1/12/2022

Supplies

Taxable Supplies Exempt Supplies Zero Rated Supplies

taxable supply‘ means a exempt supply‘ means a zero-rated supply means

supply of taxable goods supply which is exempt taxable supply which is
made by an importer, from tax (u/s 13); charged to tax at the rate
manufacturer, of 0%.(u/s 4)
wholesaler (including
dealer), distributor or
retailer other than
exempt supply (u/s 13)
and includes a zero-
rated supply (u/s 4);

1
 1/12/2022

13. Exemption
Supply of goods or imports specified in the 6th Schedule shall be exempt
from tax subject to conditions specified by Federal Government. However
the Federal Government may, whenever circumstances exist to take
immediate action for the purposes of national security, natural disaster,
national food security in emergency situations and implementation of
bilateral and multilateral agreements, exempt any taxable supplies or
import from whole or any part of tax.
The exemptions may be allowed from any previous date
The Board shall place before National Assembly all notifications issued in a
financial year.
Note: Sales made by cottage industry are exempt from tax.

4. Zero rating.—
The following goods shall be charged to tax at the rate of zero per cent:--
(a) goods exported or specified in the Fifth Schedule;
(b) supply of stores/provisions for consumption aboard a conveyance
proceeding to a destination outside Pakistan
(c) such other goods, as the Federal Government may specify (by
notification in the official Gazette), whenever circumstances exist to
take immediate action for the purposes of national security, natural
disaster, national food security in emergency situations and
implementation of bilateral and multilateral agreements.

2
 1/12/2022

However following goods shall not be charged to tax at the rate of zero
per cent:
(i) exports that are intended to be re-imported into Pakistan; or
(ii) goods that have been entered for export but are not exported; or
(iii) goods that have been exported to a country specified by the Federal
Government:
The Federal Government may restrict input tax credit for person making a
zero-rated supply.

Sales Tax

Input Tax Output Tax

Sales tax paid on the Sales tax charged on the

purchases of taxable supplies. supply of taxable supplies.

3
 1/12/2022

Supplies A B C D E F Consumer
Value of Supply 100 120 150 200 250 300 500
Exclusive of ST
Sales Tax 17 20.4 25.5 34 42.5 51 85
Output Tax
Price inclusive of 117 140.4 175.5 234 292.5 351 585
Sales Tax

Purchases A B C D E F Consumer
Value of Supply 50 100 120 150 200 250 300
Exclusive of ST
Sales Tax 0 17 20.4 25.5 34 42.5 51
Input Tax
Price inclusive of 50 117 140.4 175.5 234 292.5 351
Sales Tax

Output - Input 17 3.4 5.1 8.5 8.5 8.5 51

Supplies A B C D E F Consumer
Value of Supply 100 120 150 200 250 300 500
Exclusive of ST
Sales Tax 85 85 85 85 85 85 85
Output Tax
Price inclusive of 185 205 235 285 335 385 585
Sales Tax

Purchases A B C D E F Consumer
Value of Supply 50 100 120 150 200 250 300
Exclusive of ST
Sales Tax 0 85 85 85 85 85 85
Input Tax
Price inclusive of 50 185 205 235 285 335 385
Sales Tax

Output - Input 85 0 0 0 0 0 0

4
 1/12/2022

Input tax in relation to a registered Output tax in relation to a registered

person, means—
(a) tax levied on supply of goods
received by the person;
(b) tax levied on goods imported by the
person;
(c) tax levied under Federal Excise Act
in sales tax mode on goods/services
acquired by the person, and
(d) Provincial sales tax levied on
services rendered or provided to
the person:
(e) tax levied under the Sales Tax Act,
1990 as adapted in the State of
Azad Jammu and Kashmir, on the
supply of goods received by the
person;
person, means-
(i) tax levied on a supply of goods made by
the person;
(ii) tax charged under Federal Excise Act in
sales tax mode on: production of the
goods, or providing of the services, by
the person;
(iii) sales tax levied on the services provided
by the person [under Islamabad Capital
Territory (Tax on Services)
Ordinance,200l (XLII of 200l)].

Supply means a sale or transfer of the right to dispose of goods as owner,

including sale under a hire purchase agreement, and also includes –
(a) putting to: private, business or non-business use of goods produced
during taxable activity;
(b) auction or disposal of goods to satisfy a debt; and
(c) possession of taxable goods held immediately before de-registration.
(Possession of goods is assumed as sales).
(d) in case of manufacture of goods belonging to another person, the
transfer or delivery of such goods to the owner or to a person
nominated by him.
The Board with the approval of Federal Minister in-charge may specify
other transactions as supply

5
 1/12/2022

Taxable goods means all goods other than exempt (u/s 13);
Taxable activity means economic activity carried on by a person whether
or not for profit, and includes—
(a) an activity carried on in the form of a business, trade or manufacture;
(b) an activity that involves the supply of goods, providing of services, or
both;
(c) a one-off adventure in the nature of a trade; and
(d) anything done during the commencement or termination of economic
activity, but does not include—
i. the service provided by an employee to an employer;
ii. an activity carried on as a private recreational hobby;

Manufacture‘ or produce‘ includes –

(a) any process in which an article singly or in combination with other
articles, is:
I. either converted into another distinct article or product or
II. so changed, transformed or reshaped that it becomes capable of being
put to use differently and includes any process incidental or ancillary to
the completion of a manufactured product;
c) process of printing, publishing, lithography and engraving; and
d) process and operations of assembling, mixing, cutting, diluting, bottling,
packaging, repacking or preparation of goods in any other manner;

6
 1/12/2022

Cottage industry means a manufacturing concern, which fulfils each of

following conditions, namely:—
(a) does not have an industrial gas or electricity connection;
(b) is located in a residential area;
(c) does not have a total labour force of more than 10 workers; and
(d) annual turnover from all supplies does not exceed Rs. 10 million.
Retailer means a person, supplying goods to general public for
consumption:
A person combining the business of:
i. import and retail or
ii. manufacture with retail, shall:
iii. notify and advertise wholesale prices and retail prices separately,
iv. and declare the address of retail outlets.

Wholesaler includes a dealer and means any person who carries on,
whether regularly or not, the business of:
▪ buying and selling goods by wholesale or
▪ supplying goods, directly or indirectly, by wholesale for cash or
deferred payment or for commission or other valuable consideration
It also includes a person who:
▪ stores goods belonging to others as an agent for the purpose of sale
and
▪ supply taxable goods to a person who deducts income tax at source
under the ITO, 2001;

7
 1/12/2022

Time of supply
Type of supply Time of supply
(a) A supply of goods The time at which the goods are delivered or made
available to the recipient of the supply
(b) A supply of goods under a hire The time at which the agreement is entered into
purchase agreement
(c) Services Time at which the services are rendered or
provided
If 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 exempt supply, it shall be accounted for in the return for the tax period
during which the exemption is withdrawn from such supply.

No. Scenario Value of supply

1 If consideration for a supply is fully or Open market price of the supply excluding the amount of
partly in kind tax
2 If supplier and recipient are associates and Open market price of the supply excluding the amount of
supply is made at no consideration or at a tax
consideration lower than open market
price
3 If taxable supply is made to general public Open market price of the supply excluding the amount of
on installment basis (including surcharge) tax
4 In case trade discount is provided The discounted price excluding the amount of tax.
Provided that tax invoice shows the discounted price and
the related tax and the discount allowed is in conformity
with normal business practices
5 In case of a special nature of transaction Open market price
where it is difficult to determine value of
supply
6 In case of imported goods, (excluding those The value determined under Customs Act including
specified in Third Schedule) custom duty and excise duty charged on it

8
 1/12/2022

7 If there are sufficient reasons to believe
that the value of a supply has not been
correctly declared in the invoice
8 If goods other than taxable goods (exempt
goods) are supplied to a registered person
for processing
9 In case of manufacture of goods belonging
to another person
10 in case of supply of electricity by an
independent power producer or WAPDA
11 in case of supply of electric power and gas the total amount billed including price of electricity and
by a distribution company
The value determined by the Valuation Committee
comprising representatives of trade and the Inland
Revenue constituted by the Commissioner
Market price of goods excluding the amount of tax
the actual consideration received by the manufacturer for
the value addition carried out on such goods
the amount received for energy purchase price;
excluding the amount received for capacity purchase
price, energy purchase price premium, excess bonus
natural gas, rent, commission and all duties and taxes
local, provincial and federal but excluding the late
payment surcharge and sales tax

12 If a person purchase used vehicle the difference between sale and purchase price
from general public (on which tax of vehicle on the basis of prescribed valuation
has already been paid on import method
or manufacturing), and sell it in
the open market after making
value addition
13 In case of a taxable supply, with the price of taxable goods excluding the amount
reference to retail tax of retail tax, which a supplier will charge, or such
other price as the Board may specify.

The Board may fix the value of any imported goods or taxable supplies and may fix
different values for different classes of same type of goods.
If the import/supply is made at a higher value than fixed by Board, the value shall be the
actual price.

9
 1/12/2022

3. Scope of tax.
Normal rate of sales tax Sales tax shall be charged at the rate of 17% of the
value of–
(a) taxable supplies made by a registered person during any taxable activity
carried on by him; and
(b) goods imported into Pakistan, irrespective of their final destination in
territories of Pakistan.
Further tax
Where taxable supplies are made to a person who has not obtained
registration number, a further tax shall be charged at the rate of 3% of the
value in addition to 17%. Federal Government may specify supplies on
which the further tax shall not be charged.

An SRO provides following list of persons on ix. Supplies by steel melters, re-rollers
which this further tax of 3% is not chargeable: and ship breakers operating under
(i) Electricity energy supplied to domestic Chapter XI of Sales Tax Special
and agricultural consumers. Procedure Rules, 2007.
(ii) Natural gas supplied to domestic x. Supplies covered under the Fifth
consumers. Schedule to the Sales Tax Act, 1990.
(iii) Motor oil, diesel oil, jet fuel and fuel oil. xi. Supplies made to Government, semi-
(iv) Goods sold by the retailers to end government and statutory regulatory
customers. bodies.
(v) Supply of goods directly to end xii. Supply of white crystalline sugar.
customers including food, beverages,
fertilizers and vehicles.
(vi) Items listed in Third Schedule
(vii) Second hand worn clothing and other
worn articles falling under PCT heading
6309.0000.
(viii)Fertilizers

10
 1/12/2022

Capacity tax For goods specified
in Tenth Schedule
tax shall be levied
(a) on the production capacity
of plant, machinery
(b) on fixed basis from any
person.
Special rates of tax
Federal Government may
prescribe any higher or lower
rate of tax for any class of
taxable goods.
Tax on taxable supplies specified in 3rd
schedule
▪ For supplies and import of goods
specified in Third Schedule tax shall
be charged at 17% of the retail price.
▪ The retail price and sales tax shall be
legibly, prominently and indelibly
printed or embossed by the
manufacturer or importer (in case of
imported goods), on each article,
packet, container, package, cover or
label.
▪ Federal Government can
exclude/include any goods from the
Third Schedule;

Extra tax
Federal Government may collect tax at such extra rate or amount, in
addition to the normal tax [under subsection (1) and sub-section (2)].
The tax charged here shall not exceed 17% of value of goods.
The Federal Government will also specify the mode, manner and time
of payment of tax.

Tax on supply to CNG stations

In case of supply of natural gas to CNG Stations, the Gas Transmission
Company shall charge Sale Tax at 17% of the value of supply to the
CNG consumers.

11
 1/12/2022

Tax on retailers
▪ Tier-1 category retailers shall pay tax in normal manner at rate of 17%.
▪ Tax shall be charged through monthly electricity bills from retailers
other than Tier-1.The rate will be:
▪ 5 % where the monthly bill is upto Rs. 20,000 and
▪ 7.5 % where the monthly bill exceeds Rs. 20,000 and the electricity
supplier shall deposit the amount collected directly.
▪ The above tax on other than Tier-1 retailers is other than normal tax of
17%, further tax of 3% and extra tax.

Tax on steel products/ship plates

Goods specified in the 13th Schedule
The minimum production for a month shall be determined on the basis of a
single or more inputs as used in the production process. If minimum
production exceeds the actual supplies (sales) then minimum production
shall be treated as quantity supplied for charging tax.

12
 1/12/2022

Liability to pay sales tax

Situation Person liable to pay tax
In the case of supply of goods The person making the supply
In the case of goods imported into The person importing the goods
Pakistan
The Board, with the approval of Federal Minister in-charge, may specify goods where
person receiving supply is liable to pay the tax. [S.3 (3A)]

3B. Collection of excess sales tax etc.

A person who has collected any tax under misapprehension or otherwise
which:
▪ was not payable as tax or
▪ is in excess of the tax actually payable and the incidence has been
passed on the consumer, the person shall pay the tax to the Federal
Government. Amount payable to the Federal Government here shall be
considered as an arrear of tax and shall be recoverable accordingly.
Refund claim will not be admissible.
The burden of proof that the incidence of tax has or has not been passed
to the consumer shall be on the person collecting the tax.

13
1/12/2022

14
1/12/2022

15