish special return within such date and in such form indicating information such as quantity manufactured or produced, purchases made, goods supplied or payment of  arrears made, etc, for such period as the Board may, by a notification in official gazette, specify; and

(b)    the collector may require any person whether, registered or not, to furnish a return (whether on his own behalf or as an agent or trustee) in a prescribed form and such person shall furnish the return not later than the date specified in this regard.

 

28. Final Return.-  If a person applies for de-registration in terms of section 21, he shall before such de-registration, furnish a final return to the Collector in the specified form in such manner and at such time as directed by the Collector.

 

29.   Return deemed to have been made.-  A return purporting to be made on behalf of a person by his duly appointed representative shall, for all purposes, be deemed to have been made by such person or under his authority unless proved to the contrary

 

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