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Tax Laws in Pakistan

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Q.1: Discuss precisely history of income Tax Laws in Pakistan?
Ans:
History of Income Tax Law in Pakistan:
1) Promulgation of Income Tax Act, 1922:
When Pakistan came into being, the Government of Pakistan promulgated the
Income Tax Act, 1922, as amended upto the date for regulating the taxation
system in Pakistan.
2) An Applicability of the Income Tax Act, 1922:
The provisions of the Act were extended to the whole of Pakistan except the
specified areas.
3) Formation of the Taxation Inquiry Committee:
"A Taxation Inquiry Committee", was introduced in 1958 which was consist of
officials and the representatives of trade and commerce.
4) Recommendations of Taxation Inquiry Committee:
"Taxation Inquiry Committee" submitted a report after keen analysis of prevailing
tax system and suggested some recommendations. Some of the
recommendations were accommodated which resulted in the amendment of
Income Tax Act, 1922.
5) Abolishment of Super Tax:
Before 1959, super tax was imposed on the incomes of all the persons but in
registered firm and companies.
6) Expression of Rate Slab as a Percentage of Income:
In 1959, the rates of each slab were expressed as a percentage of income
considering the recommendations of "Taxation Inquiry committee".
7) Change in Financial Year:
Before 1960, the financial year was considered from 1st April to 31st March but
in 1960, it was changed from 1st July to 30th June.

8) Introduction of Income Tax Committee:
In 1961, FBR introduced an "Income Tax Committee". Main purpose of
introduction of such committee was to make recommendations for simplification
of the Income Tax Act, 1922 and procedure of taxation.
9) Introduction of Self Assessment Scheme:
Before 1965, an assessment officer was assessed the income and determined
the tax liability of the person but in 1965, "Self Assessment Scheme" was
introduced.
10) Promulgation and Enforcement of the Income Tax Ordinance, 1979:
Till 1979, lot of amendments were made in the context of the Income Tax Act,
1922. As a result of these amendments, the Act became a complicated law and
difficulties arose in its working. Keeping these difficulties in view, the Government
promulgated a new income tax law namely "The Income Tax Ordinance, 1979"
through the Finance Ordinance on June 28, 1979 and included all the basic
concept of the repealed Act, so that the benefit of the whole case law built up
over the last 57 years is not rendered useless.
11) Formation of National Tax Reform Commission:
In 1985, the Federal Government formed a National Tax Reform Commission. It
was consist of members of Senate and National Assembly, high government
officials and renowned industrialist. Major purpose of such commission was to
suggest way and means to improve the existing structure of tax laws in Pakistan.
12) Income Tax Survey 1999-2000:
In 1999-2000, under the Income Tax Ordinance, 1979, an income tax survey
was conducted to analyze the prevailing taxation structure and to procure the
suggestions and recommendations from surveyors.
13) Introduction of Tax Amnesty Schemes:
Many tax amnesty schemes were introduced under the Income Tax Ordinance,
1979. These schemes were introduced to provide a chance to black money
holders, so that they can change their black money into white money. Latest
scheme was introduced in the year 2002.
14) Promulgation of the Income Tax Ordinance, 2001:

vide its notification No. empowers the Federal Government to notify the date from which the Income Tax Ordinance. dated 15th June. 2001. the Ordinance specifies that "The Income Tax Ordinance. 2001: According to section 3 "The Income Tax Ordinance. 2001: Under section 1. 2001. 381 (1)/ 2002. 15) Short Title of the Income Tax Ordinance. 19) Purpose of the Income Tax Ordinance.O. 2001" overrides other laws enforceable in Pakistan. It specifies that the Income Tax Ordinance. in case of any contradiction between the provisions of the Income Tax Ordinance. the provisions of the Income Tax Ordinance. announced that the Income Tax Ordinance. 17) Date of the Enforcement of the Income Tax Ordinance 2001: Section 1 of the Ordinance. 2001: Under section 1. 2001 shall prevail. a government of Pakistan introduced a new income tax law namely. 16) Applicability of the Income Tax Ordinance. 2001: The preamble of the Ordinance specifies the object of law. 2001 shall extend to the whole of Pakistan. It was published in the Extraordinary Gazette of Pakistan at pages bearing Nos. It means. S. to modernize the taxation system.After 22 years of the promulgation of the Income Tax Ordinance. 2001 and any other law of the country.R. 2001. "The Income Tax Ordinance. 2001" shall be the short title of the law. 969 to 1217. 2001" which was promulgated on September 13. 2002. 2001 shall came into force on the first day of July. Q. 2002.2: Explain the procedure regarding imposition of Tax and what Tax credits are available to a Taxpayer under (ITO2001)? Answer: Procedure regarding Imposition of Tax: . the Ordinance specifies that the Income Tax Ordinance. 2001 shall came into force. is promulgated to consolidate and to amend law relating income tax and provide for matters ancillary to and connected with the income tax. The Federal Government. 18) Status of the Income Tax Ordinance.

Charitable donations. or property given by the person in the tax year as a donation to a non-profit organisation. B is the person’s taxable income for the tax year. 75 (2) The amount of a person’s tax credit allowed under sub-section (1) for a tax year shall be computed according to the following formula. 62.(1) A person shall be entitled to a tax credit for a tax year in respect of any amount paid. the fair market value of any property given shall be determined at the time it is given. and C is the lesser of – (a) the total amount of the person’s donations referred to in sub-section (1) in the year. namely: – 76 (A/B) x C where – . or (b) where the person is – (i) an individual or association of persons. or (ii) a company. fifteen per cent of the taxable income of the person for the year. thirty per cent of the taxable income of the person for the year. namely:– (A/B) x C where – A is the amount of tax assessed to the person for the tax year before allowance of any tax credit under this Part.(1) A person shall be entitled to a tax credit for a tax year in respect of the cost of acquiring in the year new shares offered to the public by a public company listed on a stock exchange in Pakistan where the person is the original allottee of the shares or the shares are acquired from the Privatization Commission of Pakistan. (3) For the purposes of clause (a) of component C of the formula in sub-section (2). (4) A cash amount paid by a person as a donation shall be taken into account under clause (a) of component C 76[of] sub-section (2) only if it was paid by a crossed cheque drawn on a bank. (2) The amount of a person’s tax credit allowed under sub-section (1) for a tax year shall be computed according to the following formula.Tax credits: 61. Investment in shares. including the fair market value of any property given.

Securities and Exchange Commission of Pakistan] of an insurance company duly registered under the Insurance Ordinance. (b) for the annuity payable to the person to commence before . the amount of tax payable by the person for the tax year in which the shares were disposed of shall be increased by the amount of the credit allowed. and (b) the person has made a disposal of the share within twelve months of the date of acquisition. having its main object the provision to the person of an annuity in old age. or (c) one hundred thousand rupees. 2000 (XXXIX of 2000). or (c) 78[one hundred] thousand rupees. (b) ten per cent of the person’s total income for the year. (b) five per cent of the person’s total income for the tax year. Retirement annuity scheme. (2) The amount of a resident individual’s tax credit allowed under subsection (1) for a tax year shall be computed according to the following formula. (3) A person shall not be entitled to a tax credit under sub -section (1) in respect of a contract of annuity which provides – (a) for the payment during the life of the person of any amount besides an annuity. and C is the lesser of – (a) the total contribution or premium referred to in subsection (1) paid by the individual in the year. B is the person’s taxable income for the tax year. namely: – 77 (A/B) x C where – A is the amount of tax assessed to the person for the tax year before allowance of any tax credit under this Part. 63. a resident individual deriving income chargeable to tax under the head “Salary” or the head “Income from Business” shall be entitled to a tax credit for a tax year in respect of any contribution or premium paid in the year by the person under a contract of annuity scheme approved by 77[. and C is the lesser of – (a) the total cost of acquiring the shares referred to in sub-section (1) in the year.A is the amount of tax assessed to the person for the tax year before allowance of any tax credit under this Part. – (1) Subject to subsection (3). (3) Where – (a) a person has claimed a tax credit under sub-section (1) in a tax year in respect of the purchase of a share. B is the person’s taxable income for the tax year.

or (c) 80[one hundred] thousand rupees. and C is the lesser of – (a) the total profit referred to in sub-section (1) paid by the person in the year. namely: – (A/B) x C 78 where – A is the amount of tax assessed to the person for the tax year before allowance of any tax credit under this Part. of surrender. the following shall apply – (a) component A of the formula in sub -section (2) of section 61. in whole or part. 65. sub-section (2) of section 63 and sub-section (2) of section 64 shall be the taxable income of the individual for the year if any amount derived in the year that is exempt from tax under sub -section (1) of section 92 were chargeable to tax. sub-section (2) of section 62. (2) Any tax credit allowed under this Part shall be applied in accordance with sub-section (3) of section 4.] (2) The amount of a person’s tax credit allowed under sub-section (1) for a tax year shall be computed according to the following formula. B is the person’s taxable income for the tax year. 64.79[(1) A person shall be entitled to a tax credit for a tax year in respect of any profit or share in rent and share in appreciation of value of house paid by the person in the year on a loan by a scheduled bank under a house finance scheme approved by the State Bank of Pakistan or advanced by Government. or (d) for payment of the annuity outside Pakistan. Profit on debt. or assignment. .(1) Where the person entitled to a tax credit under 82[this] Part is a member of an association of persons to which sub-section (1) of section 92 applies. Miscellaneous provisions relating to tax credits.the person attains the age of sixty years. (3) A person is not entitled to 81[tax credit] under this section for any profit deductible under section 17. the local authority or House Building Finance Corporation where the person utilizes the loan for the construction of a new house or the acquisition of a house. and (b) component B of the formula in sub -section (2) of section 61. (c) that the annuity is capable. (b) twenty five per cent of the person’s total income for the year. sub-section (2) of section 63 and sub-section (2) of section 64 shall be the amount of tax that would be assessed to the individual if any amount derived in the year that is exempt from tax under sub-section (1) of section 92 were chargeable to tax. commutation. sub-section (2) of section 62.

(5) Sub-section (4) applies only where the member and the association agree in writing for the sub-section to apply and such agreement in writing must be furnished with the association’s return of income for that year. The trading community protested against this system. determination of Tax and appeal against assessment order under (ITO2001)? Ans: procedure for filing return determination of Tax appeal against assessment Sales tax: Complete Q: Q. . Sales tax was declared a federal subject in 1948 through the enactment of General Sales Tax Act. the amount of any excess credit under sub-section (3) for a tax year may be claimed as a tax credit by the association for that year. 1948 and in 1952. administration and enforcement of Sale Tax Act 1990? Answer: Overview: Sales Tax was a provincial subject at the time of partition.3: Explain procedure for filing return. this levy was transferred permanently to the Central Government.(3) Subject to sub-section (4). Q. (4) Where the person to whom sub-section (3) applies is a member of an association of persons to which sub-section (1) of section 92 applies. or carried back to a preceding tax year. It was being administered in the provinces of Punjab & Sindh as provincial levy. any tax credit or part of a tax credit allowed to a person under this Part for a tax year that is not able to be credited under sub-section (3) of section 4 for the year shall not 79 be refunded. and this resulted in the enactment of Sales Tax Act 1951.1: Write down the Scope. carried forward to a subsequent tax year. Sales tax was levied at the standard rate of 6 pies per rupee at every stage whenever a sale was effected. application.

The sales tax. on goods which were chargeable to Central Excise Duty. by virtue of an amendment in the Sales Tax act. as if it were a duty of Central Excise.(1) by a person registered as a retailer. (3) by a registered person on the supply of(i) electrical energy. (ii) natural gas. Imports were chargeable to Sales Tax but the licensed manufacturers & wholesalers were allowed to import goods without the payment of Sales Tax. and (b) goods imported into Pakistan. Later on Sales Tax became chargeable on locally produced & imported goods at the time of their sales & import. was collected under the Finance Ordinance. (v) substances registered as drugs under the Drugs Act. 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. 1956. 1979 (XXXI of 1979) but has deducted income tax at source under sub-section (4) of section 50 of the said Ordinance. 1976 (XXXI of 1976) and medicaments as are classifiable under any heading of Chapter 30 of the . and sub-section (4) and (5): Provided that the aforesaid further tax shall not be charged. In April 1981. (Words. (iii) petroleum gases including liquified petroleum gas. or (2) by any registered person to a person whose income is not liable to tax under the Income Tax Ordinance. there shall be charged. levied and paid a tax known as sales tax at the rate of fifteen per cent of the value of-(a) taxable supplies made in Pakistan by a registered person in the course or furtherance of any taxable activity carried on by him. Scope of tax: (1) Subject to the provisions of this Act. (1A) Subject to the provisions of sub-section (6) of section 8 or any notification issued there under 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). brackets and letter "clause (a) of" omitted by Finance Ordinance. 1979) sub-section (2). 1951. (iv) petroleum products. the collection of Sales Tax on non-excisable goods was also entrusted to the Central Excise Department. Accordingly new enactment titled Sales Tax Act 1990 replaced Sales Tax Act 1951 with effect from 1-11-1990. respectively. levied and paid if the said taxable supplies are made.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.

declare that in respect of any goods or class of goods imported into or produced in Pakistan or any taxable supplies made by a registered person or a class of registered persons. (2) Notwithstanding the provisions of sub-section (1). (4) The Federal Government may. and subject to such conditions and limitations as it may. subject to such conditions and restrictions as it may impose. as the case may be. packet. of the person making the supply.First Schedule to the Customs Act. (Words.-(a) in the case of supply of goods in Pakistan. 2002) sub-section (2) and sub-section (4). manner and at time. manner and at time. and (b) the Federal Government may. in such mode. by notification in the official Gazette. in addition to or in lieu of levying and collecting the tax under sub-section (1). container. (6) The Federal Government or the Central Board of Revenue may. and (vii) fertilizers. (5) The Federal Government may. 1969 (IV of 1969). prescribed. by notification in the official Gazette. (3A) Not withstanding anything contained in clause (a) of subsection (3). package. in lieu of the tax under sub-section (1). and subject to such conditions and limitations as it may specify by a notification in the Official Gazette. (a) taxable supplies specified in the Third Schedule shall be charged to tax at the rate of fifteen per cent of the retail price which along with the amount of sales tax shall be legibly. 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. supplying such goods or class of goods. (4) to a person enrolled for the purpose of turnover tax at the rate of two per cent. manner or time of payment of such amount of tax. in addition to the tax levied under sub-section (1) and (1A). (3) The liability to pay the tax shall be. (vi) vegetable ghee and cooking oil. by a notification in the official gazette. the Federal Government may. of the person importing the goods. by rules. Application of Sale Tax Act 1990 . brackets and letter "clause (c) of" shall be omitted by Finance Ordinance. prominently and indelibly printed or embossed by the manufacturer on each article. cover or label. levy and collect such amount of tax as it may deem fit on any supplies or class of supplies or on any goods or class of goods and may also specify the mode. 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. and (b) in the case of goods imported into Pakistan. collected and paid in such manner and at such higher or lower rate or rates as may be specified in the said notification. specify the goods in respect of which the liability to pay tax shall be of the person receiving the supply. the tax shall be charged.

there are some items which are chargeable to sales tax at 18. However. The rate for sales tax is 16% of value of supplies. The taxpayer is then issued a Certificate of Registration. Sales Tax is chargeable on all locally produced and imported goods except computer software. Appointment of officer. and its scope has been extended now to remaining sectors. poultry feeds. medicines and unprocessed agricultural produce of Pakistan and other goods specified in Sixth Schedule to The Sales Tax Act.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. Similar exemption is also available to retailers having total turnover below Rs. or Sales Tax Collectorates/ RTOs for the allotment of a Registration Number by the persons liable to be registered under the Sales Tax Act. any person to be(a) a Collector of Sales Tax. Registration Every person in sectors mentioned above. five million in the last twelve months. FBR. appoint in relation to any. Previously it was being charged at the manufacturing & import stage.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. the board may. (c) an Additional Collector of Sales Tax. (d) a Deputy Collector of Sales Tax. However. who makes a taxable supply in Pakistan is required to be registered under the Sales Tax Act. by notification in the official Gazette. Wholesale & Retail stage. Administration of Sale Tax Act 1990: Section30.Administration consists of following officers: For the purposes of this Act. area. Seven lac during the last twelve months are exempted from registration and payment of sales tax. manufacturers having taxable turnover below five million rupees and also utility bill below Rs. any case or class of cases specified in the notification. (b) a Collector of Sales Tax (Adjudication). 1990. .

integrated. Fourteen Regional Tax Offices shall be responsible for collection of all domestic taxes. Tax Administration Reforms Programme: Pakistan’s fiscal crisis is deep and not easily resolvable. the Government of Pakistan has started a tax Administration Reforms Programme. Simultaneously. (g) an officer of sales tax with any other designation. the Government has transformed the Central Board of Revenue (CBR) into the Federal Board of Revenue Act. Furthermore. If taxes relative to the GDP do not increase significantly. The reform of tax administration is the single most important economic task for the government. These members shall be appointed by the FBR. For example: Income tax. 2007. Consequently. The basic objective of the programme is to develop modern. in other big cities. essential public services can not be delivered. it is planned that all Medium Taxpayers Units shall be converted into Regional Tax Offices (RTO). The divisional structure of taxation system has been converted into functional structure. Almost. Tax receipts are insufficient to pay even for debt service and defence and there is hardly any net foreign assistance for development. Major objectives of such tax administration reforms programme are the followings: 1) To provide quality service to each employee. all powers and functions of the CBR have been vested to the FBR. Lahore and Islamabad. The head of the FBR is called Chairman who is appointed by the Federal Government. Ultimately. Under Tax Administration Reforms Programme twenty three taxpayers facilitation centers have been opened whereas 29 more such centres are planned to be started. The FBR shall consist of at least seven members. without new levies. Medium Taxpayer Units have also been established. sales tax and excise etc. Pakistan can not be governed effectively. effective and efficient tax system in Pakistan which promotes mutual trust and satisfaction both for the tax payers and the tax collectors.(e) an Assistant Collector of Sales Tax. To implement such Tax Administration Reforms Programme. and high inflation can not be avoided. (f) a Superintendent of Sales Tax. For example: Large Taxpayers Units (LTU) has been established at Karachi. 2) To increase productivity by providing quality work environment and adequate . there is a crisis of confidence between the taxpayer and the government.

Sales Tax is chargeable on all locally produced and imported goods except computer software.compensation to all employees. medicines and unprocessed agricultural produce of Pakistan and other goods specified in Sixth Schedule to The Sales Tax Act. Turnover tax.(1) Subject to the provisions of this section and sub-section (7) of section 8 or any notification issued there under. 1990. Previously it was being charged at the manufacturing & import stage. 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 . there shall be charged. poultry feeds. Wholesale & Retail stage. CHARGE OF TAX: 3A. 3) To improve voluntary compliance by taxpayers through efficient and organized management. 4) To bring cultural. Enforcement of Sale Tax Act 1990: The stages of enforcement are:  Charging / Imposition of Tax  Assessment  Collection / Recovery  Charging / Imposition of Tax: 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. operational and structural changes in the taxation structure of Pakistan. and its scope has been extended now to remaining sectors.

(4) Subject to such modifications as the Board may specify. (2) Any person who is liable to pay turnover tax under sub-section (1) shall apply for enrollment. Provided further that the Federal Government may. by notification in the Official Gazette. in any period during the last twelve months: Provided that the provisions of this section shall not apply to :(i) a manufacturer or producer who is making zero rated supplies. "taxable turnover" means the total value of all taxable supplies of goods other than goods taxable at the rate of zero per cent. fix any amount of annual total turnover for the application of turnover tax under this rule.. (3) Notwithstanding the provisions of sub-section (1).For the purposes of this section. and (iii) a manufacturer engaged in the manufacture or production and supply of the goods specified in the Third Schedule. 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. as if it were sales tax under section 3. all provisions of this Act shall apply to the charge. 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. 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. payment. may. collection and enforcement of the turnover tax. Explanation. after voluntary registration under section 18. (ii) a manufacturer or producer who is a limited company itself or is owned by a limited company. a manufacturer or producer and a retailer whose taxable turnover does not exceed two and a half million rupees or five million rupees. 2002 which previously read as follows: Provided that the time-limit of two years for the de-registration under this subsection shall not apply to a retailer who opts for payment of turnover tax under sub-section (5) of section 3AA. levy. respectively.course or furtherance of any taxable activity carried on by him. . Proviso omitted by Finance Ordinance.

payment. Retail tax. a retailer not liable to pay tax. and from such date as may be specified by the Federal Government. 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. there shall be charged levied and paid retail tax at the rate specified in section 3. 3B. levy.3AA. (4) Notwithstanding the provisions of sub-section (1). opt for paying sales tax under the section. shall pay the amount of tax or charge so collected to the Federal Government. Change in the rate of tax. and such conditions and procedures regarding the mode. (2) Subject to such modifications as the Board may specify. shall. whether under misapprehension of any provision of this act or otherwise. manner and time of payment. all provisions of this Act shall apply to the charge.(1) Subject to the provisions of this section. collection and enforcement of the retail tax. subject to the condition that he shall not thereafter be entitled to be de-registered until the expiry of two years from the date of such registration. deduction of input tax. 5.(1) Any person who has collected or collects any tax or charge. (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. (2) Any amount payable to the Federal Government under subsection (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. as if it were sales tax under section 3. (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.If there is a change in the rate of tax-(a) a taxable supply made in Pakistan by a registered . by a retailer who is making taxable supplies in the course or furtherance of any taxable activity carried by him. Collection of excess sales tax etc. after voluntary registration under section 18.

apply.(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. 6. 1992 (XII of 1992). Provided that where a bill of entry is presented in advance of the arrival of the conveyance by which the goods are imported. (1A) Notwithstanding anything contained in any other law for the time being in force. authority or court whether passed. authority or court passed on that ground or on the basis of the doctrine of promissory estoppel or on account of any promise or commitment made or understanding . (b) imported goods shall be charged to tax at such rate as is in force. before or after the promulgation of the Finance Act. on the date on which a bill of entry for clearance of such goods is presented under section 104 of the Customs Act. on the date on which a bill of entry is presented under section 79 of the Customs Act. and notwithstanding any decision or judgement of any forum. Time and manner of payment. payment and enforcement of tax under this Act on such goods where no specific provision exists in this Act. or in consequence of any decision or judgement of any forum. 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 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. and (ii) in case the goods are cleared from warehouse. 1969 and the provisions of the said Act including section 31A thereof shall so far as they relate to collection.person shall be charged to tax at such rate as is in force at the time of supply. including but not limited to the Protection of Economic Reforms Act. 1969 (IV of 1969). (i) in case the goods are entered for home consumption. 1969 (IV of 1969). referred to in sub-section (1) shall be incorporated in and shall be deemed to have always been so incorporated in this Act and no person shall be entitled to any exemption from or adjustment of or refund of tax on accounts of the absence of such a provision in this Act. 1969 (IV of 1969). the provisions of section 31-A of the Customs Act. 1998 (III of 1998).

(1) Where a person who is required to file a tax return failed to file the return for a tax period by the due date or pays an amount which. (3) The tax due on taxable supplies made in Pakistan shall be paid by any of the following modes: (i) through deposit in a bank designated by the Board. or (ii) have been entered for export under Section 131 of the Customs Act. but are not exported. or the goods specified in the Fifth Schedule. by a notification in the official Gazette. 1969 (IV of 1969). and (ii) through such other mode and manner as may be specified by the Board. 4. specify: Provided that nothing in this section shall apply in respect of a supply of goods which – (i) are exported. and (c) such other goods as the Federal Government may. shall be charged. or (iii) have been exported to a country specified by the Federal Government. Zero rating:Notwithstanding the provisions of section 3. manner or at time as may be specified therein. mode. for some miscalculation is less than the amount of tax actually . a tax period shall be paid by the registered person at the time of filing. 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. direct that the tax in respect of all or such classes of supplies (other than zero-rated supplies) of all or such taxable goods. (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. but have been or are intended to be re-imported into Pakistan. by Notification in the official Gazette : Provided further that the Federal Government may. by Notification in the Official Gazette. collected and paid in any other way. as may be specified in the aforesaid notification. (2) The tax in respect of taxable supplies made in Pakistan during. by any government department or authority. a supply of the following goods shall be charged to tax at the rate of zero per cent: (a) goods exported.given whether in writing or otherwise. the return in respect of that period under Chapter-V : Provided that the Board may. by a notification in the Official Gazette.  Assessment of Tax: Section 11. 1969.

after a notice to show cause to such person. fix provided that such extended period shall in no case exceed ninety days. Mode of Recovery and collection of tax Pre. an officer of Sales Tax shall. custom.payable. (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 forty-five days of issuance of show cause notice or within such extended period as an officer of Sales Tax may.assessment / adjudication  Advance payment of tax  Withholding or collection of tax at source  Payment with return Post assessment / adjudication  Demand Notice  Deduction or adjustment from refund or money of the taxpayer in the control of income. including imposition of penalty and additional tax 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 along with additional tax and penalty. 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 additional tax in accordance with section 33 and 34. (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). excise authority . for reasons to be recorded in writing.  Recovery: Recovery and collection provision of the fiscal statue are also part of provision and are construed in the same manner as assessment provision in order to make the recovery of tax efficient and effective – Liberal construction – in favour of the state and against the subject. make an order for assessment of tax. the notice to show cause and the order of assessment shall abate.

determine the amount of tax or charge payable by him and such person shall pay the amount so determined: Provided that order under this section shall be made within forty five days of issuance of show cause notice or within such extended period as an officer of . 48(2) Section 48 – Sales Tax Rules. 2006. Cheaper XI Section 36. where a tax or charge has not been levied under this sub-section. S. 48(1A) Sales tax officer has the power of Civil Court for recovery of tax. after considering the objections of the person served with a notice to show cause under sub-section (1) or sub-section (2). (2) Where.  By notice to any person to stop clearance of imported or manufactured goods or attachment of bank accounts.  Seal of business premises  Attach and sell or sell without attachment movable or immovable property  Attach and sell movable and immovable property of guarantor where such guarantor has failed to make the payment of tax under guarantee. the amount of tax shall be recovered as tax fraction of the value of supply. requiring him to show cause for payment of the amount specified in the notice: Provided that. error misconstruction. By notice from the person holding money of the taxpayer  By stopping removal of good from business premises. the person liable to pay the amount of tax or charge or the amount of refund erroneously made shall be served with a notice within three years of the relevant date. (3) The officer of Sales Tax empowered in this behalf shall. the person liable to pay any amount of tax or charge or the amount of refund erroneously made shall be served with a notice. any tax or charge has not been levied or made or has been short levied or has been erroneously refunded.(1) Where by reason of some collusion or a deliberate act any tax or charge has not been levied or made or has been short-levied or has been erroneously refunded. bond or instrument. by reason of any inadvertence. S. Arrears by the Board or authorised officer by the Board as prescribed. within five years of the relevant date. Recovery of tax not levied or short-levied or erroneously refunded. requiring him to show cause for payment of the amount specified in the notice.

pay additional tax at the rate of two per cent of the tax due per month or any part thereof. 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. and (b) in the case of non-payment of tax or part thereof. or incorrectly applies the rate of zero per cent to supplies made by him. the date of its refund. the expression "relevant date" means-(a) the time of payment of tax or charge as provided under section 6. fix. or incorrectly applies the rate of zero percent to the supplies made by him. in case of tax fraud.Sales Tax may. for reasons to be recorded in writing. provided that such extended period shall in no case exceed ninety days. (1) Notwithstanding the provisions of section 11. the period of default shall be reckoned from the date of adjustment of such credit or. refund or makes an adjustment. 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.-(a) in the case of inadmissible input tax credit or refund. . the period of default shall be reckoned from the 16th day of a month (following the due date of the tax period to which the default release) to the day preceding the date on which the tax due is actually paid. if a registered person or enrolled person does not pay the tax due or any part thereof in time or in the manner specified under this Act. rules or notification issued thereunder or claims a tax credit. (4) For the purpose of this section. as the case be. which is not admissible to him. and (b) in a case where tax or charge has been erroneously refunded. refund is received. the rate of additional tax shall be two percent per month. he shall. in addition to the tax due. (2) For the purpose of calculation of additional tax. and the prescribed penalties. 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 Section 34.

Explanation. Collection of excess sales tax etc. -. (b) unauthorisedly issues an invoice in which an amount of tax is specified. (1) Any person who fails to furnish a return within the due date shall pay a penalty of five thousand rupees. . the short-paid amount of tax shall be recovered without giving a show cause notice to such person provided that no additional tax or penalty shall be charged unless a show cause notice is given to such person. (cc) fails to deposit the amount of tax due or any part thereof in the time or manner laid down under this Act or rules or orders made there under. 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. Section 33. General Penalties. whether under misapprehension of any provision of this act or otherwise. shall pay the amount of tax or charge so collected to the Federal Government. (c) fails to notify the changes of material nature in the particulars of registration or taxable activity. (2) Any person who -(a) fails to issue an invoice when required under this Act. (2) Any amount payable to the Federal Government under subsection (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. Section: 11A: Short-paid amounts recoverable without notice.(1) Any person who has collected or collects any tax or charge.For the purpose of this section. 3B. tax due does not include the amount of penalty. Notwithstanding any of the provisions of this Act. (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. (d) repeats erroneous calculations in the return during a year whereby amount of tax less than the actual tax due is paid. where a registered or enrolled person pays the amount of tax less than the due tax as indicated in his return.

. whichever is higher: Provided that no penalty shall be imposed when any miscalculation is made for the first time during a year.shall pay a penalty of five thousand rupees or three per cent of the amount of the tax involved.