S TEM EET FOR MARCH 2024 MASTER SHEET ON INTRODUCTION TO TX SYSTEM
Y
S RS H ATTEMPT ONLY
X E SIR TARIQ TUNIO - CSS (COMMISSIONER FBR) + CA TEACHER (CAF-02 TAX) 0332-2130867
TA AST
M (1) DEFINITION OF TAXATION
Taxation may be defined as follows:
§ It is PROCESS by which sovereign, through its law-making body, raises
revenues in order to use it for expenses of government.
§ It is MEANS for Govt. in increasing its revenue under authority of law,
purposely used to promote welfare & protection of its citizenry.
§ It is COLLECTION of share of individual and organizational income by
government under authority of law.
(2) REVENUE & NON-REVENUE OBJECTIVES
Taxes are primary revenue yielding tools of Govt of modern ages. Govt levies taxes
in order to achieve following objectives: (1) For collection of revenue to run and
administer Govt, (2) To use as a tool for implementation of its policies (3) For fair
distribution of wealth.
Aside from financing Govt operational expenditures, taxation is utilized as tool to
carry out national objective of social & economic development.
§ To strengthen anaemic enterprises by granting them tax exemptions or other
conditions or incentives for growth
§ To protect local industries agst foreign competition by increasing local import
taxes
§ As bargaining tool in trade negotiations with other countries
§ To counter effects of inflation or depression
§ To reduce inequalities in distribution of wealth
§ To promote science and invention, finance educational activities or maintain
and improve efficiency of local forces
§ To implement laws which eliminate discrimination among various elements in
the markets/businesses.
§ To discourage certain undesirable sectors and activities.
(3) TAXES AS MEANS FOR DEVELOPEMENT
Taxes are one of the main sources for development. This is not because revenue
collected by state is used on developmental projects. Rather, taxes can be used in
many different ways for development of the country.
Some examples are as under:
§ Govt can declare some areas as free zone, industrial zone, & economic zone
and provide tax incentives to the, which attracts businessman/industrialist to
establish business concerns/industrial units which bring employment,
opportunities and overall prosperity in these under developed areas.
§ Taxing rich at higher rates while taxing low income groups at lower tax rates.
§ Imposition of high CD rates on luxury items, promoting local manufacturing
industry.
§ Tax credits on charitable donations to promote welfare activities.
§ Tax exemptions to charity organisation/educational institutions to promote
these activities.
§ Exemption of tax to Agriculture sector to promote agriculture.
(4) CANONS OF TAXATION
Canons of Taxation are a set of principles that were introduced by economist Adam Smith in his
famous book, "The Wealth of Nations". These canons serve as guidelines for designing an efficient
and equitable tax system. The four canons of taxation are:
Equality This principle suggests that the tax burden should be distributed fairly
among taxpayers. Tax payments should be proportional to income and
applied equally to all concerned areas.
Certainty Tax liabilities should be clear and certain
Convenience of Taxes should be collected at a time and in a manner convenient for
payment taxpayer
Economy of Cost of collecting taxes should be minimal. The administrative expenses
collection associated with tax collection should not unduly burden the government
or the taxpayers.
(5) PRINCIPLES FOR LEVY OF TAX
Following are some broad principles for levy of taxes:
The Benefit This principle holds that individuals should be taxed in proportion to
Principle benefits received from Govt & that taxes should be paid by those people
who receive direct benefit of Govt programs & projects.
The Ability-to- This principle holds that taxes should be related to a person's income or
Pay Principle ability to pay. In other words, individuals with greater income or wealth,
who can afford to pay more, should bear a higher tax burden. Similarly, the
tax rate could increase in proportion to higher income levels.
The Equal- This principle means that there is fixed percentage applied to income,
Distribution wealth and transactions. This implies that individuals who earn higher
Principle incomes or have greater wealth, and consequently engage in more
transactions, will pay more in taxes. However, the key point here is that
while the absolute amount of taxes paid increases with income and wealth,
the tax rate itself remains the same – it doesn't go up as a person earns
more. In other words, there is a proportional increase in the tax burden
based on a person's financial capacity, without escalating the tax rate.
(6) KINDS OF TAXES
Proportional A tax system that requires the same percentage of income from all taxpayers
tax/Flat Tax regardless of their earnings. A proportional tax applies the same tax rate
across low, middle and high- income taxpayers. The proportional tax is in
contrast to a progressive tax, where taxpayers with higher incomes pay
higher tax rates than taxpayers with lower incomes. A proportional tax is
also called a flat tax.
Regressive tax A tax that takes a larger percentage from a person’s low-income than from
another person’s high-income. A regressive tax is generally a tax that is
applied uniformly. This means that it hits lower-income individuals harder.
Progressive tax A tax that takes a larger percentage from high-income earners than it does
from low-income earners. In other words, the more one earns, the more tax
he would have to pay. The tax amount is proportionately equal to someone's
status in the society. A rich man should pay more than a poor man.
(7) THE PRINCIPLES OF A SOUND TAX SYSTEM
Following are major characteristics of a taxation system:
Fiscal adequacy The sources of revenue taken as a whole should be sufficient to
meet the expenditures of the government, regardless of business,
export taxes, trade balances and problems of economic
adjustments. Revenues should be capable of expanding or
contracting annually in response to variations in public
expenditures.
Equality or Theoretical Taxes levied must be based upon the ability of the citizen to pay.
Justice
Administrative Feasibility In a successful tax system, tax should be clear and plain to
taxpayers, capable of enforcement by the adequate and well-
trained public officials, convenient as to the time and manner of
payment and not unduly burdensome to discourage business
activity.
Consistency or Tax laws should be consistent with economic goals or programs
Compatibility with of the government which pertain to basic services intended for
Economic Goals the masses.
(7) CHARACTERISTICS of TAX LAWS
Following are major characteristics of a taxation system:
Tax is an enforced contribution Tax payment is not voluntary in nature and the imposition is not dependent upon
the will of the person taxed.
Tax is generally payable in cash (bank) means that payment by cheques, promissory notes, or in kind is not accepted.
Tax is proportionate in character Payment of taxes should be based on the ability to pay principle; higher income
of the tax payer, the bigger amount of the tax paid.
Tax is levied (to impose; collect) on There are taxes that are imposed or levied on acts, rights or privileges.
income, transactions or property
Tax is levied by state which has As a general rule, only persons, properties, acts, right or transaction within the
jurisdiction over person or property jurisdiction of the taxing state are subjects for taxation.
Tax is levied by law making body This means that law must be enacted first by the Parliament in Pakistan.
Tax is levied for public purposes Taxes are imposed to support the government in implementation of projects and
programs.
(8) BRIEF OVERVIEW OF DIFFERENT DIRECT AND INDIRECT TAXES
Federal taxes in Pakistan like most of the taxation systems in the world are classified into two broad categories:
direct and indirect taxes. A broad description regarding nature of administration of these taxes is explained below:
DIRECT TAXES § Direct taxes primarily comprise of Income Tax. In ITO 2001, tax is levied generally on net
(1) Income Tax income of taxpayer earned during TY computed by applying specified tax rates.
§ For purpose of charge of tax and computation of total income, all income is classified under
following heads: Salary, IFP, IFB, Capital gains, and IFOS
(2) Capital Value Tax § Capital value tax on different transaction such as transfer of immoveable property, transfer
of rights etc.
INDIRECT TAXES § Goods imported & exported from Pakistan are liable to rates of CD as prescribed in Pakistan
(1) Custom Duty Customs Tariff.
§ CD in form of import duties & export duties constitute a major part of total tax receipts.
§ Rate structure of customs duty is determined by a large number of socio-economic factors.
§ General scheme envisages higher rates on luxury items as well as on less essential goods.
§ Import tariff has been given an industrial bias by keeping the duties on industrial plants and
machinery and raw material lower than those on consumer goods.
(2) Federal Excise Duty § FED are levied on limited number of goods produced or manufactured and services
§ On most of items FED is charged on basis of value or retail price.
§ Some items are, however, chargeable to duty on the basis of weight or quantity.
§ Classification of goods is done in accordance with Harmonized Commodity Description and
Coding system which is being used all over the world.
§ All exports are liable to Zero per cent FED.
(3) Sales Tax § Sales tax is levied at various stages of economic activity @ 18 per cent on:
o All goods imported into Pakistan, payable by the importers
o All supplies made in Pakistan by a registered person in the course of furtherance of any
business carried on by him
§ There is an in-built system of IPT adjustment and RP can make adjustment of tax paid at
earlier stages against tax payable by him on his supplies.
§ Tax paid at any stage in VAT system equal the value added by the RP.
(9) HISTORY OF TAX LAWS IN PAKISTAN
§ In Pakistan, Fed/Govt is empowered to levy & collect tax on income of person. History of modern income taxation dates
back to the year 1860. British Empire introduced first formal Income Tax Act of 1860 in an effort to end budgetary deficit
faced due to the war of independence of 1857. The tax was not intended to be permanent and was repealed in 1865.
§ The Income Tax Act of 1886 was a general income tax that had been imposed on traders by some of the provinces. This
Act of 1886 was great improvement on earlier enactments. Its basic scheme, by and large, survives till today. It
introduced definition of “agricultural income” which is almost the same as in ITO 2001.
§ The 1918 Act consolidated a number of wartime amendments. A graduated super tax on income over Rs.50,000 and on
the undistributed profits of the corporation and other entities was introduced by the Super Tax Act of 1917 and
continued in force through modifications by the Super Tax Act of 1920. The Income Tax Act and the Super Tax Act were
later on consolidated in another act i.e. the Income Tax Act of 1922, which remained in force in Pakistan till 30th June
1979; when the new law was promulgated i.e. the Income Tax Ordinance, 1979 with effect from 1st July 1979.
§ Income Tax Ordinance 1979 was amended through innumerable presidential ordinances, annual finance
acts/ordinances and statutory regulatory orders (SROs) and most of its lacunas were removed over a long period of time.
However, after approximately 23 years of its existence when substantive amendments and judicial pronouncements
made it a universally understandable and acceptable piece of legislation for everybody, a new ordinance (i.e.) Income
Tax Ordinance, 2001 was promulgated on 13th September 2001.
 H ICS ET FOR MARCH 2024
E T HE
F -2 ER S ATTEMPT ONLY
SIR TARIQ TUNIO - CSS (COMMISSIONER FBR) + CA TEACHER (CAF-02 TAX) 0332-2130867
CA AST
M (1) ETHICS – MEANING & APPLICATIONS
§ Word ethics is derived from Greek ‘ethos’ which means "character" and from Latin
word “mores” which means "customs."
§ Aristotle was one of the first great philosophers to study ethics.
§ To him, ethics was more than moral, religious or legal concept.
§ He believed that most important element in ethical behaviour is knowledge that
actions are accomplished for betterment of common good. He asked whether
actions performed by indvls or groups are good both for individual, group and for
society.
§ To determine what is ethically good for the indvl and society, Aristotle said it is
necessary to possess 3 virtues of practical wisdom: (i) Temperance [moderation
and self-control & finding right balance in one's desires and actions, avoiding
excesses or deficiencies] (ii) Courage [involves facing challenges, adversity, and
danger with confidence and resilience], and (iii) Justice.
(2) ETHICS FOR LEGISLATORS
§ "Legislative office is a public trust, and every effort to realise personal gain
through official conduct is a violation of that trust".
§ Constitution mandates legislature to enact code of ethics prohibiting conflicts
between public duty and private interests of members of legislature, disclosure
of prohibited conduct and financial interest (if any) and post-service restrictions.
§ In addition, Constitution requires that legislature enact a code of ethics for all
officials and employees of state and its political subdivisions.
(3) POWERS OF TAX ADMINISTRATORS
§ Tax administration is not responsible for tax policy & tax legislation but deals with
current tax system. FBR is empowered under law to monitor, assess, levy & collect
taxes as provided in tax statutes.
§ There are number of occasions whereby they possess any of following powers: (1)
Assess taxes (including best judgment), (2) Collect Revenue, (3) Seize Property, (4)
Attach bank accounts, (5) Commence legal (criminal/civil) proceedings against
taxpayer
§ Such powers may be misused and can become abusive powers as exercise of that
power can result in the following against the taxpayer: (1) Loss of property and
income & (2) Imprisonment
§ So, these powers can result in the loss of some of the fundamental human rights
of the taxpayer.
§ Ethics tend to bring these powers within the principles of goodness and morality.
(4) PILLARS OF TAX ADMINISTRATION
4 pillars of Tx Admin to safeguard interest of txprs & avoid misuse of powers by tax
administration:
Fairness Strive to be impartial, fair, neutral and consistent in
administering the law without regard to race, social or
economic circumstances.
Transparency All Proceedings must be transparent and must be seen as
transparent.
Equity Best tax administration is not that which collects most revenue.
Rather it depends on how revenue generation is actually
accomplished. Whether all stakeholders are taxed fairly or tax
is collected from poor/salaried class after failing to collect taxes
from entrepreneurs/businesses. Thus, equity demands tax
administrators should not achieve their objectives in an
irrational manner.
Accountability There must be strong system of accountability for wrong doers
which should curb corruption, nepotism and
maladministration.
Some ethical issues facing tax administration: (1) Acceptance of
gifts (2) Conflict of Interest (3) Selective application of law/ or
inconsistency in applying the law Political influence (4)
Confidentiality/secrecy (5) Discretion (6) Corruption & (7) Lack
of Autonomy
To avoid pitfalls of abusive use of discretion, 7 principles that
structure discretion are: (1) Open plans (2) Open policy
statements (3) Open rules (4) Open findings (5) Open reasons
(6) Open precedents (7) Fair informal procedure
MASTER SHEET ON ETHICS
(5) RESPONSIBILITIES OF THE TAX IMPLEMENTING
AUTHORITIES
Concise code which can enlist responsibilities of Tax Administrators:
1. Obey all laws relating to taxation and grant no exemptions, credit or
advantage to any taxpayer that is not provided by the law
2. Be dedicated to the highest ideals of honesty and integrity in all matters in
order to maintain the respect and confidence of the government and
taxpayers
3. Strive to be impartial, fair, neutral and consistent in administering the law
without regard to race, social status or economic circumstances
4. Provide prompt, efficient and quality service to all stakeholders in an effort
to exceed their expectations
5. Refrain from actively participating in partisan political activities
6. Accurately record proceedings and maintain taxpayer information in the
strictest confidence and highest level of security
7. Refrain from soliciting gifts for actions and non-actions
8. Make reasonable effort to collect the proper amount of tax revenue due
at the lowest possible cost to the state, and in a manner that warrants the
highest degree of confidence in our integrity, efficiency, effectiveness and
fairness
9. Respond to valid taxpayer refund claims with the same diligence as
employed in collection of taxes
10. Educate taxpayers on their rights and responsibilities to ensure the highest
possible levels of voluntary compliance to the laws
(6) ETHICS FOR TAX PRACTITIONERS
MORAL AND ETHICAL PRINCIPLES GOVERNING TAX PRACTITIONERS
Five fundamental principles of ethics for tax practitioners:
Integrity Tax Practitioners should be straightforward & honest in
all professional & business relationships. Integrity implies
not just honesty but also fair dealing & truthfulness.
Objectivity Tax practitioners should not allow bias, conflicts of
interest or undue influence of others to override their
professional or business judgments.
Professional Tax Practitioners have a duty to maintain their
competence professional knowledge and skill at such a level that a
and due care client or employer receives competent service, based on
current developments in practice, legislation and
techniques. Tax practitioners should act diligently and in
accordance with applicable technical and professional
standards.
Confidentiality Tax Practitioners should respect confidentiality of info
acquired as a result of professional & business
relationships & should not disclose such info to 3rd
parties without authority or unless there is legal or
professional right or duty to disclose. Confidential info
acquired as a result of professional and business
relationships should not be used for the personal
advantage of tax practitioners or third parties.
Professional Tax practitioners should comply with laws & regulations
behaviour & should avoid any action which discredits the profession.
They should behave with courtesy & consideration
towards all with whom they come into contact in their
professional capacity.
(7) ETHICS FOR TAXPAYERS
MORALITY BEHIND TAX COMPLIANCE
There are three approaches to ethics for tax compliance which are as under:
Utilitarianism § which tells us to aim for greatest total happiness
across population. In economic sphere, we can
interpret ‘happiness’ as satisfaction of our desires so
utilitarianism as aiming for maximum satisfaction of
desires.
Deontology Deontology, which bases ethics on the idea of duty.
Virtue ethics § which focus on virtues we should have, and on what
constitutes a virtuous life. A broad conception of
virtues must be used here, encompassing not only
virtues such as honesty, but also virtues such as using
one’s talents and leading a fulfilled life.
(8) TAX AVOIDANCE VS EVASION
In recent years, tax avoidance has been the subject of considerable
public concern. It is compliance with the law, though aggressive or
abusive avoidance, as opposed to simple tax planning, will seek to
comply with the letter of the law, but to subvert its purpose.
Tax evasion occurs when someone acts against the law.
o Tax avoidance is generally legal exploitation of the tax regime to
one's own advantage, to attempt to reduce the amount of tax
that is payable by means that are within law whilst making full
disclosure of the material information to the tax authorities.
Examples of tax avoidance involve using tax deductions,
changing one's business structure through incorporation or
establishing offshore company in tax haven.
o By contrast tax evasion is general term for efforts by individuals,
firms, trusts and other entities to evade the payment of taxes by
illegal means. Tax evasion usually entails taxpayers deliberately
misrepresenting or concealing the true state of their affairs to
the tax authorities to reduce their tax liability, and includes, in
particular, dishonest tax reporting (such as under declaring
income, profits or gains; or overstating deductions.
DIFFERENCE BETWEEN ‘TAX AVOIDANCE’ & ‘TAX EVASION’
TAX AVOIDANCE TAX EVASION
Where payment of tax is avoided Where the payment of tax is
though by complying with the avoided through illegal
provisions of law but defeating means or fraud.
the intension of the law.
Tax Avoidance is undertaken by Tax evasion is undertaken
taking advantage of loop holes in by employing unfair means
the law & practices
Tax Avoidance is done through Tax Evasion is an unlawful
not malafied intention but way of paying lower taxes &
complying the provision of law. defaulter may be punished.
Tax Avoidance looks like a tax Tax evasion is blatant fraud
planning and is done before the and is done after the tax
tax liability arises. liability has arisen.
Example of tax avoidance is Falsifying income tax return
making use of donating to
approved charity recognized by
FBR, to claim a tax credit in future
when computing the tax liability.
(9) CODE OF ETHICS FOR CHARTERED
ACCOUNTANTS
Code of Ethics for Chartered Accountants (Revised 2019) is based on
Handbook of International Code of Ethics for Professional Accountants,
2018 Edition of International Ethics Standards Board for Accountants,
published by International Federation of Accountants (IFAC) in July 2018.
TAX SERVICES:
Providing tax services to an audit client might create a self-review or
advocacy threat. This includes requirements that prohibit firms and
network firms from providing certain tax services to audit clients in some
circumstances because the threats created cannot be addressed by
applying safeguards.
Factors that are relevant in evaluating the level of threats created by
providing any tax service to an audit client include:
• The particular characteristics of the engagement.
• The level of tax expertise of the client’s employees.
• System by which the tax authorities assess and administer the tax in
question and the role of the firm or network firm in that process.
• The complexity of the relevant tax regime and the degree of
judgment necessary in applying it.
TAX RETURN PREPARATION:
Providing tax return preparation services does not usually create a
threat. Tax return preparation services involve:
• Assisting clients with their tax reporting obligations by drafting &
compiling info, including amount of tax due (usually on standardized
forms) required to be submitted to applicable tax authorities.
• Advising on tax return treatment of past transactions & responding
on behalf of the audit client to the tax authorities’ requests for
additional information and analysis (for example, providing
explanations of and technical support for the approach being taken).
(10) CANONS OF TAXATION
They are the basic principles (i.e.) rules set to build a 'Good Tax System'. Canons of
Taxation were first originally laid down by economist Adam in his famous book "The
Wealth of Nations". In this book, Adam Smith only gave four canons of taxation, which
are now known as the "Original or Main Canons of Taxation". These are as follows:
Equality The principle aims at providing economic and social justice to
the people. According to this principle, every person should
pay to the government depending upon his ability to pay. Rich
people should pay higher taxes to the government, because
without the protection of the government authorities (Police,
Defence, etc.) they would not have earned and enjoyed their
income. Adam Smith argued that the taxes should be
proportional to income, i.e., citizens should pay taxes in
proportion to the revenue which they respectively enjoy
under protection of the State.
Certainty According to Adam Smith, the tax which an individual has to
pay should be certain, not arbitrary. The taxpayer should
know in advance how much tax he has to pay, at what time
he has to pay the tax, and in what form the tax is to be paid
to the government. In other words, every tax should satisfy
the canon of certainty. At the same time a good tax system
also ensures that the government is also certain about the
amount that would be collected by way of tax.
Convenience of The mode and timing of tax payment should be as far as
payment possible, convenient to the taxpayers. For example, land
revenue is collected at time of harvest and income tax is
deducted at source. Convenient tax system encourages
people to pay tax and increases tax revenue.
Economy of This principle states that there should be economy in tax
collection administration. The cost of tax collection should be lower
than the amount of tax collected. It may not serve any
purpose, if the taxes imposed are widespread but are difficult
to administer. Therefore, it would make no sense to impose
certain taxes, if they are difficult to administer.
Additional Canons of Taxation: Activities and functions of the government have
increased significantly since Adam Smith's time. Governments are expected to
maintain economic stability, full employment, reduce income inequality and
promote growth and development. Tax system should be such that it meets the
requirements of growing state activities. Accordingly, modern economists gave
following additional canons of taxation.
Canon of It is also known as the canon of fiscal adequacy. According to
Productivity this principle, the tax system should be able to yield enough
revenue for the treasury and the government should have no
need to resort to deficit financing. This is a good principle to
follow in a developing economy.
Canon of According to this canon, every tax imposed by the
Elasticity government should be elastic in nature. In other words, the
income from tax should be capable of increasing or
decreasing according to the country’s requirement. For
example, if the government needs more income at a time of
crisis, the tax should be capable of yielding more income
through increase in its rate.
Canon of It should be easily possible for the authorities to revise the tax
Flexibility: structure both with respect to its coverage and rates, to suit
the changing requirements of the economy. With changing
time and conditions, the tax system needs to be changed
without much difficulty. The tax system must be flexible and
not rigid.
Canon of The tax system should not be complicated. That makes it
Simplicity difficult to understand and administer and results in problems
of interpretation and disputes. In Pakistan, efforts of the
government in recent years have been to make the system
simple.
Canon of This principle states that the government should collect taxes
Diversity from different sources rather than concentrating on a single
source of tax. It is not advisable for the government to depend
upon a single source of tax, it may result in inequity for a
certain section of the society and uncertainty for the
government to raise funds. If the tax revenue comes from
diversified sources, then any reduction in tax revenue from
one source for any reason is bound to be small.
 (9) CODE OF ETHICS FOR CHARTERED ACCOUNTANTS AS
APPLICABLE TO TAX SERVICES

Tax return preparation services are usually based on historical information and principally involve analysis and presentation of such historical information under existing tax law, including precedents and established practice. Further, the tax returns are subject to whatever review or
approval process the tax authority considers appropriate

TAX CALCULATIONS FOR THE PURPOSE OF PREPARING ACCOUNTING ENTRIES:

All Audit Clients
Preparing calculations of current and deferred tax liabilities (or assets) for an audit client for the purpose of preparing accounting entries that will be subsequently audited by the firm creates a self-review threat.
In addition to the factors in paragraph 6.1 above, a factor that is relevant in evaluating the level of the threat created when preparing such calculations for an audit client is whether the calculation might have a material effect on the financial statements on which the firm will express
an opinion.
Audit Clients that are Not Public Interest Entities
Examples of actions that might be safeguards to address such a self-review threat when the audit client is not a public interest entity include:
• Using professionals who are not audit team members to perform the service.
• Having an appropriate reviewer who was not involved in providing the service review the
audit work or service performed.
Audit Clients that are Public Interest Entities
A firm or a network firm shall not prepare tax calculations of current and deferred tax liabilities (or assets) for an audit client that is a public interest entity for the purpose of preparing accounting entries that are material to the financial statements on which the firm will express an
opinion.
The examples of actions that might be safeguards in (to all audit clients) to address self-review threats are also applicable when preparing tax calculations of current and deferred tax liabilities (or assets) to an audit client that is a public interest entity that are immaterial to the financial
statements on which the firm will express an opinion.
 T E R CHARGE OF TAX & 4 KEY CONCEPTS
S
M T#1
A PREPARED BY SIR TARIQ TUNIO - CSS (COMMISSIONER FBR) + CA TEACHER (CAF-2 Tax & PRC-5 ITB) 0332-2130867

HEE FOR MARCH 2024 ATTEMPT ONLY

S CHARGE OF TAX
Income tax shall be imposed for each tax year, at rate or rates specified
in First Schedule, on every person who has taxable income for the year.

PERSON TAXABLE INCOME TAX YEAR TAX RATES

(i) Individual (ii) AOP (iii) Company (iv) Federal Government MR. TAXPAYER TYPE PROVISION SALARIED PERSON
COMPUTATION OF TAXABLE INCOME & TAX LIABILITY
(v) Foreign Government (vi) Political Subdivision of Foreign FOR TAX YEAR 20X1 Normal Tax w Period of 12 months S.
TAXABLE INCOME RATE OF TAX
Government (vii) Public International Organization A SALARY Year ending on 30th June NO
w denoted by calendar Where TI does not exceed 0%
PSI FSI 1
year in which said Rs. 600,000
PERSON WHEN RESIDENT Amounts Chargeable XX XX
Where TI > Rs. 600,000 but 2.5% of the amount exceeding
[No deduction Allowed] — — date falls
2 does not exceed Rs. Rs. 600,000
Individual w Presence in Pakistan of 183 days or more in Income under the Head ‘Salary’ XX Special Tax w Period of 12-months 1,200,000
aggregate in a TY, or B INCOME FROM PROPERTY Year different from NTY Where TI > Rs. 1,200,000 Rs. 15,000 + 12.5% of the
w Employee/official of Federal/Provincial Amounts Chargeable XX XX that person is allowed 3 but does not exceed Rs. amount exceeding Rs.
Less: Deductions Allowed (XX) (XX) by CIR by order, & 2,400,000 1,200,000
Govt. posted abroad
Income under the Head ‘Income from Property’ XX w denoted by calendar Where TI > Rs. 2,400,000 Rs. 165,000 + 22.5% of the
w Being citizen of Pakistan is not present in year relevant to NTY 4 but does not exceed Rs. amount exceeding Rs.
C INCOME FROM BUSINESS
any other country for more than 182 days (i) Business Income Other Than Speculation Business in which the closing 3,600,000 2,400,000
during tax year or who is not resident Amount Chargeable XX XX date of the STY falls Where TI > Rs. 3,600,000 Rs. 435,000 + 27.5% of the
taxpayer of any other country. Less: Deductions Allowed (XX) (XX) Transitional w Period that comes 5 but does not exceed Rs. amount exceeding Rs.
6,000,000 3,600,000
AOP w Control & Management of the affairs of PSI/FSI Business Income (other than SB) XX XX Tax Year between end of last
Where TI > Rs. 6,000,000 Rs. 1,095,000 + 35% of the
AOP is situated wholly or partly in Pakistan (ii) Speculation Business TY prior to change &
6 amount exceeding Rs.
at any time during the year Amount Chargeable XX XX date on which 6,000,000
Company w Company incorporated/ formed by or Less: Deductions Allowed (XX) (XX) changed TY
PSI/FSI SB Income XX XX commences
under Pakistani law NON-SALARIED PERSON
Income under the Head ‘Income from Business’ XX
w Control & Management of the affairs of D CAPITAL GAIN PROCEDURE FOR TRANSITION Sr. TAXABLE INCOME RATE OF TAX
company is situated wholly in Pakistan at (i) CG on Disposal of Capital Asset → Person having NTY/STY apply to CIR Where TI does not exceed 0%
any time in the year 1
Consideration received XX XX to allow him to use STY/NTY Rs. 600,000
w Provincial Government /Local Government L: Cost of Capital Asset (XX) (XX) → CIR by order allow/reject request. Where TI > Rs. 600,000 but 7.5% of the amount
Fed. Govt. w Always Resident Person PSI/FSI Gain Relating to CA O/T Immovable Property XX XX After giving opportunity of being 2 does not exceed Rs. exceeding Rs. 600,000
(ii) CG on Disposal of Securities heard to the taxpayer 800,000
Foreign Govt. Always Non-resident Person Consideration received XX XX Where TI > Rs. 800,000 but Rs. 15,000 + 15% of the
w → CIR to allow only when compelling
L: Cost of Security (XX) (XX) 3 does not exceed Rs. amount exceeding Rs.
need is shown by taxpayer 1,200,000 800,000
Political Sub- w Always Non-resident Person PSI/FSI Gain relating to Securities XX XX → In case of acceptance conditions by Where TI > Rs. 1,200,000 Rs. 75,000 + 20% of the
division of Foreign Income under the Head ‘Capital Gains’ XX CIR may apply 4 but does not exceed Rs. amount exceeding Rs.
E INCOME FROM OTHER SOURCES → In case of rejection, order to be
Govt. 2,400,000 1,200,000
Amounts Chargeable XX XX passed after recording reasons for Where TI > Rs. 2,400,000 Rs. 300,000 + 25% of the
Public International w Always Non-resident Person Less: Deductions Allowed (XX) (XX) rejection in writing 5 but does not exceed Rs. amount exceeding Rs.
Income under the Head ‘Income from Other Sources’ XX 3,000,000 2,400,000
Organization
F SUM OF ALL HEADS Where TI > Rs. 3,000,000 Rs. 465,000 + 30% of the
Add: Exempt Income XX Board may permit class of persons 6 but does not exceed Rs. amount exceeding Rs.
G TOTAL INCOME XX having NTY to use STY or vice versa 4,000,000 3,000,000
COMPUTING DAYS AN INDIVIDUAL IS PRESENT IN PAKISTAN Less: Exempt Income (XX) Where TI > Rs. 4,000,000 Rs. 765,000 + 35% of the
→ Days Counted
` as Whole Days H NET TOTAL INCOME XX 7 amount exceeding Rs.
- Part of a day an individual is present in Pakistan (day of Less: Deductible Allowances [Cannot Reduce T/I Before Zero] REJECTION 4,000,000
arrival and day of departure) → Zakat paid under Zakat and Ushar Ordinance, 1980 →Review by FBR →FBR’s decision is final
- Public holiday → Workers’ Welfare Fund WITHDRAWN SALARIED PERSON
→ Workers’ Participation Fund (XX) CIR may withdraw permission to If income of an individual under the head “salary” exceeds
- Day of leave (including sick leave) §
I TAXABLE INCOME XX
- Day an individual’s activity in Pakistan is interrupted use STY/NTY by order after giving 75% of his taxable income, the individual is termed as
Less: Income subject to Separate Rates (GHS; Salary in Arrears; CG on Immovable
because of strike, lock-out or delay in receipt of supplies opportunity of being heard. ‘Salaried Individual’.
Property & CG on disposal of Securities) (XX)
- Holiday spent in Pakistan before, during or after any Tax on Taxable Income (As per Tax Tables) XX § Against this order, taxpayer may
activity in Pakistan. Tax on Income subject to Separate Rates (As per special rates) XX file review application to the COMPANY TAX RATES
→ Day Not Counted J TAX LIABILITY XX Board. COMPANY → 29%
- Day or part of day an individual is in transit in Pakistan Less: Tax Credits (XX) § Board’s decision on review shall SMALL COMPANY → 20%
K TAX PAYABLE XX be final. BANKING COMPANY → 39%
 ST ER MARCH 2024
HEAD OF INCOME: SALARY BY SIR TARIQ TUNIO - CSS (COMMISSIONER FBR) + CA TEACHER (CAF-2 Tax & PRC-5 ITB) 0332-2130867
MA T # 2
ATTEMPT
HE E GENERAL POINTS
S „ REIMBURSEMENT OF EXPENDITURE
Charge of Any salary received by an employee in a tax
Tax on Salary year, other thanexempt, is chargeable to tax in
that year under the head “Salary”
Revenue/ Capital Salary means any amount received by an
Nature employee from anyemployment, whether of a
revenue or capital nature
Basis of Charge Received basis
Receipt of (a) actually received by the person;
Income (b) applied on behalf of the person, at the
instruction of the personor under any law; or
(c) made available to the person.
When is Salary An amount or perquisite is treated as paid if it is
Treated as Paid? paid or provided:
§ by employer, an associate of the employer, or by
3rd party underan arrangement with employer
or associate of the employer.
§ to employee, or an associate of employee or
3rd party under anagreement with employee or
an associate of the employee.
§ by past or prospective employer
Deductions § No deductions are allowed for any expenditure
Definitions § Employee means any individual engaged in
employment
§ Employer means any person who engages and
remunerates an employee
§ Employment includes (a) a directorship or any
other office involved in the management of a
company; (b) a position entitling the holder to a
fixed or ascertainable remuneration; or (c) the
holding or acting in any public office
EXEMPTIONS
Free medical MEDICAL BENEFITS: Benefit representing free
Treatment, medical treatment, hospitalization or both, or
Hospitalization reimbursement of medical charges/hospital
or Both charges or both are provided by employer is
Reimbursement exempt subject to following conditions:
of Medical § Benefit is provided in employee’s terms of
Charges, employment
Hospital § NTN of the hospital or clinic is given &
Charges, or § employer certifies and attests the medical/
Both hospital bills
Exemption for following perquisites received by an employee are
Food, exempt:
Education, § free or subsidized food provided by hotels and
Medical restaurants toits employees during duty hours;
Treatments, etc. § free or subsidized education provided by an
educationalinstitution to the children of its
employees;
§ free or subsidized medical treatment provided
by a hospital ora clinic to its employees; and
§ any other perquisite or benefit for which the
employer does nothave to bear any marginal
cost, as notified by the Board.
Foreign-Source § FS salary received by resident individual is
Salary exempt if he paid foreign income tax on salary.
§ Foreign Inc.tax is treated as paid if tax has been
withheld fromsalary by employer and paid to the
revenue authority of foreigncountry in which the
employment was exercised.
 CORE AMOUNTS
Pay, wages or other remuneration provided to employee, leave pay, Expenditure incurred for employee’s own benefit Fully Taxable
Fully
payment in lieu of leave, overtime payment, bonus, commission, fees, work Expenditure incurred in performance of duties of employment Not Taxable
Taxable
conditions supplement (e.g unpleasant or dangerous working conditions)
SPECIAL AMOUNTS
‚ ALLOWANCES Golden handshake § Taxable in the year of receipt at current tax rates, or
Amount of allowance provided by employer to employee including (or amounts given § Taxable at the average rate of three preceding tax years
cost of living, dearness allowance, subsistence, rent, utilities, on termination § Option to be filed with CIR by the due date for filing of
education, entertainment or travel allowance. Note: any Fully of employment) return ofthe tax year in which salary in arrears is received.
allowance solely expended in the performance of the employee’s § Mere right or option is not taxable
Taxable
duties of employment is not included in employee’s Salary. § Benefit from mere right/option is taxable if it is disposed, as
follows: Consideration received –Cost= Gain
Explanation: The allowance solely expended in the performance of
§ Value of shares (Without Restriction): FMV of shares
employee’s duty does not include (i) allowance which is paid in
determinedat date of issue reduced by consideration given
monthly salary on fixed basis or %age of salary; or (ii) allowance Taxable
Employee Share for the shares and right/option by employee
which is not wholly, exclusively, necessarily or actually spent on
Scheme § Value of shares (With Restriction): FMV of shares determined
S
behalf of the employer. [Example: Special Allowance]
atearlier of:
Medical Allowance: Medical allowance received by employee, if
Exempt upto § time when employee has free right to transfer the shares
free medical treatment or hospitalization or reimbursement of § time of disposal of shares
10% of Basic
A
medical or hospitalization charges are NOT provided for in the reduced by consideration given for the shares and right/option
terms of employment. Salary
byemployee
Amount of any profit given to employee instead of salary
L
Profits
or inaddition to salary is taxable.
ƒ PERQUISITES Agreement to enter Amounts received as consideration for agreement to enter
Accommodat- § Amount that would have been paid if accommodation was not into employment intoemployment are taxable
A
ion provided (i.e. alternative amount) Agreement to Amounts received as consideration for conditions of
§ Minimum value to be taken at 45% of MTS/Basic Salary. Conditions employmentor changes thereof is taxable.
Conveyance § Partial personal use: Amounts received as consideration for agreement to
R
Restrictive
5% of Cost of vehicle (owned case) or FMV of vehicle at thetime restrictive covenant for past, present or prospective
covenant
of commencement of lease (lease case). employment.
§ Full personal use: § Taxable in the year of receipt at current tax rates;
Y
10% of Cost of vehicle (owned) or FMV of vehicle at the time of § Taxable at the tax rates of the relevant tax year if opted;
Salary in arrears
commencement of lease agreement (lease case). § Option to be filed with CIR by the due date for filing of
Domestic Where services of house keeper, driver, gardener or other return ofthe tax year in which salary in arrears is received.
servant domestic assistant are provided: Total salary paid to such servant in Tax on tax § Amount of tax paid by employer is to be grossed up.
the year for services rendered to employee as reduced by
payment made by employee to employer for such services.
Utilities FMV of the utilities provided reduced by payment made by † RETIREMENT BENEFITS
employee for the utilities. Provident (1) Statutory Provident Fund (for Govt Employee) → Employee’s &
Waiver Waiver/Payment: Amount paid/waived by employer Fund Employer’s annual contribution and Annual accretion of Interest are
Transfer of FMV of property determined at the time of transfer, as reduced byany not taxable → Payment of accumulated balance Exempt
property payment made by employee for the property (2) Recognized Provident Fund →Employee’s annual contribution is
Services FMV of services provided by employer determined at the time not taxable → Employer’s annual contribution: Amount exceeding
services are provided as reduced by payment made by employee lower of 1/10th of basic salary & dearness allowance or Rs. 150,000
for the services is taxed on annual basis. →Annual accretion of interest: Amount
Concessional § Amount equal to bench mark rate (in case no interest is charged by exceeding higher of 1/3 of basic salary & dearness allowance or
/ employer) interest amount calculated @ 16% of accumulated amount is taxed
Interest- free § Difference between interest charged by employer and the interest annually →Payment of accumulated balance is exempt
Loan computed at bench mark rate e.g. 10% (in case interest is charged (3) Unrecognized Provident Fund →Employee’s & employer’s annual
by employer) contribution and annual accretion of interest are not taxable
§ No amount is to be added to salary in following situations: →Payment of accumulated balance is fully taxable (except repayment
§ If employer has charged interest ≥ bench mark rate. of employee’s own contribution)
§ If employee has waived interest on his account maintained Pension § Pension received by citizen of Pk from former employer is
by the employer. exempt
§ If loan amount does not exceed Rs. 1,000,000/- § Pension is not exempt if employee continues to work for same
Residual Residual perquisites (i.e. other perquisites not mentioned above) employer or associate of employer
FMV of the perquisites determined at the time they are provided by § More than one pensions: Only higher pension is exempt
employer reduced by any payment made by employee to employer Leave → Taxable
for the perquisite Encashment →Exempt for employees of Federal Govt., Provincial Govt., or Armed
Forces when it is received preparatory to retirement.
Gratuity or ΠGovt. employees: Exempt if received by employee of Govt. (Federal/Provincial/Local), Statutory body, or Govt. corporations in accordance with rules & condition
Commutation of of employee’s service  Approved Gratuity Fund: Fully exempt Ž Approved Gratuity Scheme: Exempt upto Rs. 300,000/-  Others: Lower of 50% of the
pension on amount or Rs. 75,000/- is exempt (This exemption is not available if gratuity is (a) received outside Pakistan, (b) received by a NR individual, (c) received by an
retirement employee who has already received a gratuity previously from same or any other employer, & (d) received by a director who is not a regular employee of Co.)
 # 3
ET INCOME FROM PROPERTY
S HE PREPARED BY SIR TARIQ TUNIO - CSS (COMMISSIONER FBR) + CA TEACHER (CAF-2 Tax & PRC-5 ITB) 0332-2130867
FOR MARCH 2024 ATTEMPT ONLY
Rent means (1) any amount received or receivable by owner of land or building as consideration for use or occupation or right to use/occupy land or building,
RENT (2) any forfeited deposit paid under a contract for sale of land/building and (3) non-adjustable amount received in relation building.
Rent received or receivable for a tax
year by owner of the land or building
Non-adjustable Amount (In/Rel/To Building Only): (1) Taxed when received; NAA of Building ÷ 10 (Not taxed after 10 years) (2) Not taxed if refunded before
10 years on termination of tenancy (3) If earlier NAA is refund and subsequent received, subsequent is taxed after reducing that portion of earlier amount
N.A.A
which has been charged to tax. (Balance ÷ 10) [RECEIPT OF ADJUSTABLE AMOUNT: Not taxable. Being advance rent, it is taxed as rent whenever adjusted.]
AMOUNT
CHARGEABLE Fair market rent is taken where rent received/receivable is less than fair market rent (applies to both land or building). Exception: does not apply where fair
market rent is included in income of lessee under head Salary. ► WHETHER OR NOT FMV APPLIES TO EMPLOYER BEING OWNER IF RENT FREE
FAIR MARKET ACCOMMODATION IS PROVIDED TO AN EMPLOYEE? No fair market principle does not apply to this case. No amount is added to IFP of employer/owner.
VALUE ► SELF-HIRING: Employer rents accommodation from employer & returns it to him as perquisite. TAX TREATMENT: Employee chargeable to tax (1) under
Salary at AA or 45% w/e/h & (2) IFP for rent earned from employer. [FMV not applicable]

RENT NOT ► (1) Rent from sub-lease of a land or building, (2) Rent from lease of a building together with plant and machinery (3) Amount included
CHARGEABLE in rent for amenities, utilities or other service connected with renting of building [These 3 are chargeable to tax under IFOS]
UNDER IFP ► RENT FROM MOVABLE PROPERTY (such as machines, equipment, vehicles etc.) is chargeable to tax under Income from Business.
► Rent from agricultural land is exempt. (Agricultural Income is exempt u/s 41)

(1) REPAIR ALLOWANCE 1/5th of RCT in/con/with building

(2) INSURANCE PREMIUM paid/payable to insure building against damage or destruction
INCOME (3) LOCAL RATE, TAX, CHARGE OR CESS in/res/of property or income from property (excluding Income Tax)
FROM 10 DEDUCTIONS (4) GROUND RENT paid/payable in/res/of property
(5) PROFIT paid/ payable ON MONEY BORROWED to ACRER property, including by way of mortgage.
PROPERTY ALLOWED
[acquire, construct, renovate, extend or reconstruct]
(6) SHARE IN RENT AND SHARE IN APPERCEPTION IN VALUE PAID/ PAYABLE TO HBFC OR BANKS if property is ACRER with capital of HBFC/ bank under scheme of investment on basis of sharing
rent. [RETURN OF CAPITAL TO HBSC/BANK: Not allowed as deduction]
(7) PROFIT or INTEREST paid WHERE THE PROPERTY IS SUBJECT TO MORTGAGE OR OTHER CAPITAL CHARGE
(8) EXPENDITURE TO DERIVE RCT (including admin & collection charges) – not exceeding 4% of RCT in/res/ of property (Rent Collection Charges)
(9) EXPENDITURE paid/ payable FOR LEGAL SERVICES to defend title to property or any suit connected with property in court
(10)DEDUCTION FOR IRRECOVERABLE RENT: An allowance equal to unpaid rent is allowed as deduction, where reasonable grounds to believe that unpaid rent is irrecoverable.
CONDITIONS: (a) Defaulting tenant has vacated property or steps have been taken to compel him to vacate it; (b) Defaulting tenant is not in occupation of any other property of the person;
(c) All reasonable steps to institute legal proceedings for the recovery of unpaid rent have been taken or there are reasonable grounds to believe that legal proceedings would be useless;
(d) Unpaid rent was included in IFP in the TY in which rent was due and tax was paid on it.
► RECOVERY OF UNPAID RENT: Unpaid rent which was allowed as deduction, is charged to tax if recovered [in year of recovery]

► NO DOUBLE DEDUCTION: Expenditure deducted under IFP is not deductible under any other head
DEDUCTIONS ► DEDUCTIONS NOT ALLOWED (DNA): A deduction not allowed under § 21 under IFB is not allowed under IFP
GENERAL POINTS ► UNPAID LIABILITY: Deduction allowed on accrual basis is added back in income if not paid in 3 years following the year in which it was allowed as deduction. [PAYMENT OF UNPAID
LIABILITY: Allowed as deduction if paid after having been added in income.]

INCOME OF If respective shares → “definite & ascertainable” ► Net rental income is chargeable in each partners’ hands proportionately (not jointly). But if respective shares→ “not” definite & ascertainable
JOINT OWNERS ► Net rental income is chargeable jointly as AOP
 STER
MA # 4
MARCH 2024
T
ST EET ATTEMPT
SH
(1) Profits & gains of any business carried on by person at any time in TY
(2) Income of trade, professional or similar association from sale of goods/ services to its
members [Note: Income of co-operative societies from sale of goods, immoveable
AMOUNT property or provision of services to its members chargeable to tax under ITO-2001]
(3) Income from hire or lease of tangible movable property
CHARGEABLE (4) FMV of any benefits or perquisite (whether convertible to money or not) in course of/ by
virtue of past, present, or prospective business relationship [Note: ‘benefit’ includes
waiver of profit on debt or debt itself under SBP Circular No.29 of 2002 or any other SBP
scheme]
GENERAL
PRINCIPLES
ALLOWED
DEDUCTIONS
NOT ALLOWED
(PAGE 2)
SPECIAL
DEDUCTIONS
8 BAD DEBTS
► Deduction → allowed for BD if (1) amount previously
part of income or money lent by FI, (2) written off and (3)
reasonable grounds to believe it is irrecoverable
► Recovery → Case 1: Recovered amount > difference b/w
whole of bad debt and amount previously allowed as
deduction then excess chargeable to tax.
Case 2: Recovered amount < difference b/w whole of bad
debt and amount previously allowed as deduction then
shortfall allowed as deduction
7 PROFIT ON DEBT
► Deduction → allowed for PoD incurred to extent that proceeds/
benefit of debt have been used by person for the purposes of business
► Deduction → allowed for lease rental incurred for an asset used
for business purposes [to bank, FI, Approved modaraba, Approved
L/coy or SPV ► For determining deduction on a/c of lease rentals,
cost of passenger transport vehicle not paying for hire, to extent of
principal amount, shall not exceed Rs. 2.5 million
► Deduction → Any amount incurred to modaraba or PTC holder for
funds borrowed and used for the purpose of business
6 EMPLOYEE T&F
► Deduction → allowed for Expenditure (other than capital expenditure)
incurred in/res/of (1) Educational institution/ hospital in Pak established
for benefit of employees/ their dependents (2) Training institute in Pak
established for training of industrial workers recognized, aided, or run by
FG/PG/LG & (3) Training of any person being a citizen of Pakistan, in
connection with a scheme approved by the FBR
INCOME FROM BUSINESS – CAF 2 TAX MASTER SHEET BY STT
SIR TARIQ TUNIO CSS (COMMISSIONER FBR) + CA TEACHER (TAX/LAW/ITB) 0332-2130867
(5) Management fee derived by management coy (including modaraba management coy)
(6) Profit on debt (PoD) derived by person whose business is to derive such income
(7) Where lessor, being scheduled bank, investment bank, development finance institution,
modaraba or leasing coy has leased out asset, whether owned by it or not, to another person,
any amount paid/ payable in/con/with lease of said asset shall be treated as income of lessor Business (Def) – Business includes any trade,
and shall be chargeable to tax under IFB commerce, manufacture, profession, vocation
(8) Amount received by banking coy or a non-banking finance coy, where such amount or adventure or concern in the nature of trade,
represents distribution by mutual fund or Private Equity and Venture Capital Fund out of its commerce, manufacture, profession or
income from PoD, shall be chargeable to tax under the head IFB and not under IFOS vocation but does not include employment
► Deduction is allowed for expenditure incurred wholly & exclusively for business purposes ►Depreciable Asset/Intangibles are depreciated/amortized
4 SPECIAL CASES OF DEPRECIATION
► Pre-commencement Expenditure (PCE) is amortized at 20% on straight line basis ► Deduction in respect of animals used in business otherwise than (1) PBU CASE ►DD allowed is to the extent of
as stock-in-trade — Cost reduced by amount realized in/res/of animal/carcasses deducted when animal dies/become permanently useless for business business use; / WDV computed on the basis
F that DA was solely used to derive IFB; / On
► Depreciation Deduction → a person shall be allowed a deduction for depreciation of person’s depreciable assets used in person’s disposal WDV is increased by amount not
1 business in tax year [3 conditions: (1) Asset – depreciable asset (2) owned & (3) used in person’s business] allowed on account of partial business use
► Calculation → Written Down Value x Depreciation Rate (2) PTV NOT PLYING FOR HIRE ► For DD, cost
► WDV → 1st YEAR► Cost – IA = WDV | SUBSEQUENT YEARS► Cost – Total Dep (including Initial Allowance) = WDV of PTV not plying for hire shall not exceed Rs.
► Depreciation after Exemption Period → building, furniture, plant or machinery used for business purposes during TY for which 7.5 (m). ► Disposal → consideration received
income is exempt, depreciation admissible shall be treated to have been allowed in/res/of said tax year and after expiration of the is computed as follows:
DEPRECIATION
Amount received on Disposal of Vehicle X Rs. 7.5
exemption period, WDV of such assets shall be determined after reducing total depreciation deductions (including any IA)
► Total deductions allowed i/r/o DA cannot > cost of the asset / ►Cost of DA, being IP or SI to IP does not include cost of land (M)/ Actual cost of Acquiring the Vehicle
►Disposal: No DD allowed in TY in which DA disposed ► CR > WDV = Gain (Taxable, IFB)/ CR < WDV = Loss (deductible, IFB) (3) DISPOSAL OF IP ► CR is treated as cost of
► DA (Def) means TMP, IP (o/th unimproved land), or SI to IP owned by person that—(a) has NUL >1 yr (b) is likely to lose value due property, if property disposed is IP and CR on
to normal w-and-t or obsolescence & (c) is used wholly or partly in deriving IFB, but shall not include assets whose entire cost is its disposal > cost of the property.
deducted in Yr one under ITO-2001. ► SI to IP (Def) “structural improvement” in relation to immovable property, includes any (4) EXPORT/TRANSFER O/S PAK ► Where DA
building, road, driveway, car park, railway line, pipeline, bridge, tunnel, airport runway, canal, dock, wharf, retaining wall, fence, power used in Pak is exported or transported outside
lines, water or sewerage pipes, drainage, landscaping or dam Pakistan, person is treated as having disposed
► DA is jointly owned by taxpayer & Islamic financial institution licensed by SBP or SECP, pursuant to an arrangement of Musharika of asset at the time of export or transfer for CR
financing or diminishing Musharika financing, depreciable asset shall be treated to be wholly owned by the taxpayer equal to cost of the asset.
2 ► IA Deduction → is allowed to person who places into service in Pakistan an EDA [being plant & machinery]
ALLOWANCE
► Calculation → IA Amount = Cost x Prescribed Rate (i.e. 25%)
INITIAL
► Definition → EDA means a depreciable asset other than the following (1) Road transport vehicle not plying for hire (2) Furniture & Fittings, (3) Plant or machinery that has been used
previously in Pakistan (4) Plant or machinery in/rel/to which deduction has been allowed for entire cost of asset in TY in which asset is acquired (5) immovable property or structural
improvement to immovable property
►Timing IA is allowed in  the tax year in which asset is used for the first time, or ‚ the tax year in which commercial production is commenced W/E/L
► Deduction → Amortization deduction is allowed for cost of intangible (1) that is wholly or partly used in deriving ICT under IFB & (2) that has NUL exceeding 1 year
► Calculation → Amortization Deduction = Cost/ NUL [If NUL is not ascertainable → treated as = 25 yrs]
3 ► No Deduction → No deduction allowed where deduction allowed under another section for entire cost of intangible in the tax year in which intangible is acquired.
► PBU Case → deduction allowed to the extent of business use. | WDV computed on the basis that Intangible was solely used to derive IFB.
► Proportionate → Amortization Deduction X No. of days Intangible is used/ Total Days in Yr [Note: Intangible available for use on day, including non-working day, is treated as used]
INTANGIBLES
► Disposal: No AD allowed in TY in which Intangible disposed ► CR > WDV = Gain (Taxable under IFB)/ CR < WDV = Loss (deductible under IFB)
► WDV → FBU ► WDV = Cost – Total AD Allowed / PBU ► WDV = Cost – Total AD Computed (Allowed & Not Allowed)
► Cost (Def) → Cost means any expenditure incurred in acquiring or creating intangible, including expenditure incurred in improving or renewing intangible
► Intangible (Def) → “intangible” means any patent, invention, design or model, secret formula or process, copyright, trade mark, scientific or technical knowledge, computer software,
motion picture film, export quotas, franchise, licence, intellectual property, or other like property or right, contractual rights and any expenditure that provides an advantage or benefit
for a period of more than one year (other than expenditure incurred to acquire a depreciable asset or unimproved land, but shall not include self-generated goodwill or any adjustment
arising on account of accounting treatment in the manner as may be prescribed.
► Total deduction =Cost → total deductions allowed to a person in current TY and all previous TYs in/res/ of intangible shall not exceed cost of intangible
4 ► Deduction for Pre-commencement Expenditure → allowed at 20% of PCE ► Def → PCE means any expenditure incurred, before commencement of business, wholly and exclusively to
P.C.E
derive ICT & includes: Cost of feasibility studies, Construction of prototypes, Trial production activities, but shall not include expenditure Incurred in acquiring land, or DA or intangible.
► PCE shall not be allowed where deduction for entire PCE amount has allowed under another section of ITO-2001
SCIENTIFIC
RESEARCH
5 ► Deduction → allowed for SRE incurred in Pak wholly and exclusively for purpose of deriving IFB ► Search conducted in Pak & PCE incurred in Pak
► Def → SRE means, expenditure incurred (including contribution to SR institution) on Sci/Research in Pak Other than expenditure incurred in: Acquisition of DA /intangible, Acquisition
of immovable property & Ascertaining existence/ location/extent/quality of natural deposit
PAGE 1 of 2
 DEDUCTIONS NOT ALLOWED (§21) TAX ACCOUNTING
Due= When entitled to
1. Tax paid on Profits & Gain of Business [i.e. Income Tax] receive it even if time for
2. Withholding Income Tax [i.e. Income Tax]
Derive Income When it is DUE to the person discharge of entitlement
3. Expenditure Paid Without Requisite Tax Deduction/ Collection
►R/M & Finished Goods, DNA not > 20% of purchases is postponed or amount
► Recovery of tax from W/H agent or taxpayer by FBR is treated as paid is payable in instalments
4. Commission in/res/of 3rd Schedule Goods ►3rd Schedule goods ►commission >0.2% of Accrual Basis
Company
gross amount of supplies
►Not applicable if commission agent on ATL Payable= All events that
5. Entertainment Expenditure in violation of conditions Conditions: (i) incurred in Pak/outside Incur Expenditure When it is PAYABLE by the person determine liability have
Pakistan in/con/with business, (ii) in Pak for foreign customers/suppliers, (iii)
customers/clients on business premises, (iv) meetings of shareholders, agents, directors or Method of occurred and amount
employee, (v) opening of branches [Rule 10] Accounting can be determined with
6. Contribution to Unrecognized Provident Fund, Unapproved Pension/Superannuation/ Accrual Basis reasonable accuracy
Gratuity Fund
7. Amount in excess of 50% of contribution to approved gratuity fund, approved pension
fund, approved superannuation fund Individual/AOP OR Derive Income When it is RECEIVED
8. Contribution to a Fund without Effective Arrangements for Tax Deduction
9. Penalty or Fine for violation of law, rule or regulation
10. Personal Expenditure Cash Basis
11. Amount Carried to Reserve or Capitalized
12. Certain Amounts Paid by AOP to Its Members
PoD, Brokerage, Commission, Salary or other remunerations
13. Payment by Taxpayer not being Coy Otherwise than Banking Channel Incur Expenditure When it is PAID
(1) Single a/c head, (2) Sum > 250,000 (3) Individual expense >25,000
Exception: utility bills, freight, travel fare, postage &taxes/duties/fees/fine or other STOCK-IN-TRADE (S-in-T)
ADD BACK OF UNPAID TRADING LIABILITY
statutory obligation ► S-in-T means anything produced, manufactured, purchased, or otherwise acquired for manufacture, sale or exchange,
► Where deduction for expenditure incurred is
14. Payment by Coy O/W than Digital Means from Business Bank Account & any materials/ supplies to be consumed in production or manufacturing process, but does not include stocks or shares.
allowed on accrual basis under IFB and it (or part of it)
(1) Single a/c head, (2) Sum > 250,000 (3) Individual expense >25,000 ► Cost of S-in-T Disposed → computed in/acc/ with formula: (A + B) – C [A = opening value of the person’s S-in-T for the
is not paid within 3 years of end of TY in which
Exception: utility bills, freight, travel fare, postage &taxes/duties/fees/fine or other year; B = is cost of S-in-T acquired in the year; and C = closing value of S-in-T for the year.]
deduction was allowed, unpaid amount is chargeable
statutory obligation to tax under IFB in 1st TY following end of 3 years. ► Opening value of S-in-T for TY → (a) closing value of person’s S-in-T at the end of the previous year; or (b) where the
15. Salary Paid o/w/t crossed cheque/online transfer [>Rs 32,000 PM] ►Deduction is allowed where trading liability or part person commenced to carry on business in the year, FMV of any S-in-T acquired prior to commencement of business.
16. Capital Expenditure of it paid in subsequent year, in year of payment. ► FMV of S-in-T → determined at the time the S-in-T is ventured in the business.
17. Pharma manufactures → Sales promotion, advertisement & publicity, expenditure >10% of ►Value of any benefit in/res/of such trading liability ► Closing Value S-in-T → lower of cost or NRV [net realizable value] of S-in-T on hand at end of yr.
TO derived by person is chargeable to tax under IFB in TY ► Cost of S-in-T → Person accounting for income chargeable under IFB:
18. Expenditure on account of Utility Bills > limits or in violation of conditions (i) on cash basis may compute S-in-T on prime-cost method or absorption-cost method
in which benefit is received.
19. Sales to unregistered persons under STA-90 ►Sale by Industrial undertaking (ii) on accrual basis shall compute S-in-T on absorption-cost method.
►Disallowance not > 10% of total Deductions ► A/B x C A=Total Deductions, B=TO & ► Where particular items of stock-in-trade are not readily identifiable, a person may account for that stock on FIFO
C=Total Sales TAXATION OF LEASING
method or average cost method but, once chosen, stock valuation method may be changed only with written
20. Expenditure attributable to sales claimed by persons who fails to integrate his business ► Principal amount and mark up taxable for lessor permission of CIR and in/acc/with any conditions that CIR may impose.
with FBR through approved fiscal electronic device and software ► Depreciation deductions is allowed to lessor in/res/
► disallowance shall not exceed 8% of allowable deductions. of asset owned by it and leased to another person
► Depreciation deductible only against lease rental ABSORPTION-COST METHOD DIRECT LABOUT COSTS
means generally accepted accounting principle under which means labour costs directly related to the
income derived in respect of leased assets.
SPECULATION BUSINESS (SB) the cost of an item of stock-in-trade is the sum of direct manufacture or production of stock-in-trade.
► Asset owned by lessor and leased to another person
is treated as used in business of lessor material costs, direct labour costs, and factory overhead costs.
► TAX TREATMENT
(a) SB is treated as distinct and separate from any other business ► List of lessors: leasing company, investment bank,
(b) provision of ITO-2001 relation to IFB shall apply separately to SB and other business modaraba, bank or development finance institution. PRIME-COST METHOD DIRECT MATERIAL COSTS
(c) Speculation Loss is not set off against NB income or income under any other head but is means generally accepted accounting principle under which means the cost of materials that become an integral
FOR LESSEE:
carried forward for 6 years and set off only against income under SB of subsequent 6 TYs. cost of stock-in-trade is sum of direct material costs, direct part of the stock-in-trade manufactured or
► Lease rental deduction allowed to lessee
labour costs, and variable factory overhead costs. produced, or which are consumed in the
► Lease rental deduction allowed only when:
► SPECULATION BUSINESS means any business in which contract for purchase and sale of any manufacturing or production process.
- it is incurred for asset used for business
commodity (including stocks and shares) is periodically or ultimately settled otherwise than by
purposes
actual delivery or transfer of commodity, but does not include a business in which
- Incurred to Bank, Financial Institution, VARIABLE FACTORY OVERHEAD COSTS FACTORY OVERHEAD COSTS
(a) contract in/res/ of RM or merchandise is entered into by person in course of manufacturing
Approved modaraba, Approved Leasing coy or means those factory overhead costs which vary directly with means total costs of manufacturing or producing
or mercantile business to guard against loss through future price fluctuations for purpose of
Special purpose vehicle changes in volume of stock-in-trade manufactured or stock-in-trade, other than direct labour and direct
fulfilling person’s other contracts for actual delivery of goods to be manufactured or
► For determining deduction on a/c of lease rentals, produced. material costs.
merchandise to be sold
cost of passenger transport vehicle not paying for hire,
(b) contract in/res/ of stocks and shares is entered into by dealer or investor to guard against
to extent of principal amount, shall not exceed Rs. 2.5
loss in person’s holding of stocks and shares through price fluctuations. AVERAGE-COST METHOD FIRST-IN-FIRST-OUT METHOD
million
(c) contract is entered into by member of forward market or stock exchange in course of any means GAAP under which valuation of stock-in-trade is based means GAAP under which valuation of stock-in-trade
► Deduction not allowed for down-payment made by
transaction in nature of jobbing arbitrage to guard against any loss which may arise in on weighted average cost of units on hand. is based on assumption that stock is sold in order of
lessee at the beginning of lease agreement (it is
ordinary course of person’s business as such member. its acquisition.
advance in nature, hence, asset and not expenditure) PAGE 2 of 2
 S T ER
MA T # 5
FOR MARCH 2024 ATTEMPT ONLY
HEAD OF INCOME: CAPITAL GAINS
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SHE
PREPARED BY SIR TARIQ TUNIO - CSS (COMMISSIONER FBR) + CA TEACHER (CAF-2 Tax & PRC-5 ITB) 0332-2130867
CAPITAL ASSET SECURITIES
AMT CHARGEABLE Gain arising on disposal of capital asset Gain arising on disposal of securities
ASSETS ► Capital Asset means property of any kind held by person, whether or not connected with business. § Security means shares of public company, voucher of Pakistan Telecommunication Corporation, Modaraba Certificate,
► Including [Declared Capital Assets (DCA)]: (a) Painting, sculpture, drawing or other work of art (b) Jewellery an instrument of redeemable capital, debt Securities, units of exchange traded fund and derivative products.
(c) Rare manuscript, folio or book (d) Postage stamp or first day cover (e) Coin or medallion; or (f) Antique § Corporate Debt Securities such as Term Finance Certificates (TFCs), Sukuk Certificates (Sharia Compliant Bonds),
[Loss is not recognized on disposal of DCAs] Registered Bonds, Commercial Papers, Participation Term Certificates (PTCs) and all kinds of debt instruments issued by
any Pakistani or foreign company or corporation registered in Pakistan; and
► Shares of private company [ i.e. Pvt Ltd Co which has either no or <50% Govt holding]
§ Government Debt Securities such as Treasury Bills (T-bills), Federal Investment Bonds (FIBs), Pakistan Investment Bonds
► Shares of public unlisted company (PIBs), Foreign Currency Bonds, Government Papers, Municipal Bonds, Infrastructure Bonds and all kinds of debt
EXCLUSIONS (i) Stock-in-trade, Consumable stores or Raw materials (ii) Depreciable asset/intangibles instruments issued by Federal Government, Provincial Governments, Local Authorities and other statutory bodies.
FROM CA (iii) Movable property held for personal use, except 6 declared capital assets. [NOT TAXABLE UNDER ANY HEAD]
5FORMULA A – B [A = CR on disposal of CA/Security B = Cost of CA/Security] ►CR= total amount received or FMV (w/e/h)► Cost (Not included in cost): (1) Expenditure deducted under another head (2) Expenditure that is DNA (u/s 21
DEDUCTION In computing amount chargeable to tax under Capital Gains, a deduction is allowed for any loss on disposal of capital asset
LOSS ► Capital loss is not set off against income chargeable under any other head, but is carried forward to next TY ► Loss on disposal of securities shall be set off only against gain from any other securities chargeable to tax.
and set off against capital gain ► Loss that is not able to be set off against gain from disposal of securities shall be:
► Capital loss is carried forward to 6 TYs immediately succeeding the TY in which loss was first computed - carried forward to 3 tax years and
► Where a person has b/ f capital loss for more than one TY loss of the earliest tax year is set off first - set off only against gain from disposal of securities chargeable to tax
TAX RATES All Cpt. Assets (Except Imm/Property) Capital Assets Being Immovable Property Public Company means — (1) a coy in which not < 50% shares are held by FG or PG; (2) coy in which not <50%
Gain is clubbed with other heads of shares are held by foreign Govt, or foreign coy owned by foreign Govt; (3) coy whose shares were traded on reg’d
Open Constructed Flats stock exchange in Pakistan at any time in TY and which remained listed at the end of that year; (4) a unit trust
income i.e. Salary, IFP, IFB & IFOS and Plots Property
charged to tax at rates as provided in whose units are widely available to the public and any other trust as defined in the Trusts Act, 1882
Where holding period does not exceed 1 15% 15% 15%
tables ► Shares of Public Company shall be considered as security if such company is a public company at the time of
year
disposal of such shares.
Where holding period exceeds 1 year but 12.5% 10% 7.5%
§ Buyer of CA, being shares of coy, shall
does not exceed 2 years Rates
deduct advance tax at 10% of FMV of
shares (Paid to FG in 15 days of payment) Where holding period exceeds 2 years but 10% 7.5% 0% Where holding period does not exceed 1 year 15%
does not exceed 3 years Where holding period exceeds 1 year but does not exceed 2 years 12.5%
§ On application by buyer & after making Where holding period exceeds 3 years but 7.5% 5% Where holding period exceeds 2 years but does not exceed 3 years 10%
inquiry, CIR may allow making payment does not exceed 4 years Where holding period exceeds 3 years but does not exceed 4 years 7.5%
w/o tax deduction or at a reduced rate.
Where holding period exceeds 4 years but 5% 0% Where holding period exceeds 4 years but does not exceed 5 years 5%
§ Person disposing of shares shall furnish does not exceed 5 years Where holding period exceeds 5 years but does not exceed 6 years 2.5%
statement to CIR within 30 days of Where holding period exceeds 5 years but 2.5% Where holding period exceeds 6 years 0%
transaction, unless CIR, by notice, require does not exceed 6 years Future commodity contracts entered into by members of Pakistan 5%
to furnish it in less than 30 days Where holding period exceeds 6 years 0% Mercantile Exchange
DISPOSAL DISPOSAL: 1 A person is treated as having disposed of an asset if he parts with ownership of the asset including when asset is (a) sold, exchanged, transferred or distributed; or (b) cancelled, redeemed, relinquished, destroyed, lost, expired or
surrendered. 2 Transmission of asset by succession or will → treated as disposed by deceased at the time asset is transmitted 3 Application of Business Asset to Personal Use → treated as disposed by owner at the time the asset is so applied. 4
Business Asset Is Discarded or Ceases to be Used in Business → treated as disposed 5 A disposal shall include the disposal of a part of an asset.
ACQUIRED: 1 Person shall be treated as having acquired an asset → at the time the person begins to own the asset, including at the time the person is granted any right. 2 The application of a personal asset to business use → shall be treated as
an acquisition of the asset by the owner at the time the asset is so applied.
DEFINITIONS: 1 “Business Asset” means an asset held wholly or partly for use in a business, including stock-in-trade and a depreciable asset; 2 “Personal Asset” means an asset held wholly for personal use.
COST 1 Cost of asset purchased → Sum of following amounts: (a) total consideration given for asset, including FMV of consideration in kind determined at the time the asset is acquired; (b) incidental expenditure incurred in acquiring/ disposing asset; and
(c) expenditure incurred to alter/ improve asset. [But shall not include expenditure that has been fully allowed as a deduction under another head] 2 Cost of personal asset applied to business use → FMV of asset determined at date of application
to business. 3 Cost of asset produced/ constructed → total costs incurred in producing/ constructing asset plus expenditure referred to in (b) and (c) of Sr. 1 above. 4 Asset acquired with foreign currency loan and, before full and final repayment,
there is increase/ decrease in liability in Rupees → Amount by which liability is increased or reduced is added to or deducted from cost of asset [Explanation: Difference on account of foreign currency fluctuation, shall be taken into account in the year
of occurrence for the purposes of depreciation. Note: In determining whether liability has increased or decreased, account shall be taken of hedging agreement relating to loan. 5 Where part of asset is disposed, cost of asset shall be apportioned
b/w part of asset retained and part disposed of in accordance with their respective FMV determined at the time person acquired the asset. 6 Where acquisition of asset is derivation n of an amount chargeable to tax → Cost of asset shall be amount
so charged plus amount paid by the person for the asset. 7 Where acquisition of an asset is derivation of an amount exempt from tax → cost of asset shall be the exempt amount plus any amount paid by the person for the asset
NOTE: Cost of asset does not include the amount of any grant, subsidy, rebate, commission or any other assistance (other than a loan repayable with or without profit) received or receivable by a person in respect of the acquisition of the asset, except
to the extent to which the amount is chargeable to tax under this Ordinance
Consideration 1 CR on disposal of asset → total amount received or FMV, whichever is higher, including FMV of CR in kind determined at time of disposal. 2 Asset is lost/ destroyed → compensation, indemnity or damages received under (a) insurance policy,
Received indemnity or other agreement; (b) settlement or (ca judicial decision. 3 Application of Business Asset to Personal Use OR Business Asset Is Discarded or Ceases to be Used in Business → CR shall be FMV of asset determined at the time it is applied to
personal use or discarded or ceased to be used in business. 4 lease of asset by Bank, FI, modaraba, or leasing coy approved by CIR → residual value received on maturity of lease agreement sub/to condition that residual value plus amount realized
during term of lease towards cost of asset is not < original cost of asset. (5) 2 or more assets are disposed in single transaction and CR for each asset is not specified → total CR shall be apportioned among assets disposed in proportion to their respective
FMV determined at the time of the transaction.
NON-RECOGNITION No gain or loss shall be taken to arise on the disposal of an asset - (a) between spouses under an agreement to live apart; (b) by reason of the transmission of the asset to an executor or beneficiary on the death of a person; (c) by reason of a gift of
RULES § 79 the asset to a relative as defined in § 85(5); (d) by reason of compulsory acquisition of asset under any law where the consideration received for the disposal is reinvested by the recipient in an asset of a like kind within one year of the disposal; (e) by
a company to its shareholders on liquidation of the company; or (f) by an association of persons to its members on dissolution of the association where the assets are distributed to members in accordance with their interests in the capital of the
association.
 T ER
FOR MARCH 2024 ATTEMPT ONLY
INCOME FROM OTHER SOURECES
S
MA T # 6 PREPARED BY SIR TARIQ TUNIO - CSS (COMMISSIONER FBR) + CA TEACHER (CAF-2 Tax & PRC-5 ITB) 0332-2130867
E
SHE GENERAL PRINCIPLE ► Income of every kind received by a person in a TY, if not included in any other head, is chargeable to tax under IFOS, other than exempt income.

INCOMES LISTED ► Including the following:

UNDER IFOS (1) Dividend [Dividend from local & foreign company is chargeable under FTR under § 94(2), which provides ‘Dividend paid by a company shall be taxable in accordance with § 5’, which is FTR]
(2) Royalty
(3) Profit on Debt
[Deduction for Zakat ► Person receiving POD chargeable under IFOS is allowed deduction for Zakat paid under Zakat and Ushr Ordinance, 1980, at the time the profit is paid
to the person. If PoD claimed as deduction in this manner, then it cannot be claimed as deductible allowance]
(4) Additional payment on delayed refund under any tax law
(5) Ground rent
(6) Rent from the sub-lease of land or a building
AMOUNT (7) Income from the lease of any building together with plant or machinery
[Depreciation Allowed► Building – normal deprecation @ 10% ► Plant & Machinery – IA @25% (if used in Pak for the first time) & Normal Deprecation @15%]
CHARGEABLE (8) Income from provision of amenities, utilities or any other service connected with renting of building
(9) Any annuity or pension
(10) Any prize bond, or winnings from a raffle, lottery, prize on winning a quiz, prize offered by companies for promotion of sale or cross-word puzzle
(11) Any other amount received as consideration for the provision, use or exploitation of property, including from the grant of a right to explore for, or exploit, natural resources
(12) FMV of any benefit, whether convertible to money or not, received in connection with the provision, use or exploitation of property;
(13) Any amount received by a person as consideration for vacating the possession of a building or part thereof, reduced by any amount paid by the person to acquire possession of such building
or part thereof. [How Taxed ► Amount ÷ 10 = Amount Chargeable for TY]
(14) Any amount received by a person from Approved Income Payment Plan or Approved Annuity Plan under Voluntary Pension System Rules, 2005; and
(15) Any amount or FMV of any property received without consideration or received as gift, other than gift received from relative as defined in sub-§ (5) of § 85
(16) Bonus shares

LOAN, ADVANCE, AMOUNT RECEIVED FROM MODE TREATED AS

GIFT & DEPOSIT FOR 1) Loan 2) Advance 3) Gift Any Person ►Otherwise than by Crossed cheque drawn on a bank or INCOME CHARGEABLE TO TAX
ISSUANCE OF SHARES 4) Deposit for Issuance of Shares (except Banking Coy or FI) through banking channel ►from a person holding NTN UNDER IFOS

EXCEPT: Advance for sale of goods/provision of services

How paid ► POD paid to person in arrears or

►Amount received includes POD chargeable to tax in
tax year/years preceding tax year in which it is received Option ► Person may by notice in writing to CIR
POD► From investment in National - elect for profit to be taxed
PROFIT ON DEBT FROM
Savings Deposit Certificates/ - at tax rate that would have been applicable
NATIONAL SAVINGS &
Defence Savings Certificate - if the profit had been paid to the person
Result ► As a result person is chargeable to tax at - in the tax year to which it relates
higher rate than would have been applicable if POD had
been paid to person in tax year to which it relates

► A deduction is allowed for any expenditure (other than of capital nature) paid by the person in the year to the extent to which it is paid in deriving income chargeable under IFOS.
DEDUCTIONS (Capital Expenditure: Expenditure is of a capital nature if it has a normal useful life of more than one year.)
ALLOWED ►Deduction not allowed for expenditure that is deductible in under another head of income
►Deductions not Allowed (DNA) u/§ 21 under IFB shall not be allowed under IFOS either.
 TAX CREDITS
PREPARED BY SIR TARIQ TUNIO - CSS (COMMISSIONER FBR) + CA TEACHER (CAF-2 Tax & PRC-5 ITB) 0332-2130867
FOR THIS ATTEMPT ONLY CHARITABLE DONATION
► Credit allowed for sum paid (through crossed cheque) or property given (FMV of date of donation) ►DONEES → (1) Board of education/University est’d
1 by/under Fed/Prov law, (2) Educational institution/hospital/relief fund est’d/ run by FG/PG/LG (3) NPO/ any person eligible for credit u/§ 100C. (4) 13th
WHEN? Schedule Entities, organizations and funds

PENSION FUND EXAMPLES (13th SCHEDULE)

► Eligible person deriving ICT under Salary/IFB is entitled in/res/of any contribution/ The Citizens Foundation
2 premium paid in approved pension fund under VPS Rules, 2005. Fatimid Foundation, Karachi
► Eligible Person means an individual Pakistani who holds a valid NTN, or CNIC or NIC for Al-Shifa Trust
Overseas Pakistanis issued by NADRA Shaukat Khanum Memorial Trust, Lahore
Christian Memorial Hospital, Sialkot
National Institute of Cardiovascular Diseases, (Pakistan) Karachi
Premier Trust Hospital, Mardan
Khair-un-Nisa Hospital Foundation, Lahore
Alkhidmat Foundation [Total Entries 62]
TWO

Person’s tax for the TY before Total Amount of Donation, Voluntary contribution or subscription
(including FMV of property given)
2
allowance of any tax credit
CHARITABLE DONATION
30% of Taxable Income of Individual/AOP (In case of company → 20%)
[Donation to Associate: 15% (Individual and AOP) & 10% (Coy)
A
TAX X C
AMOUNT?
CREDITS B

Total Contribution/ Premium paid in Year

Person’s taxable
income for TY
PENSION FUND
20% of Taxable
2

POS MACHINE → Person required to integrate with FBR’s computerized system for real time reporting of sale/receipt [i.e. Tier-1 Retailers] entitled to credit in/res/of purchase amount of POS
ONE machine ► When? → POS machine is installed, integrated & configured with FBR’s computerized system ► Credit Amount → Lesser of purchase amount of POS machine or Rs. 150,000/- per
machine ► Definition → POS Machine means a machine meant for processing and recording sale transactions for goods or services, either in cash or through credit and debit cards or online
payments in an internet enabled environment

TAX CREDIT FOR CERTAIN PERSONS → Equal to 100% of tax payable including minimum, alternate corporate tax and final taxes for period ► Persons or incomes allowed tax credit are: (a) persons
engaged in coal mining projects in Sindh supplying coal exclusively to power generation projects; (b) a startup as defined in § 2(62A) for the tax year in which the startup is certified by Pakistan
Software Export Board and next following 2 tax years ► Condition: Filing of Income Tax Return, Withholding Statement and Sales Tax Return

TWO
TAX CREDIT FOR SPECIFIED INDUSTRIAL UNDERTAKING → allowed investment tax credit of 25% of eligible investment amount against tax payable including minimum and final taxes
► Tax credit not fully adjusted during the year of investment shall be carried forward to subsequent 2 tax years
► Eligible investment means investment made in purchase and installation of new machinery, buildings, equipment, hardware and software, except self-created software and used capital goods.
► Eligible person means (a)Green field industrial undertaking (i) Manufacture of goods or materials or subjection of goods or materials to any process which substantially changes their original
condition; or (ii) Ship building (b) industrial undertaking set up by 30.06.2023 and engaged in manufacture of plant, machinery, equipment and items with dedicated use (no multiple uses) for
generation of renewable energy from sources like solar and wind, for a period of 5 years beginning from the date such industrial undertaking is set up.
 S T ER DEDUCTIBLE ALLOWANCE, LOSSES & EXEMPTIONS
MA T # 8 PREPARED BY SIR TARIQ TUNIO - CSS (COMMISSIONER FBR) + CA TEACHER (CAF-2 Tax & PRC-5 ITB) 0332-2130867
E F OR THIS ATTEMPT ONLY
SHE ► A person shall be entitled to deductible allowance for Zakat paid under Zakat and Ushr Ordinance, 1980
ZAKAT ► Zakat that has been allowed as deduction under IFOS in respect of POD income shall not be allowed as deductible allowance.
► Deductible allowance for Zakat that is not able to be deducted shall not be refunded, carried forward to a subsequent tax year, or carried back to a preceding tax year.

DEDUCTIBLE ► Person shall be entitled to deductible allowance for amount of Workers’ Welfare Fund paid by person under Workers’ Welfare Fund Ordinance, 1971 or under any law relating to the
WWF Workers’ Welfare Fund enacted by Provinces after 18th Constitutional Amendment Act, 2010.
ALLOWANCE
► Deductible Allowance in/res/of Workers’ Welfare Fund paid to Provinces by trans-provincial establishment shall not be allowed. [Trans-provincial means operating in two or more provinces.]
► Note: Deductible Allowance in respect of amount of Workers’ Welfare Fund paid to FBR under Workers’ Welfare Fund Ordinance, 1971 shall be allowed.

► Person shall be entitled to deductible allowance for amount of Workers’ Participation Fund paid by person in accordance with provisions of Companies Profit (Workers’ Participation) Act,
WPPF 1968 or under any law relating to the Workers’ Profit Participation Fund enacted by Provinces after 18th Constitutional Amendment Act, 2010.
► Deductible allowance in respect of amount of Workers’ Profit Participation Fund paid to the province by a trans-provincial establishment shall not be allowed.
► Note: Deductible Allowance in respect of amount of Workers’ Profit Participation Fund paid to the province by a trans-provincial establishment shall be allowed.

Deductible ► Individual entitled to deductible allowance in/res/of tuition fee paid by individual in TY provided taxable income of individual is < Rs. 1.5 M ► Amount of deductible allowance shall not exceed
Allowance for lesser of —(a) 5% of total tuition fee paid (b) 25% of person’s taxable income for the year; and (c) amount computed by multiplying 60,000 with number of children ► No carry fwd of allowance or
Education part of it that is not able to be deducted ► Allowance under this § shall be allowed against tax liability of either of parents making payment of fee on furnishing NTN or name of the educational
Expenses institution. ► This allowance shall not be taken into account for computation of tax deduction u/§ 149 by employer. [Note: This is tax credit as it is allowed against tax liability]

INC. Inc. Not INCOME AVAILABLE FOR SET OFF OF LOSSES Intra-head Inter-head Carry
WHAT IS LOSS? Available Head of Income No. of Years
Setting Off Setting Off Forward
► Loss under a head arises when IFB CG Income Available C/F Allowed
total deductions allowed under a Allowed Allowed Allowed
HEAD SALARY IFP Capt. Secu- IFOS SALARY No N/A N/A N/A N/A
head exceed total amounts BL UAD SB
LOSSES chargeable under that head Asset rities IFP Yes Yes Yes No N/A
► Intra-head set off = loss under LOSS No Loss ó ó X X X ó BL Yes Yes Yes 6 Yrs
a head is set off against income CURRENT
IFB UAD Yes Yes Yes Yes Unlimited

3 Tax Years
under the same head
YEAR
C/F for 6 Tax Years

C/F for 6 Tax Years

C/F for 6 Tax Years

C/F for Unlimited

equal to the excess.
► Inter-head set off = loss under
one head is set off against
income under another head
equal to the excess.
EXEMPTIONS
AGRICULTURAL INCOME
► Agri inc derived by a person is exempt from tax
► Agricultural Income means:
(a) rent or revenue derived from land situated in Pak &
used for agricultural purposes
(b) income derived from land situated in Pakistan from
(i) agriculture
(ii) performance of process ordinarily employed to
render produce raised/received fit to be taken
to market, or
(iii) sale of produce raised/received in/res/of
which no process has been performed oth/t
process of nature
(c) income derived from
(i) bldg owned & occupied by receiver of rent or
revenue of any land
(ii) bldg occupied by cultivator or receiver of rent-
in-kind, of any land in/ res/of which or produce
of which, any operation [i.e. fit to be taken to
market/process of nature] is carried on,
but only where bldg is on/in immediate vicinity of
land & is bldg which receiver of rent or revenue, or
cultivator, or receiver of rent-in-kind by reason of
the person’s connection with land, requires as
dwelling-house, store-house, or other out-bldg.
C/F for
SB Yes No Yes 6 Yrs
Yr 1 CA Yes No Yes 6 Yrs
Period
Yr 2 CG Yes
Secu-
Yr 3 Yes No Yes 3 Yrs
rities
Yr 4 IFOS Yes Yes Yes No N/A
Yr 5
Yr 6 Key Point 1 Only current losses are allowed inter-head set off. After being carried forward, loss can only be
set off against income under the head in which it had occurred.
EXEMPTIONS UNDER INTERNATIONAL AGREEMENTS Key Point 2 In case of loss for more than one year, the earliest loss shall be set off first, as it will lapse earlier.
DIPLOMATIC AND UNITED NATIONS EXEMPTIONS
Key Point 3 In case of loss under IFB and under another head (i.e. IFP & IFOS) loss under IFB shall be set off
► Income of individual entitled to privileges under ► PSI which Pak is not permitted to tax under tax
last, as loss under IFP & IFOS is not permitted to be carried forward.
(1) Diplomatic and Consular Privileges Act, 1972 treaty is exempt from tax under ITO-2001.
(2) UN (Privileges and Immunities) Act, 1948 ► Salary received by Indv (not being citizen of Pak) is
shall be exempt from tax to the extent provided for in exempt to the extent provided for in Aid Agreement
the Act. ► Pension of Pak citizen, from former b/w FG & foreign govt or PIO, where
PROFIT ON DEBT SHORT TERM RESIDENT EXEMPTION in 2nd SCHEDULE
employment in UN/ its specialised agencies (including (a) individual is either not resident Indv or resident
Profit received by NR person on security issued by RP ► FSI of Individual who is resident Income/Person
ICJ), is exempt if salary was also exempt under ITO-2001 Indv solely by reason of performance of services
is exempt if (a) persons are not associates (b) security solely by reason of employment and ► Exempt from tax – Part I
under Aid Agreement
was widely issued by NR outside Pakistan for who is present in Pakistan for not ► Sub/to reduced tax rate – Part II
FOREIGN GOVERNMENT OFFICIALS (b) if Aid Agreement is with foreign country, Indv is
purposes of raising loan outside Pakistan for use in exceeding 3 years is exempt. ► Reduction in tax liability – Part III
Salary received by For/Govt employee as remuneration citizen of that country and
business carried on by in Pakistan (c) profit was paid ► Exemption does not apply to (a) ►Exempt from operation of
for services rendered to such govt shall be exempt if (c) salary is paid by foreign Govt or PIO out of
outside Pak; and (d) security is approved by Board any income derived from business provision of ITO-2001 – Part IV
(a) Employee is citizen of for/country & not citizen of Pak; funds/grants released as aid to Pak in pursuance
set up in Pakistan or (b) any FSI
(b) Services performed by employee are of a character of such Agreement.
SCHOLARSHIPS brought in/received in Pakistan
similar to those performed by employees of Fed Govt in ► Income received by person (not being citizen of EXEMPTION IN OTHER LAWS
foreign countries; and Scholarship granted to person to meet cost of
Pak) engaged as contractor, consultant or expert on ► Exemptions from tax provided in
(c) Foreign govt grants similar exemption to employees of education is exempt, except when paid by associate
project in Pak is exempt to the extent provided in FSI OF RETURNING EXPATRIATES other laws have no effect unless also
Fed Govt performing similar services in such foreign bilateral/multilateral technical assistance agreement ► FSI derived by Pak citizen who provided in ITO-2001
country.
b/w FG & foreign Govt or PIO, where FEDERAL/PROVINCIAL/LOCAL GOVT was not Res/Indv in 4 preceding TYs ► ITO-2001 prevails over other laws
PRESIDENT’S HONOURS (a) project is financed out of grant funds in/acc/with ► Income of Federal Govt – Exempt ► FSI of year in which Indv became
Allowance attached with Honour, Award, or Medal & agreement ► Income of Provincial /Local Govt. – Exempt resident after 4 yrs & following TY is
Monetary award by President are exempt LIMITATION OF EXEMPTION
(b) person is either NR or RP solely by reason of ► Income of Provincial /Local Govt is taxable if exempt (i.e. 2 Years)
If income is exempt, it shall be
performance of services under the agreement derived from business outside its jurisdictional area ► Pak Citizen leaves Pak during TY
limited to original recipient of
SUPPORT PAYMENTS UDR AGREEMENT 2 LIVE APART and ► Income of Govt Corporation, company, regulatory & remains abroad during that year,
income & shall not extend to any
Income received by spouse as support payment under (c) income is paid out of funds of grant in pursuance authority, development authority, or other his Salary income earned outside
person receiving payment out of it.
an agreement to live apart is exempt of agreement. body/institution – Taxable Pak during that year is exempt
 TER
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MARCH 2024 RETURNS – MASTER SHEET BY STT
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(i) Every company (vii) Person who owns: (ix) Person who owns a flat having covered area of ³2000 (xiv) resident person being an RETURN FOR PERIOD OF < 12 MONTHS
(a) Immovable Property with land area of sq/feet located in a rating area individual required to file
(ii) Person (other than company) ³500 square yards (x) Person who owns motor vehicle of engine capacity of foreign income and assets
WHO IS whose Txbl Inc exceeds max >1000 CC statement (FIAS) CIR may, by notice in writing, require any of the
(b) owns flat
LIABLE amount that is NOT chargeable Located in: (xi) Person who has obtained NTN following person/ his representative to furnish return
(xv) Any other persons or classes
to tax for year (i.e. Rs. 600,000) (xii) Person who is holder of commercial/industrial electricity for a period of less than 12 months:
TO § Municipal limits (existing before of persons notified by Board
(iii) Non-profit Organization (NPO) commencement of Local Govt laws in connection & amount of annual bill >Rs. 500,000/-
FILE (xvi) Every individual whose ▪ person has passed away,
provinces) (xiii) Resident person who is registered with chamber of
RETURN? (iv) person subject to final taxation
§ Cantonment Areas, or commerce and industry, trade or business association, any income under IFB exceeds ▪ person has become bankrupt/ gone into liquidation,
(v) Person who has been charged to market committee, or any professional body including Rs. 300,000 but does not ▪ person is about to leave Pakistan permanently,
§ Islamabad Capital Territory (ICT)
tax in any of 2 preceding TYs Pakistan Engineering Council, Pakistan Medical and Dental exceed Rs. 400,0000 in a tax ▪ CIR otherwise considers it appropriate to require
(viii) Person who owns Immovable Property Council, Pakistan Bar Council or any Provincial Bar Council, year is also required to such a return to be furnished
(vi) person who claims loss carried with land area of ³500 sq/yards located in a furnish return of income
ICAP or ICMA [Tip: Businessman & Professionals i.e.
forward under ITO-2001 for a TY rating area Engineer, Doctor, Lawyer, CA or ACMA are covered here] from the tax year [Due date for filling of such return is mentioned on the notice.]

PERSONS NOT LIABLE TO FILE RETURN If sole reason for filing return is these 4 grounds [list at (vii) to (x) above], then following person are not liable to file a return (1) a widow (2) orphan below the age of 25 years (3) a disabled person (4) a Non-resident person (property)

NOTICE OF DISCONTINUED BUSINESS WEALTH STATEMENT FOREIGN INCOME AND ASSET STATEMENT NOTICE TO NON FILERS

Event: Business is Discontinued
Notice by Person Discontinuing Business to CIR:
Within 15 days of discontinuance
Purpose of Notice: Informing that business has
discontinued
Filing of Return by Person Discontinuing Business:
Such person is required to furnish return ►under
provisions of ITO-2001 or ►on being required by CIR
Period of Return: Commencing from 1st day of TY in
which discontinuance occurred to the date of
discontinuance
(This period is treated as separate TY)
What if notice is not given by taxpayer? CIR may
serve notice on person who has discontinued/is likely
to discontinue business to furnish return within time
specified on notice
Status of Return: Return furnished is treated as
return for all purposes of ITO-2001, including
coverage under self-assessment (as per § 120)
Content of file WS? (1) Person’s total assets & liabilities on specified date (2) Total NOTICE TO NON-FILERS OF RETURN:
Who? Every resident individual
assets & liabilities of spouse, minor children & other dependents on specified CIR may require a person who is liable to file a return but has not done
When? When foreign income of not <USD 10,000/- or foreign so to furnish return within 30 days from service of notice or such longer/
date (3) Assets transferred during the period and consideration for transfer (4)
Total expenditures incurred by person & spouse, minor children & other assets of not <USD 100,000 shall furnish ‘foreign income and shorter period as may be specified in notice.
dependents during the period, and (5) Wealth reconciliation statement (WRS) assets statement’ in prescribed form and verified in CASE 1► RETURN WAS FILED FOR AT LEAST 1 TY IN LAST 5 YEARS:
prescribed manner If at least one return has been filed in the last 5 years, notice may be
Who is Liable to File WS? (1) Every resident individual filing return (+WRS) (2) issued in respect of one or more of the last 5 completed TYs.
Every member of AOP (+WRS) along with return of AOP & (3) Individual required
Content of FIAS? (a) person’s total foreign assets and
TY 2019 TY 2020 TY 2021 TY 2022 TY 2023 TY 2024
by CIR by notice to file WS liabilities as on last day of TY (b) any foreign assets NF NF Filer NF NF Current TY
transferred by the person to any other person during the TY - Notice can’t go beyond TY 2019.
Revision of WS ►Person may file revised WS in/c/of omission or wrong
statement ►WS is accompanied by revised WRS & reasons for filing revised WS
and the consideration for the said transfer; and (c) complete CASE 2► NO RETURN WAS FILED FOR LAST 5 YEARS:
►Revision is made at any time before receipt of SCN for amendment for tax year particulars of foreign income, the expenditure derived If no return has been filed in the last 5 years, , then notice may be issued
to which it relates. during the tax year and the expenditure wholly and in/res/of 1 or more of last 10 completed TYs.
necessarily for the purposes of deriving the said income. TY 2019 TY 2020 TY 2021 TY 2022 TY 2023 TY 2024
CIR’s Powers to Declared Revision Void: Where CIR is of opinion that revision is
NF NF NF NF NF Current TY
not for purpose of correcting a bona fide omission or wrong statement, he may Notice for FIAS: CIR may by notice require any person being an
- Notice can go beyond TY 2019 upto TY 2014
declare such revision as void through an order in writing after providing O/O/B/H. individual who, in opinion of CIR on basis of reasons to be
► Time-limitations [5/10 years] shall not apply if CIR is satisfied (on the
WS Cannot Be Revised After 5 Years: W/S cannot be revised after expiry of 5 recorded in writing, was required to furnish FIAS but who has
basis of reasons to be recorded in writing) that a non-filer has foreign
years from due date of filing of return of income for that tax year. failed to do so to furnish the FIAS on date specified in notice. income or owns foreign assets.

ELECTRONIC FILING OF RETURN REVISED RETURN PENALTY IN/C/OF RR FILED DUE DATE FOR FILING OF RETURN/WS EXTENSION OF DUE DATE

Electronic Return: Return filed
electronically on web, magnetic media
or any other computer readable media
shall also be deemed to be a return for
the purpose of ITO-2001
Rules by Board: Board may, by
notification in the official Gazette,
make rules for
▪ determining eligibility of the data of
such returns and
▪ e-intermediaries who will digitize the
data of such returns and transmit the
same electronically to the Income Tax
Department under their digital
signatures and
▪ other matters relating to electronic
filing of returns, statements or
documents, etc.
Revised Return (RR): Person may file RR in/c/of omission or wrong Revised Return is filed:
statement ► Before Notice for audit – No penalty
if tax short paid/ sought to be evaded is
Conditions for RR: RR is accompanied by (1) revised accounts/revised deposited with default surcharge (D/S).
audited accounts [Note: This condition may be waived by CIR if ► During Audit but before Issuance of
satisfied that revised accounts/audited accounts is not necessary.] SCN for Amendment 25% of penalty
(2) reasons for revision in writing duly signed by taxpayers (3) leviable is payable if tax pointed out by
CIR is deposited with D/S.
Approval of CIR in writing for revision (4) taxable income declared is ► After Issuance of SCN u/s 122(9):
not < & loss declared is not > income/ loss determined by
50% of penalty leviable is payable if tax
assessment/appeal/rectification orders. ►CIR shall grant approval sought to be evaded is deposited with
in/c/of bonafide omission or wrong statement. D/S [SCN shall stand abated]
If Any Condition for Revision Is Not Fulfilled: Return furnished shall
be treated as an invalid as if it had not been furnished PURPORTED RETURN
Approval By CIR Not Required: ►Revised return is filed within 60
Every return purporting to be
days of filing of return. ►Approval required shall be deemed to have
made or signed by, or on behalf
been granted by CIR if (a) CIR has not made an order of approval in
of person, shall be treated as
writing, for revision of return, before expiration of 60 days from the
having been duly made by the
date when the revision of return was sought; or b) taxable income is
person or his authority until the
more than or loss is less than the income/loss declared in the return.
person proves the contrary.
RETURN
Individual or AOP
Case 1 ► Salaried Individual – by 30th Sept next
following end of TY to which return relates
Case 2 ► Other individuals/AOPs – by 30th Sept
next following end of TY to which return relates
Company
Case 1 ► Company Whose TY ends b/w 1st Jan to
30th June – by 31st Dec next following end of TY to
which return relates.
Case 2 ► Company Whose TY ends b/w 1st July to
31st Dec – by 30th Sept next following end of TY to
which return relates.
WEALTH STATEMENT
Filed Mandatorily with Return – Date of furnishing
of return
Filed under notice by CIR – Date specified on the
notice
Extension Application: Person may apply to CIR
for extension of time to furnish (a) Return (b)
Return required to filed on discontinuance of
business (c) WS
When apply? Application is required to made by
(on or before) due date
Ground for extension of due date: CIR may
grant extension in writing if satisfied that
applicant is unable to furnish/statements by due
date b/c of (a) absence from Pak (b) sickness or
other misadventure or (c) any other reasonable
cause
Time period of extension: should not exceed 15
days from due date, unless exceptional
circumstances justifying longer extension.
► Where CIR rejects extension, CC may grant
extension or further extension for period not
>15 days unless exceptional circumstances
justifying longer extension of time.
 STER ASSESSMENT – CAF 2 TAX MASTER SHEET BY STT
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NOTICE TO To file return within 30 days TAXPAYER RETURN REQUIREMENTS OF COMPLETE RETURN
RETURN NOT FILLED
NON FILER or longer/shorter time RESPONSE NOT FILE
Return of income

RETURN 1) shall be in prescribed form and accompanied by prescribed annexures,

FILED
INCOMPLETE
NOTICE informing taxpayer of deficiencies (other
than incorrect tax or short paid tax amount) &
COMPLETE
directing him to provide info, particulars,
statement or doc’s by date specified on notice
(Time Limits: not issued after expiry of 180 days
from end of FY in which return was furnished)
FILED statements or documents
2) shall fully state all relevant particulars or information as specified in the form
of return, including declaration of records kept
3) shall be signed by person when person is an individual, or signed by person’s
RETURN INVALID representative wherever § 172 (entitled ‘Representatives’) is applicable
COMPLIANCE NON/PARTIAL (as if not filed) 4) shall be accompanied with evidence of payment of due tax as per return of
income, and
5) shall be accompanied with a wealth statement as required under § 116
6) shall be accompanied with foreign income and assets statement under § 116A

FULL

ASSESSMENT §120
1 BEST JUDGEMENT ASSESSMENT §121

Where complete return is filed, taxable income & Where a Person Fails to
tax liability is assessed in the following manner:
TIME LIMITS
► BJAO shall only be issued within 6 years after end of TY to
CIR is taken to have Furnish Return Furnish Return Furnish Produce Accounts, Docs & Records which it relates.
Return is taken to be ► Where notice for filing of return for one or more of last 10
made assessment of in Response to (aircraft/ ship owner Wealth before CIR, Special Audit Panel, CA/ICMA
deemed ‘assessment years, assessment order shall only be issued within 2 years
order’ issued to Notice or charterer) Statement firm appointed by FBR for tax audit
►taxable income from the end of TY in which such notice is issued
taxpayer by CIR on the
and
day return was
►tax due
furnished.
CIR may ► Based on available information or material and to the best of his judgment CIR issues Best Judgment Assessment order (BJAO) Stating:
► make best judgment assessment of taxable income, income & tax due taxable income; amount of tax due, amount of tax paid (if any);
► [Assessment on the basis of return/revised return shall be of no legal effect] and time, place and manner of appealing the assessment order

2 AMENDED ASSESSMENT § 122

Assessment order is amended and amended DEFINITE INFORMATION includes
Original assessment may be amended by CIR by making alterations or additions as he considers necessary assessment order further amended (on the basis of information
Contents of Amended Assessment Order: As soon as possible after making an amended assessment, CIR shall audit or definite information) if CIR is satisfied that: § on sales or purchases of any
issue amended assessment order to the taxpayer stating a) amended taxable income of the taxpayer b) amended (1) any income chargeable to tax has escaped goods made by the taxpayer
amount of tax due c) amount of tax paid, and b) time, place, and manner of appealing the amended assessment assessment § receipts of the taxpayer from
(2) total income has been under-assessed, or services rendered or
(3) total income has been assessed at too low § any other receipts that may be
TIME LIMITS FOR AMENDMENT a rate, or chargeable to tax under this
Before expiry of 5 years from end of FY in which CIR has issued/ treated as issued the assessment order (4) total income has been subject of excessive Ordinance, and
relief or § on the acquisition, possession or
(5) total income has been subject of excessive
3 FURTHER AMENDED ASSESSMENT § 122 Refund; or
disposal of any money, asset,
valuable article or investment
(6) Any amount under a head of income has made or expenditure incurred by
Original assessment once amended may be further amended as many times as necessary been misclassified the taxpayer.

TIME LIMITS FOR FURTHER AMENDMENT

Amended assessment may be further amended within the later of
► 5 years from end of FY in which CIR has issued or is treated as having issued the original assessment order to the taxpayer; or
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►1 year from end of FY in which CIR has issued or is treated as having issued the amended assessment order to the taxpayer.
 PAGE 2 OF 2
No assessment shall be amended or further amended unless taxpayer has been provided with an opportunity of being heard (SCN)

SHOW CAUSE
ISSUANCE OF SCN Within 180 Days + Max 90 Days (for reasons to be recorded in writing) AMENDED/FURTHER AMENDED ASSESSMENT ORDER
NOTICE
U/S 122(9)
Days not Counted: Any period during which proceedings are adjourned on account of ►stay order ► ADR Proceedings ►agreed assessment proceedings or ► time
taken through adjournment by taxpayer not exceeding 60 days

PROCESSING OF COMPLETE RETURN THROUGH AUTOMATED SYSTEM Complete return is furnished → processed through automated system →to arrive at correct total income, taxable income and tax payable
PROCESSING OF → by making adjustments for (1) arithmetical error in return (2) incorrect claim (if such incorrect claim is apparent from information in return) (3) disallowance of loss, deductible allowance or tax credit, and
RETURN (4) disallowance of c/f of loss where person has not filed return within due date (i.e. person is late filer) [NOTE: Date of implementation not yet notified by the Board]
THROUGH
AUTOMATED ARITHMETICAL ERROR includes any INCORRECT CLAIM apparent from any information in the return shall mean a claim, on the basis of an entry, in the return (i) of an item, which is inconsistent
wrong or incorrect calculation of tax with another entry of the same or some other item in such return; (ii) regarding any tax payment which is not verified from the collection system; or (iii) in
SYSTEM payable including any minimum or final respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio
tax payable. or fraction.

SYSTEM GENERATED NOTICE RESPONSE RECEIVED FROM TAXPAYER NO ADJUSTMENTS IF NOT DONE WITHIN 60 MONTH
No adjustments shall be made - shall be considered before making any adjustment, and Where no adjustments are made within 6 month of filing of return, amounts specified in the return
- unless system generated notice is given to taxpayer - in case no response is received within 30 days of as declared by the taxpayer shall be deemed to have been taken as adjusted amounts on the day the
- specifying adjustments intended to be made issuance of notice, adjustments shall be made. return was filed and the taxpayer shall be intimated automatically through IRIS

PROVISIONAL ASSESSMENT ASSESSMENT IN CASE OF

REVISION BY CIR REVISION BY CC AGREED ASSESSMENT IN CERTAIN CASES DISPUTED PROPERTY

Revision in Case of Exemption or
Suomoto Calling for Record: CIR may
Lower Rate Certificates: Chief
suomoto call for record of any
Commissioner may
proceeding in which order has been
§ either of his own motion or
passed by OIR other than CIR (Appeals)
§ on application by taxpayer
Revision of Order: After making inquiry
for revision
(if necessary), CIR makes revision to
§ call for record of any
order (as deems fit)
proceedings
Revision Order Not Prejudicial to
§ relating to issuance of
Taxpayer: Order of revision by CIR shall
exemption or lower rate
not be prejudicial to the person to whom
certificate with regard to
the order relates.
collection/ deduction of tax
No Revision if Case Pending in Appeal:
§ in which an order has been
CIR shall not revise order if (a) appeal
passed by any authority
against order lies to CIR (A) or to ATIR
subordinate to him
and time within which such appeal may
Order of Revision: Where
be made has not expired; or (b) order is
§ after making such inquiry
pending in appeal before CIR (A) or has
as is necessary
been made subject of appeal to ATIR.
§ CC considers that order
Appeal Effect Order in 120 Days: If any
requires revision
order is remanded back to any lower
§ CC may make such order as
authority by CIR for modification,
he may deem fit in the
alteration, implementation of directions
circumstances of case
or de novo proceedings the order giving
§ after providing reasonable
effect to the directions of CIR shall be
opportunity of being heard
issued within 120 days
to the taxpayer
Offer of Settlement: Where taxpayer in/res/to SCN u/§ 122(9) Provisional Assessment in Two Where ownership of any property income from
intends to settle his case he may file offer of settlement in Situations: Where which is chargeable to tax under ITO-2001 is in
prescribed form before Assessment Oversight Committee (AOC) (1) Concealed asset of person is dispute in Civil Court in Pakistan
in/add/to filing reply to CIR (Exclusions: cases involving impounded by § assessment order or amended assessment
concealment of income or interpretation of question of law having department/agency of FG/PG order in respect of such income
effect on other cases) (2) offshore asset of person (not § may be issued at any time within 1 year -
Composition: AOC comprises of income tax authorities having declared earlier) is discovered after the end of FY in which decision of Court
jurisdiction over taxpayer, namely: (a) CCIR (b) CIR and (c) Add. CIR by CIR or any department/ is made
Calling of Record by AOC: AOC after examining offer may call for agency of FG/PG
record of case & after affording oobh to taxpayer, may decide to CIR may issue provisional assessment
accept or modify offer through consensus and communicate its EVIDENCE OF ASSESSMENT § 126
order or provisional amended
decision to the taxpayer. assessment order for last completed
Payment of Tax and Amendment of Assessment as per Decision of Certified Copy of Assessment Order: Production of
TY taking into account the
Assessment Oversight Committee: Where taxpayer is satisfied with AO/ certified copy of AO shall be conclusive evidence
concealed/offshore asset at any time
decision of AOC: (a) taxpayer shall deposit amount of tax payable of due making of assessment & amount and all
before issuing BJAO u/§ 121 or
including penalty and D/S as per decision of AOC (b) CIR shall amend particulars of assessment are correct except in
amended AO u/§ 122
assessment in/acc/with decision of AOC after tax payable including appeal proceedings relating to the assessment
Finalization of Provisional Order: CIR
penalty and D/S as per decision of AOC has been paid (c) taxpayer Want of Form/ Mistake & Defect or Omission: AO or
shall finalise provisional AO or
shall waive right to prefer appeal against such amended other document purporting to be made, issued, or
provisional amended AO as soon as
assessment, and (d) no further proceedings shall be undertaken executed under ITO-2001 may not be (a) quashed or
practicable
under ITO-2001 in/res/of issues decided by AOC unless tax has not deemed to be void or voidable for want of form; or
Concealed Asset (Definition):
been deposited by taxpayer (b) affected by reason of any mistake, defect, or
Concealed asset means any property
Referral of Case Back to CIR if Issue Not Resolved: Where AOC has omission therein IF it is in substance & effect in
or asset which, in the opinion of CIR,
not been able to arrive at consensus or where taxpayer is not conformity with Ordinance & person assessed/
was acquired from any income subject
satisfied with decision of AOC, case shall be referred back to CIR for intended to be assessed or affected by document, is
to tax under this Ordinance
decision on the basis of reply of taxpayer in/res/to notice. designated in it according to common understanding
 STER MARCH 2024 APPEALS – MASTER SHEET BY STT (CAF-02 TAX PRACTICE)
MA T # 11 ATTEMPT SIR TARIQ TUNIO CSS (COMMISSIONER FBR) + CA TEACHER (TAX/LAW/ITB) 0332-2130867
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SHE TOPIC COMMISSIONER (APPEALS) ATIR HIGH COURT
Appellate Authority CIR (Appeals): Any person dissatisfied with following orders passed by CIR or → Appellate Tribunal Inland Revenue (ATIR → High Court
officer inland revenue may prefer appeal to CIR(Appeals) against the order. → Decision of ATIR on appeal relating to Question of Fact shall be final → Reference to HC heard by Bench of not less than 2 Judges
Circumstances Giving Appeal may be filed by any person dissatisfied with orders of CIR or taxation officer (1) Where Taxpayer or CIR objects to order passed by CIR (A) taxpayer or Aggrieved person/CIR may file reference to HC stating the Question(s)
Rise to Appeals adjustment of arithmetical errors & incorrect claims by automated system (2) Best CIR may appeal to ATIR against such order of Law arising out of such order
judgement assessment order (3) Amendment of Assessment, (4) An order holding a
(i.e. Orders Appealed person to be personally liable to pay an amount of tax, which was required to be
Against) Where HC is satisfied that question of law arises out of the order of
collected or deducted by him/her of having collected or deducted fails to pay the same
ATIR, it may proceed to hear the case.
as required under law, (5) Order declaring a person to be the representative of a
nonresident person, (6) an order refusing to rectify mistake, either in full or in part, as
claimed by the taxpayer, or (7) an order having the effect of enhancing the assessment
or reducing a refund or otherwise increasing the liability of the person [→ No appeal
shall be made against order of assessment unless taxpayer has paid tax due with return]
Requirements of Appeal Appeal shall be →in prescribed form →verified in prescribed manner → state Appeal shall be → in prescribed form →verified in prescribed manner Aggrieved person/CIR may prefer an application → in prescribed form
precisely grounds upon which appeal is made → accompanied by prescribed fee →accompanied by prescribed fee →preferred to ATIR within time limits along with statement of case to HC → Statement shall set out facts of
& → lodged with CIR (A) within prescribed time limits case, determination of ATIR & Q of Law arising out of ATIR order
Prescribed Fee Appeal Against Assessment Order →Company Rs. 5000 →Non-coy Rs. 2,500 → Company Rs. 5000 Rs. 100/- (All Taxpayers)
In Any Other Case →Company Rs. 5000 →Non-company Rs. 1000 → Non-company Rs. 2,500 [No fee is paid by CIR] [No fee is paid by CIR]
Prescribed Time Limits Appeal Relating to Assessment/Penalty Order → within 30 days of date of Within 60 days of date of service of CIR (A) order Within 90 days of communication of order of ATIR
service of demand notice
Appeal Relating to Other Order → Within 30 days of date of service of order
Condonation of Time Upon application in writing by appellant, CIR (A) may admit an appeal after Upon application in writing, ATIR may admit an appeal after expiration Application may be admitted after period of limitation when appellant
Limits expiration of prescribed time limit if satisfied that appellant was prevented by of specified time limit if satisfied that person appealing was prevented or applicant satisfies HC that he had sufficient cause for not preferring
sufficient cause from lodging appeal within period by sufficient cause from filing appeal within that period appeal or making application within such period.
Date of Hearing CIR (A) shall give notice of day fixed for hearing of appeal to appellant & CIR → ATIR shall afford oobh to the parties to the appeal
→ In case of default by any party on date of hearing, ATIR may proceed
ex parte to decide appeal on basis of available record
Stay of Recovery → Where in a particular case, CIR (A) is of opinion that recovery of tax levied → Notwithstanding appeal has been filed to ATIR, tax shall be payable → Notwithstanding reference to HC is filed tax shall be payable in
shall cause undue hardship to taxpayer he may stay recovery of tax (after in/acc/with assessment made unless recovery is stayed by ATIR accordance with order of ATIR
affording oobh to CIR) for period not exceeding 30 days in aggregate → Appellant/taxpayer shall file application for stay of recovery →ATIR Stay of Recovery → Where recovery of tax has been stayed by HC by
grants stay if it is of the opinion that recovery of tax levied & upheld by order, such order shall cease to have effect on expiration of 6 months
→ After affording oobh to CIR, CIR (A) may stay recovery of tax for further period CIR(A) shall cause undue hardship to taxpayer →ATIR shall afford oobh following the day on which it was made unless appeal is decided or such
of 30 days [provided that order on appeal shall be passed within the said period to CIR before issuing stay order →Stay granted by ATIR shall not exceed order is withdrawn by HC earlier
of thirty days] 180 days in aggregate →Stay order shall cease to have effect on Stay of Refund → Judgment of HC reduces tax resulting in refund → CIR
expiration of 180 days following date on which it was made and CIR shall wants to prefer petition for leave to appeal to SCP →CIR may apply to
proceed to recover tax → In computing period of 180 days, period for HC in this case for stay of refund within 30 days →HC may he make order
which recovery of tax was stayed by HC shall be excluded. authorizing CIR to postpone refund until disposal of appeal by SCP.
Adjournments CIR (A) may adjourn the hearing of the appeal from time to time
Addition of New Before hearing of appeal, CIR(A) may allow addition new ground where satisfied
Grounds of Appeal that omission of ground from form of appeal was not willful or unreasonable.
Calling Particulars & Before disposing of an appeal, CIR (A) may call for such particulars as CIR (A) may Before disposing of an appeal, ATIR may call for such particulars - as it
Causing Inquiry by CIR require respecting matters arising in appeal or cause further enquiry to be made may require - in respect of the matters arising on the appeal or cause
by CIR further enquiry to be made by CIR
New Documentary CIR(A) shall not admit documentary material/evidence not produced before CIR
Material or Evidence → unless satisfied appellant was prevented by sufficient cause
Types of Decision in Assessment Case→ CIR (A) may confirm, modify or annul assessment order Assessment Case → ATIR may make an order to (i) Affirm, modify or → Upon hearing a reference, HC shall decide the question of law raised
Appeal annul AO (ii) Remand the case to the CIR or CIR (A) for making inquiry or by the reference and pass judgment thereon specifying the grounds on
Other Than Assessment Case → CIR (A) may make such order as he thinks fit taking action as specified by ATIR. which such judgment is based and the Tribunal’s order shall stand
Other Cases → ATIR make an order to (i) affirm, vary or annul decision, modified accordingly.
& (ii) issue such consequential directions as case may require → HC shall send copy of judgment under seal of Court to ATIR
Assessment Powers CIR (A) shall not ↑ tax amount of AO or ↓ refund unless appellant is given ATIR shall not ↑ tax amount of AO/Penalty or ↓ refund unless appellant
reasonable opportunity of showing cause against such increase or decrease is given reasonable opportunity of showing cause against such ↑↓

PAGE 1 OF 2
 Appeal Order As soon as practicable, CIR (A) shall specify in order amount of tax upheld & → ATIR shall communicate its order to the taxpayer and the
(Time limits) serve order on appellant/ CIR Commissioner
→ Appeal order shall be passed not later than 120 days from date of filing of
appeal [extendable by 60 days by CIR (A) with reasons in writing] → ATIR shall decide the appeal within 6 months of its filing
→ Period Not Counted – period during which hearing of appeal is adjourned at
request of appellant or is postponed due to any appeal proceedings stay order
remand alternative dispute resolution proceedings for any other reason
Consequential Effect on Where any change is made in assessment of AOP or new assessment of AOP is Where any change is made in assessment of AOP or new assessment of
Members of AOP ordered to be made CIR (A) may authorize CIR to amend accordingly AO made AOP is ordered to be made ATIR may authorise CIR to amend accordingly
on member of AOP and time limit shall not apply AO made on member of AOP and time limit shall not apply
APPOINTMENT OF ATIR

Appellate Authority Appellate Tribunal Inland Revenue (ATIR)

Composition of ATIR ATIR shall consist of Chairman and such other judicial and accountant members who shall be appointed in such numbers and in such manner as the Prime Minister may prescribe by rules.
Judicial Members No person shall be appointed as judicial member he (1) has been a Judge of a High Court (2) is or has been a District Judge (3) is an advocate of a High Court with standing of not less than 10 years; or (4) possess such other
qualification as may be prescribed
Accountant Members No person shall be appointed as accountant member unless he (1) is officer of Inland Revenue equivalent to Chief Commissioner (2) is CIR / CIR(A) having not less than 3 years of experience as CIR (3) has practiced professionally
as Chartered Accountant for not less than 10 years (4) has practiced professionally as cost and management accountant for not less than 10 years.
Members Equally Divided → Cases is referred to the Chairman ATIR → Chairman ATIR refers the case to new member(s), who hear the case → Case is decide by majority of original as well as new (referee) member(s)

ALTERNATIVE DISPUTE RESOLUTION

CONDITIONS IN WHICH ADR MAY BE OPTED
§ Aggrieved person in/con/with any
dispute pertaining to
(a) liability of tax of Rs. 100 M or above
against aggrieved person or
admissibility of refund
(b) extent of waiver of default
surcharge and penalty
(c) any other specific relief required to
resolve the dispute
may apply to Board for appointment of
ADRC for resolution of any hardship or
dispute mentioned in detail in
application, which is under litigation in
any court of law or appellate authority,
except where criminal proceedings have
been initiated.
COMMITTEE COMPOSITION
(i) Rtd. judge not below rank of judge of HC (Chairperson of
ADRC); nominated by Board from panel notified by Law and
Justice Division for the purpose
(ii) CCIR having jurisdiction over the case, and
(iii) person nominated by taxpayer from panel notified by Board
comprising:
(a) CAs, CMAs and advocates having minimum 10 years’
experience in field of taxation;
(b) officers of IRS retired in BS 21 or above; or
(c) reputable businessmen nominated by Chambers of
Commerce and Industry. (Note: Taxpayer shall not
nominate CA or advocate if CA/ advocate is or has been
auditor or authorized representative of taxpayer.)
COMMITTEE WORK AND DECISION
BINDING ON CIR ON WITHDRAWAL OF APPEAL
§ Decision of Committee shall be binding on CIR when
aggrieved person, being satisfied with decision, has
withdrawn appeal pending before court of law or any
appellate authority in/res/of dispute and has communicated
order of withdrawal to CIR.
§ CIR shall also withdraw appeal, if any, pending before any
court or appellate authority in/res/of dispute within 30 days
of communication of order of withdrawal by aggrieved
person to CIR.
§ If order of withdrawal is not communicated to CIR within 60
days of service of decision of Committee upon aggrieved
person, decision of Committee shall not be binding on CIR.
PAYMENT OF TAX
DISSOLUTION OF ADRC AND MATTER TAKEN UP BY APPELLATE
AUTHORITY
§ If Committee fails to decide within period of 60 days, the
Board shall dissolve Committee by order in writing and the
matter shall be decided by the court or appellate authority
where the dispute is pending under litigation.
§ The Board shall communicate the order of dissolution to the
aggrieved person, court of law or the appellate authority and
to the Commissioner.
§ On receipt of the order of dissolution, the court of law or the
appellate authority shall decide the appeal within 6 months
of communication of the said order.
RECOVERY STAYED DURING ADR PROCEEDINGS

§ Application for dispute resolution shall be
accompanied by initial proposition for
resolution of dispute, including an offer
of tax payment.
APPOINTMENT OF COMMITTEE
§ Board examines application and appoints
a committee within 15 days of receipt of
application
§ Board shall communicate order of
appointment of Committee to aggrieved
person, court or appellate authority
where dispute is pending and to CIR.
§ Committee shall examine the issue and may, if it deems
necessary,
o conduct inquiry
o seek expert opinion
o direct officer of IR or any other person to conduct audit
and shall decide dispute by majority, within 45 days of its
appointment extendable by another 15 days for reasons to
be recorded in writing.
§ Aggrieved person shall make payment of income tax and
other taxes and within such time as decided by the
Committee and all decisions and orders made or passed shall
stand modified to that extent
The aggrieved person shall make the payment of income tax and Recovery of tax payable by taxpayer in/con/with any dispute for
other taxes and within the time decided by Committee and all which a Committee has been appointed shall be deemed to
decisions and orders made or passed shall stand modified to that have been stayed on constitution of Committee till the final
extent. decision or dissolution of Committee, whichever is earlier.
NOT PRECEDENT & REMUNERATIONS
The decision by the Committee shall not be cited or taken as a
precedent in any other case or in the same case for a different tax
year.
The Board may prescribe the amount to be paid as remuneration
for the services of the members of the Committee, other than the
CCIR. PAGE 2 OF 2
 X
S TA T # 1 SALES TAX MASTER SHEET-1
LE EE
T SA R SH FOR MARCH 2024 ATTEMPT ONLY
SIR TARIQ TUNIO - CSS (COMMISSIONER FBR) + CA TEACHER (CAF-02 TAX) 0332-2130867
ST STE
MA 1.1 FOUNDATIONAL CONCEPTS OF SALES TAX 1.3 THIRD SCHEDULE OF SALES TAX ACT, 1990 1.5 MODEL SALES TAX CALCULATION
► Sales Tax Types Two Types: (1) Sales tax on goods (Federal 1. Fruit juices and vegetable juices 12. Perfumery and cosmetics MR TAXPAYER
2. Ice cream 13. Tea CALCULATAION OF SALES TAX LIABILTY, REFUND & CARRY FORWARD
subject) & (2) Sales tax on services
FOR AUGUST 2023
(Provincial subject) 3. Aerated waters or beverages. 14. Powder drinks
► Consumption Tax Sales tax is a tax on consumption 4. Syrups and squashes. 15. Milky drinks INPUT TAX
► Indirect Tax Person such as e.g. manufacturer, 5. Cigarettes. 16. Toilet paper and tissue paper - Local Purchases from RP (100 x 18%) [To claim IPT, Mr. Taxpayer must also be a RP] 18
17. Spices sold in retail packing - Imports (100 x 18%) [+ 3% value addition tax in case of commercial imports] 18
distributor or retailer pays sales tax to the
6. Toilet soap bearing brand names and trade - Unclaimed IPT if claimed within 6 months (100 x 18%) 18
government and passes it on to the
marks
consumers. - IPT on credit purchases (IPT payable by buyer to supplier [in 180 days] but supplier must 18
7. Detergents 18. Shoe polish and shoe cream
► Taxpayer A taxpayer is referred to as a ‘Registered have paid it to FBR) 100 x 18%
8. Shampoo 19. Fertilizers
Person’ 9. Toothpaste 20. Cement sold in retail packing - Sales Tax on services used in making taxable supply [100 x 16%(P+B)/15%(K)/13%(S)] 16
► Tax Period A month 10. Shaving cream 21. Mineral/Bottled water - Federal Excise Duty in Sales Tax Mode on goods & services purchased (100 x 18%) 18
► Time of Supply Goods are delivered or made available 11. Motorcycles 22. Auto rickshaws - Sales tax paid to supplier located in AJK under STA-1990 as adapted by AJK (100 x 18%) 18
(whichever is earlier) 23. Household electrical goods, including air conditioners, refrigerators, - IPT paid on local purchase / imports of capital goods (e.g. machine) 100 x 18% 18
► Reporting A registered person e-files a Return deep freezers, televisions, recorders and players, electric bulbs, tube- - Not Admissible: Local Purchases from Un-registered Person -
► Due Date (Payment) 15th of the next month lights, electric fans, electric irons, washing machines and telephone sets. - Not Admissible: Purchases/ Imports without proper documents -
► Due Date (Return Filing) 18th of the next month 24. Household gas appliances, including cooking range, ovens, geysers - Not Admissible: Unclaimed IPT claimed after 6 months -
and gas heaters
- Not Admissible: IPT Credit Not Allowed under § 8 -
25. Foam and spring mattresses and other foam products for household
- Not Admissible: IPT paid on goods returned & destroyed being unfit for consumption -
1.2 SALES TAX IN THIRD SCHEDULE METHOD (METHOD 1) use
26. Paints, distempers, enamels, pigments, colours, varnishes, gums, - Not Admissible: Purchase payment > Rs.50K paid otherwise than banking channel e.g. paid -
Who is liable to pay § Manufacturer or
resins, dyes, glazes, thinners, blacks, cellulose lacquers and polishes sold in cash (Exception: Payment for Utilities)
§ Importer (in case of imported goods)
in retail packing. - Not Admissible: IPT claimed on credit purchases but payment outstanding for >180 days -
Tax rate § 18% (if goods listed in 3rd Schedule only)
26. Lubricating oils, brake fluids, transmission fluid, and other vehicular - Less: Purchase returns if proper Dr./Cr. Notes are issued (100 x 18%) (18)
§ Reduced rate specified in 8th Schedule if
fluids sold in retail packing INPUT TAX FOR THE MONTH 124
goods are listed in 3rd Schedule as well as 8th 27. Storage batteries excluding those sold to automotive manufacturers
Schedule or assemblers
Amount subject to tax Retail price OUTPUT TAX
28. Tyers and tubes excluding those sold to automotive manufacturers or
Goods subject to tax Goods listed in the 3rd Schedule to STA-1990 - Local supplies to registered person (200 x 18%) 36
assemblers
Procedural Tax amount is required to be legibly, 29. Biscuits in retail packing with brand name - Local supplies to unregistered person (200 x 18%) 36
requirements prominently and indelibly printed or embossed 30. Tiles - Discount (Not mentioned on invoice or in excess of normal business practice) (20x18%) 3.6
by manufacturer or importer on each article, 31. Auto-parts, in retail packing, excluding those sold to automotive - Goods manufactured given free to friend/director etc. or self-supplied (10 x 18%) 1.8
packet, container, package, cover or label. manufacturers or assemblers - Exports (200 x 0%) 0
- Exempt supplies (100) -
- Federal Excise Duty in Sales Tax Mode on goods & services supplied (200 x Various%) 36
1.4 VALUE ADDED TAX METHOD (METHOD 2) - Sales Tax on Services Rendered in ICT (200 x 18%) 36
SUPPLY CHAIN PURCHASES INPUT TAX SUPPLIES OUTPUT TAX S.T. LIABILITY PAID TO FBR - Less: Sale returns if proper Dr./Cr. Notes are issued (100 x 18%) (18)
FORESTER 00 00 100,000 18,000 18,000 18,000 OUTPUT TAX FOR THE MONTH 131.4
FURNITURE MAKER 100,000 18,000 180,000 32,400 14,400 14,400
RETAILER 180,000 32,400 220,000 39,6000 7,200 7,200 LESS: ADMISSIBLE IPT [W-1/W-2]
- Relating to other than Fixed Assets 89.45
39,600
- Relating to Fixed Assets [ + B/F IPT Relating to Fixed Assets If Any] 13.22
SALES TAX LIABILITY 28.73
1.8 INPUT TAX & OUTPUT TAX 1.7 W-1 APPORTIONMENT OF INPUT TAX
Add: FURTHER TAX – 4% of supplies to un-registered person or RPs not on ATL (200 x 4%) 8
INPUT TAX, in relation to a registered person, means: - Total Input 124
Add: PENALTY/ Default Surcharged/Fees 1
§ Sales tax, on supply of goods to the person, levied under STA-90
- Less: Capital Goods/Fixed Assets (18) [ii]
TOTAL/GROSS SALES TAX LIABILITY 37.73
§ Sales tax, on import of goods by the person, levied under STA-90 - Input Tax other than Capital Goods 106
REFUND (17.70 + 3.18) 20.88
§ Excise duty in sales tax mode on manufacture/ production of goods, or - Less: Input Allocated to Taxable Supply (06)
rendering/providing of services, levied under F.E. Act, 2005 - Less: Input Allocated to Zero Rated (00) SALES TAX CARRY FORWARD 00
§ Provincial sales tax on services rendered or provided to the person and
§ Sales tax on goods supplied to the person from AJK, whereon tax is - Less: Input Allocated to Exempt Supply (00)
levied under STA-1990 as adapted in AJK. - Residuary IPT 100 [i] 1.6 W-2 RESTRICTION ON IPT EQUAL TO 90% OF OUT
OUTPUT TAX, in relation to a registered person, means:
- IPT Apportioned to Taxable Supply 73.45
Taxable Supply Zero-rated Supply Exempt Supply - Add: IPT Allocated to Taxable Supply 06
§ Sales tax, on supply of goods made by person, levied under STA-90 (830/1130=0.734) (200/1130=0.176) (100/1130=0.088) - Add: Brought Forward Input Tax [Data from question] 10
§ Tax levied under in sales tax mode as duty of excise on
manufacture/production of goods or rendering/providing of services by Res/IPT [i] 100 73.45 17.70 8.85 ACCUMULATED INPUT TAX 89.45
the person under F.E. Act 2005 Cpt Goods [ii] 18 13.22 03.18 1.59 - 90% of OPT (131.4 x 90%) 118.26
§ Sales tax on services rendered/provided by person levied under - Sales Tax Carried Forward 00
Islamabad Capital Territory (Tax on Services) Ordinance, 2001.
- Admissible IPT (w/e/l) 89.45
 X
S TA T # 2 FOR MARCH 2024 SALES TAX MASTER SHEET-2
A LE HEE
T S RS ATTEMPT ONLY
BY STT - SIR TARIQ TUNIO CSS (COMMISSIONER FBR) + CA TEACHER (CAF-02 TAX) 0332-2130867
T
S STE
MA POINT 1: REGISTERED PERSON POINT 4: DOCUMENTS REQUIRED TO CLAIM IPT POINT 11: DR & CR NOTES POINT 14: COTTAGE INDUSTRY
§ Registered person (Def): § RP shall not be entitled to deduct IPT from OPT unless § Dr/Cr Notes are issued when value changes after invoice issuance Cottage Industry (Def) means a manufacturing concern,
- Registered person means a person who is registered In Case of Documents § Event 1 – Reduction in value e.g. goods return, cancellation of supply which fulfils each of the following conditions
under STA-90 or who is liable to be registered. Claim of IPT in § He holds tax invoice in his name & or due to some other reason a) does not have industrial gas or electrical connection
respect of bearing his registration number in- Person Adjustment Document b) is located in a residential area
- Person liable to be registered but not registered shall Supplier Reduces OPT Issues Cr. Note c) does not have a total labour force of more than 10
Taxable Supply res-of such supply
not be entitled to benefits available to RP. Buyer Reduces IPT Issues Dr. Note workers, and
§ Electricity or gas – bill bearing his
§ A person can claim IPT only when he/she is registered d) annual turnover from all supplies does not exceed
registration no. & address where [Dr./Cr Notes in this case are required to be issue within 180 Days,
under STA-90. which is extendable by another 180 on application to CIR.] Rs. 8 million
connection is installed.
§ Effects of Registration: STT Notes:
§ Supplier has declared supply in his § Event 2 – Increase in value of supply after issuance of invoice § Cottage industry is not liable to be registered
Registered Person Unreg’d Person return & has paid tax due as indicated Person Adjustment Document § Local supplies made by cottage industry are exempt
Purchases from IPT Allowed IPT Not Allowed in his return. Supplier Increases OPT Issues Dr. Note § Cottage industry does not charge OPT.
Supplies to ST charged at 18% ST charged at 18% Goods imported § He holds bill of entry or goods Buyer Increases IPT Issues Cr. Note § No IPT is claimed on purchase from cottage industry
plus 4% further tax into Pakistan declaration (GD) in his name & § However, if taxable goods are supplied to cottage
Note: Further tax is added in sales tax liability showing his STRN, duly cleared by industry, supplier charges ST as well as further tax.
customs. POINT 12: PAYMENT THROUGH BANKING CHANNEL
Goods purchased in § He holds a treasury challan, in his Payment of Amount Exceeding 50,000
POINT 2: TYPES OF SUPPLY auction name & bearing his registration § Payment of amount >Rs. 50,000/- is required to be mode by POINT 15: IMPORTS
§ There are 2 types of supply: number, showing payment of ST. crossed cheque, c/bank draft, c/pay order or any other Type Treatment
crossed banking instrument showing transfer of amount from Importer IPT at 18%
(1) Taxable Supply business bank a/c of buyer to business bank a/c of supplier.
POINT 5: UNCLAIMED IPT Commercial IPT at 18%
Taxable Supply is further sub-divided into 2 types § If not done, IPT shall not be allowed Importer
If RP did not deduct IPT within the relevant period Plus 3% value addition tax
(i) Normal Taxable Supply § Exception: Utilities
§ he may claim such tax in return for § Commercial importer is one who supplies goods in the
(ii) Zero-rated Supply IPT on Credit Purchases:
§ any of the six succeeding tax periods. same condition in which they were imported.
§ IPT on credit purchases is allowed if supplier has paid tax § Sales tax paid at import stage is claimed as IPT
(2) Exempt Supply § Payment in this case is required to be made by buyer to (including 3% value addition tax) by importer and
POINT 6: RESTRICTION ON IPT = TO 90% OF OPT supplier within 180 days.
3 Key Points to Remember: deducted from OPT charged on supply of those goods.
RP is not allowed adjustment of IPT in excess of 90% of OPT § If not done, IPT shall be disallowed/reversed. § 3% value added tax is not refund in any case. It is only
1) IPT related to purchases used/to be used in making
allowed as deduction.
taxable supply is deducted from OPT
POINT 7: EXCLUSION OF FXD ASSETS FROM RESTRICTION
2) IPT related to purchases used/to be used in making zero- POINT 13: TAX CREDIT NOT ALLOWED § 8
90% POINT 16: SUSPENSION/BLACKLISTING
rated supply is refunded (1) G/S used/to be used for purposes o/t taxable supplies
This restriction of not allowing IPT in excess of 90% of OPT does (2) G/S notified by FG (Notification: Food, beverages, garments and § IPT not allowed on invoices issued during period
3) IPT related to purchases used/to be used in making
not apply to fixed assets or capital goods consumption on entertainment; Gift and giveaways; Electricity/gas of suspension
exempt supply is disallowed (Disallowed IPT is neither
used in residential colonies of RP; Crockery, cutlery, utensils § IPT not allowed on invoices issued during, prior
deducted from OPT nor refunded. It gets added in POINT 8: SUPPLY (Def) (excluding directly used in taxable actability); Exception: Input tax and after blacklisting.
registered person’s cost.) Supply means allowed stock-in-trade
(3) Extra tax POINT 17: FURTHER TAX
POINT 3: APPORTIONMENT OF RESIDUAL IPT (1) Sale
(4) G/S in/res/of which ST has not been deposited by supplier § While making taxable supplies to a person who has not
ALLOCATION (Exclusive link with 1 particular supply): (2) Other transfer of right to dispose goods as owner
(5) Purchases in/res/of which CREST has indicated discrepancy or IPT obtained registration number or who is not on ATL,
(3) Sale or transfer under hire-purchase agreement
is not verifiable in supply chain further tax at 4% of supplies is charged.
§ IPT related to purchases exclusively used/to be used in making (4) Putting to private, business or non-business use goods (6) Fake invoices § EXCLUSIONS: Further Tax is not charged in the
taxable supply is deducted from OPT produced/manufactured in the course of taxable activity for (7) Failure to furnish information to Board u/§ 26(5) following cases:
§ IPT related to purchases exclusively used/to be used in making purposes other than taxable supply (8) G/S not related to taxable supplies made by RP
(5) Auction (1) Electricity energy supplied to domestic & agricultural
zero-rated supply is refunded (9) G/S acquired for personal or non-business consumption consumers
(6) Disposal of goods to satisfy a debt owed by person (10) Goods used in, or permanently attached to, immoveable
§ IPT related to purchases exclusively used/to be used in making (2) Natural gas supplied to domestic consumers & CNG
(7) Possession of taxable goods held immediately before a person property, such as building and construction materials paints electrical
exempt supply is disallowed (which means IPT is neither stations
ceases to be a registered person and sanitary fittings, pipes, wires and cables (Exclusion: (1) Pre-
deducted from OPT nor refunded.) It gets added in registered (3) Motor oil, diesel oil, jet fuel, kerosene oil and fuel oil
person’s cost.) (8) In case of manufacture of goods belonging to another person, fabricated buildings (2) Goods acquired for sale (3) used directly in (4) Goods sold by retailer to end consumers
the transfer or delivery of such goods to owner or to a person production/ manufacture of taxable goods (5) Supply of goods directly to end consumers including
APPORTIONMENT (Common link with > 1 type of supply): nominated by him [Toll Manufacturing] (11) Vehicles or parts of vehicles/electrical and gas food, beverages, fertilizers and vehicles
appliances/furniture furnishings/office equipment (excluding (6) Third Schedule goods
§ IPT not exclusively related to any one supply i.e. taxable, zero-
electronic cash registers) (Exclusion Goods acquired for sale) (7) Second hand worn clothing and other worn articles
rated or exempt supply is called residual IPT. POINT 9: DISCOUNTS (12) Services in/res/of which IPT adjustment is barred under (8) Supplies by steel-melters, re-rollers and ship breakers
§ Since it is common to more than 1 type of supply, residual IPT In case of trade discounts, discounted price is taken, provided provincial sales tax law (9) Supplies covered under 5th Schedule (Zero-rated)
is apportioned among all types of supplies in which it is used. § tax invoice shows discounted price and related tax and (13) Import or purchase of agricultural machinery or equipment (10) Supplies made to government, semi-government and
§ Apportionment is done on the basis of gross sales values. § discount allowed is in conformity with normal business (subject to ST at 7% under 8th Schedule) statutory regulatory bodies
practices (14) G/S which have not been declared by supplier in his return & (11) Supply of white crystalline sugar
§ Apportionment Formula: supplier has not paid tax
- Residual IPT x Taxable Supply/Total Supplies (12) Supply of foam or spring mattress and other foam
POINT 10: TREATMENT OF ADVANCE (15) Input G/S attributable to supplies to unregistered distributor on products for household use
- Residual IPT x Zero-rated Supply/Total Supplies
- Residual IPT x Exempt Supply/Total Supplies § No treatment of advance payment. Ignore. prorata basis, for which sale invoice do not bear NIC number or NTN (13) Supplies by steel sector and edible oil sector
 X
E S TA T 3
E FOR MARCH 2024 SALES TAX MASTER SHEET-3
SAL SHE ATTEMPT ONLY
SIR TARIQ TUNIO - CSS (COMMISSIONER FBR) + CA TEACHER (CAF-02 TAX) 0332-2130867
STT STER
MA 1) SCOPE OF TAX 7) EXTRA TAX 12) REFUND 16) VALUE OF TAXABLE SUPPLY
There shall be charged, levied and paid a tax known as sales tax at the § FG may in addition to normal ST levy and collect extra tax at such extra Monthly If IPT paid on taxable purchases made during a tax period Value of supply means consideration in money including all
rate of 18% of the value of rate or amount not exceeding 18% of value of goods. Refund exceeds OPT on a/c of zero-rated local supplies or exports Fed/ Prov duties & taxes which supplier receives from
(a) taxable supplies made by RP in the course or furtherance of § FG may prescribe goods/class of goods and persons/class of persons made during that tax period recipient for that supply, excluding sales tax
any taxable activity carried on by him; and subject to extra tax. § excess amount of IPT shall be refunded to RP IN CASE VALUE OF SUPPLY SHALL BE
(b) goods imported into Pakistan, irrespective of their final § FG also prescribe mode, manner, time, conditions and limitation in § not later than 45 days of filing of refund claim Consideration is in kind or Open market price (OMP) of
destination in territories of Pakistan. relation to extra tax. § in such manner & sub/to conditions as Board may specify partly in kind & partly in supply [OMP = FMV]
Annual In case of excess IPT against supplies, o/t zero-rated or money
8) CAPACITY TAX & FIXED TAX Refund exports, such excess input tax Supplier & recipient are OMP of supply
2) LIABILITY TO PAY TAX § may be carried forward to next tax period,
§ CAPACITY TAX: On goods specified in 10th Schedule, tax shall be levied & associates & supply is for no/
Liability to pay § person making the supply (in case of collect on production capacity of plant, machinery, undertaking, § along with IPT not adjustable due to restriction on IPT of lower than OMP
establishment or installation producing or manufacturing goods. 90% of OPT and
sales tax is of the: supply of goods) & consideration
[Note: Currently there is no entry in 10th Schedule for capacity tax] § shall be treated as IPT for that period
§ person importing goods (in case of Taxable supply is made to OMP of supply
Board may prescribe procedure for refund of such excess IPT. consumer from gen/public on
import of goods into Pakistan) § FIXED TAX: On goods specified in 10th Schedule, tax shall be levied &
Adjustment If RP is liable to pay any tax, default surcharge or penalty installment basis on price
collect on fixed basis from any person who is in position collect such tax
of Tax / under any law administered by Board, refund of IPT shall be inclusive of mark up or
3) JOINT & SEVERAL LIABILITY due to nature of such business & different rates may be prescribed for
Penalty made after adjustment of unpaid outstanding tax amount, surcharge rendering it > OMP
different regions/areas.
default surcharge and penalty. Trade discounts Discounted price if invoice
Where RP receiving taxable supply Such person (i.e. buyer) as [Example: ST on Bricks is Rs. 12,500 per month in Lahore]
Proceedings § Where there is reason to believe that a person has claimed shows discounted price &
(buyer) from another RP (supplier) well as the person making In case of IPT or refund which was not admissible, proceedings
9) EXCESS TAX related tax & discount is in
has knowledge or reasonable the taxable supply (i.e. Claim of against him shall be completed within 60 days.
§ conformity with normal
grounds supplier) If a person has collected/collects § shall pay it to FG Inadmissible § For enquiry, audit or investigation regarding admissibility of business practices
sale tax which is not payable or is in § regardless of whether it was IPT/Refund refund claim, period of 60 days may be extended up to 120 Difficult to ascertain value OMP
§ to suspect that some or all of
the tax payable § shall be jointly and excess of tax payable and incidence done under misapprehension days by an officer not below the rank of Additional CIR and for special nature of
severally of which has been passed on to of STA-90 or Board, for reasons to be recorded in written, may extend transaction
§ in-res-of supply, previous or the period which shall in no case exceed 9 months.
§ liable for payment of consumer, the person § due to any other reason Imported goods excluding Value determined by Customs,
subsequent supply
unpaid amount of tax. Excess tax is deemed to be Arrear of tax under STA-90 & is Third Schedule goods including CD and FED
§ would go unpaid recoverable accordingly 13) ZERO-RATING (ZERO-RATED SUPPLIES) Sufficient reason to believe Value determined by Valuation
Claim for refund of excess tax shall not be admissible to RP. Following goods are chargeable to tax at the rate of zero percent: value has not been correctly Committee comprising rep/of
4) TIME & MANNER OF PAYMENT OF TAX Burden of proof that tax incidence shall be on person collecting it. 1) Goods exported declared in invoice trade & IR constituted by CIR
has or has not been passed on to 2) Goods specified in 5th Schedule [Toll Manufacturing] Actual consideration received
IMPORTS: Sales Tax on is charged and paid consumer Manufacture of goods by manufacturer for value
3) Supply of stores and provisions for consumption aboard a conveyance
goods imported in Pakistan § in same manner and at same time belonging to another person addition made in-rel-to goods
proceeding to destination outside Pakistan
§ as customs duty Taxable supply with reference Price supplier charges at the
10) TAXATION OF RETAILERS 4) Goods specified by FG in NIOG issued in emergency situations of national
TAXABLE SUPPLIES: Tax on § shall be paid by RP security, national food security, natural disaster, and implementation of to retail tax time of making taxable supply or
RETAILER O/T TIER-1 (Payment of tax through electricity bill)
taxable supplies made § by prescribed due date (15th) bilateral & multilateral agreements price specified by Board in NIOG
PAYMENT MODE: Tax on § in bank designated by Board, and Where monthly bill amount Tax Rate Exclusions from zero-rating: Supply of electricity by § Amount received on-a/c-of
taxable supplies is required § through such other mode & does not exceed Rs. 20,000/- At the rate of 5% 1) Goods exported but have been or are intended to be reimported independent power producer energy purchase price only;
exceeds Rs. 20,000/- At the rate of 7.5% 2) Goods have been entered for export u/§ 131 of CA-1969 but are not or WAPDA
to paid through deposit manner as specified by Board
§ Electricity supplier shall deposit the amount so collected directly exported § amount received on account
without adjusting his input tax. [Clarification: This tax is in addition to 3) Goods have been exported to country specified by FG by NIOF of capacity purchase price,
5) CHANGE IN TAX RATE tax payable by electricity supplier on supply of electricity] energy purchase price
§ CIR shall issue order to electricity supplier regarding exclusion of a premium, excess bonus,
TAXABLE SUPPLY: In case of change in tax rate, taxable supply made shall 14) EXEMPTIONS (EXEMPT SUPPLIES)
person who is either a Tier-1 retailer or not a retailer. supplemental charges etc.
be charged to tax at rate which is in force at the time of supply. § Supply or import of goods specified in 6th Schedule is exempt from tax. shall not be included
IMPORTS: Imported goods shall be charged to tax at the rate which is in TIER-1 RETAILER § FG may exempt any supplies or imports of any goods/class of goods from
force § Tier-1 retailers shall pay sales tax at rate applicable to goods sold (e.g. 18%) whole or any part of tax by NIOG issued in emergency situations of national Supply of electric power and § Total amount billed including
- on date on which GD is presented u/§ 79 of CA-1969 (in case goods are § All Tier-1 retailers shall integrate their retail outlets with Board’s security, national food security, natural disaster, and implementation of gas by a distribution company price of electricity & natural
entered for home consumption) computerized system for real-time reporting of sales [POS System] bilateral and multilateral agreements. gas, charges, rents,
- on date on which GD for clearance of goods is presented u/§ 104 of § Exemption from tax by FG may be allowed from any previous date specified commissions & all
CA-1969 (in case goods are cleared from warehouse) in notification. Fed/Prov/Local duties/taxes
11) APPORTIONMENT OF RESIDUAL INPUT TAX
§ Where GD is presented in advance of arrival of conveyance (e.g. ship) § Board shall place before NA all notifications issued in a financial year. but excluding late payment
rate of ST shall be charged as is in force on date on which manifest of § IPT paid on raw materials rel-wholly-to (1) Txb supplies shall be
surcharge
conveyance is delivered. admissible & (2) rel-wholly-to exempt supplies shall not be admissible.
§ IPT incurred for both exempt & taxable supplies shall be apportioned acc/
15) TAXABLE ACTIVITY
§ If tax is not paid within 7 days of presenting of GD ST shall be charged at § Value of supply does not
to prescribed formula (R/IPT x Txb Supply/Total Supply) Taxable activity means any economic activity carried on by a person whether
rate as in force on date on which tax is actually paid. include subsidy provided by
§ R/IPT means amount of tax paid on raw materials, components and or not for profit, and includes
FG/PG to electricity or natural
capital goods being used for making txb as well as exempt supplies but § an activity carried on in the form of a business, trade or manufacture; gas including re-gasified LNG
6) SHORT-PAID AMOUNT RECOVERABLE W/O NOTICE does not include IPT paid on RM used wholly for making taxable or § an activity involving supply of goods, rendering or providing of services, consumers and has never
exempt supplies. or both to another person; been chargeable to tax under
Short-paid amount = amount indicated on return as payable but not paid
Provisional vs. Final Adjustment § a one-off adventure or concern in the nature of a trade; and the Act.
Short-paid amount of § stopping removal of goods from his business anything done or undertaken during the commencement or
§ Monthly adjustment of IPT on the basis of prescribed apportionment §
tax is recovered from premises, and though termination of the economic activity.
formula shall be treated as provisional adjustment. RP is engaged in purchasing Difference between sale and
RP, along with default § attachment of his business bank a/c.
§ At the end of each FY, RP shall make final adjustment on the basis of used vehicles from general purchase price of the said
surcharge by § without giving him SCN & w/o prejudice to But does not include:
taxable and exempt supplies made during the course of the year. public on which ST was paid at vehicle on the basis of the
any other action. a) activities of employee providing services in that capacity to employer
§ Any IPT adjustment claimed wrongfully on a/c of incorrect application of time of import or valuation method prescribed by
In case of recovery of § no penalty shall be imposed apportionment formula shall be punishable under applicable provisions b) activity carried on by individual as private recreational pursuit or hobby
short-paid amount § unless SCN is given to the person. c) activity carried on by a person other than an individual which, if carried manufacturing, & which are, the Board
of law irrespective of the fact that the claim was provisional. later on, sold in open market
on by an individual, would fall within sub-clause (b).
after making value addition
 X
E S TA T # 4 FOR MARCH 2024 SALES TAX MASTER SHEET-4 (REGISTRATION & RETURN)
SAL SHEE ATTEMPT ONLY
SIR TARIQ TUNIO - CSS (COMMISSIONER FBR) + CA TEACHER (CAF-02 TAX) 0332-2130867
STT STER
MA 1) REGISTRATION 4) APPLICATION FOR REGISTRATION 5) COMPULSORY REGISTRATION 7) TRANSFER OF REGISTRATION
(1) Person req’d to be reg’d shall, before making taxable supplies, (1) If person required to be registered under STA-90 does not (1) Board may, by order, transfer registration of RP from
Every person engaged in making taxable supply (including ZR supply) falling apply on computerized system (in Form STR-1) through: jurisdiction of one LTO/RTO to another.
apply for registration and
in any of following categories is required to be registered: o Owner
o CIR or any other officer authorized by Board is satisfied (2) On transfer of registration
o Authorized member (a) all records & responsibilities relating to RP shall be
(1) MANUFACTURER who is (after inquiry as deemed appropriate) that the person is
(2) IMPORTER o Partner or transferred to LTO/RTO, in whose jurisdiction reg’n
not running cottage industry required to be registered
o Authorized director is transferred.
o he shall issue notice for compulsory registration to the (b) LTO/RTO, in whose jurisdiction registration is
• Application shall specify Regional Tax Office (RTO) in whose person (in Form STR-6).
(3) WHOLESALER, DEALER or DISTRIBUTOR jurisdiction, registration is sought – as per criteria given below: transferred, shall exercise jurisdiction over RP in
(2) If CIR receives written reply from said person within time manner as if it always had jurisdiction over RP (even
(a) PUBLIC LIMITED COMPANY (listed or unlisted) – place specified in notice, contesting his liability to be registered, CIR on actions already taken, being taken or pending
(4) EXPORTER who (5) RETAILER who is liable to where registered office is located. shall grant such person opportunity of personal hearing, if so immediately before transfer)
intends to obtain ST
pay ST, excluding retailer (b) OTHER COMPANIES: desired by person, and shall thereafter pass order whether or
refund against his zero- (3) Board shall issue intimation letter to RP along with copy
required to pay ST through his not such person is liable to be registered compulsorily.
rated supplies (i) if coy is primarily engaged in manufacture or to concerned LTU or RTO.
electricity bill
processing – place where factory is situated. o Copy of order shall invariably be provided to that person. (4) RP shall apply to Board for transfer of reg’n, in case he
(ii) if coy is primarily engaged in business other than o Where CIR passes order for compulsory registration, he o intends to shift business activity from jurisdiction of
(6) Person required, under any other Federal/Provincial law, to shall cause the said person to be registered through one LTO/RTO to another, or
manufacture or processing – place where main
be registered for purpose of any duty or tax collected or paid computerized system. o he has any other valid reason for such transfer.
business activities are actually carried on.
as if it were ST collected under STA-90.
(c) PERSON NOT INCORPORATED – jurisdiction where (3) Where person to whom a notice is given, does not respond
Person NOT engaged in making taxable supply, if required to be registered business is actually carried on. within time specified in notice 8) CANCELLATION OF MULTIPLE REGISTRATIONS
(i) for making imports/exports, or (ii) under any provisions of STA-90 or any o CIR shall cause to compulsorily register the person (1) If RP holds multiple STRNs, only one shall be retained and
other Federal law may apply for registration. (d) PERSON NOT INCORPORATED, having single all others surrendered (under intimation to CIR).
manufacturing unit and whose business premises and o through computerized system
manufacturing unit are located in different areas – o under intimation to the person through courier service. (2) Board may allow/ allocate separate registration for
2) DISCONTINUANCE OF GAS & ELECTRICITY CONNECTIONS jurisdiction where manufacturing unit is located. (4) Person reg’d compulsorily is req’d to comply with all provisions manufacturing units located in different RTO/LTU.
§ Board shall have power to direct, through ST General Order (STGO), the of Act and rules from date of compulsory registration. (3) Tax liabilities against cancelled registration shall be
• Jurisdiction of LARGE TAXPAYERS’ OFFICE (LTO) shall remain as
gas and electricity distribution companies to discontinue gas/electricity specified by Board (i.e. RPs are specified for LTO by Board). o In case of failure to do so CIR may issue notice transferred against registration retained.
connection of: - for production of records or documents and (4) If cancelled registrations is in different RTO/LTO than the
(1) Person, including tier-1 retailers, who fail to register for ST • Board may transfer registration of RP to jurisdiction where
appearance in person [u/§ 25] one retained by RP, CIR having jurisdiction over cancelled
purpose, or place of business, regd office or manufacturing unit is located.
- to assess amount of ST payable [u/§ 11] and registrations shall ensure that tax arrears files are
(2) Notified Tier-1 Retailers registered but not integrated with (2) Applicant having NTN/ income tax registration shall, using his - take other action as req’d under law against person transferred to RTO/LTU having jurisdiction over RP, on
Board’s Computerized System login credentials, upload following info and documents. basis of retained STRN.
§ Upon registration/integration, Board shall notify restoration of their (5) If it is subsequently established that person was not liable to be
gas/electricity connection through STGO. (a) Bank a/c certificate issued by bank in name of business registered but was wrongly registered due to inadvertence,
(b) Reg’n/consumer number with gas and electricity supplier error or misconstruction 9) NON-ACTIVE TAXPAYER
(c) Particulars of all branches in/c/of multiple branches o CIR shall cause to cancel his registration through (1) RP who does not fulfil prescribed conditions shall
3) TEMPORARY REGISTRATION computerized system. automatically become non-active taxpayer (NAT) & his
(d) GPS-tagged photographs of business premises; and
(1) Where person files application for ST reg’n as manufacturer w/o name shall be removed from ATL.
(e) In/c/of manufacturer, also GPS-tagged photographs of o In/c/of such cancellation of registration, such person shall
having installed machinery, for purpose of import of machinery not be liable to pay any tax, default surcharge or penalty. (2) NAT shall not be entitled to (a) file Goods Declarations
machinery and industrial electricity or gas meter
o temporary registration as manufacturer shall be allowed for import or export, (b) issue sales tax invoices, (c) claim
installed.
o for period of 60 days IPT or refund, or (d) avail any concession under the Act
o sub/to furnishing of complete list of machinery to be imported (3) On furnishing above documents, system shall register 6) CHANGE IN REGISTRATION PARTICULARS or rules.
along with Bill of Lading (BL) or Goods Declaration (GDs). applicant for sales tax.
(1) If there is change in name, address or other particulars (3) No person (including govt depts, autonomous bodies and
(2) Temp/registration shall be issued by computerized system within 72 (4) After registration, applicant or his authorized person shall visit public sector organizations) shall make any purchases
hours of filing of complete application. e-Sahulat Centre of NADRA within month for bio-metric o as stated in registration certificate from NAT.
verification. In case of failure to visit or failure of verification, o RP shall notify the change [in Form STR-l]
(3) After receiving temporary registration (4) In case of entry of invoice, issued by NAT, by any
RP’s name shall be taken off ST ATL. o to computerized system
o person is allowed to import, as manufacturer, plant, machinery registered buyer in his return, a message shall appear to
o within 14 days of change
and R/M, etc. (5) In case of manufacturer, Board may require post-verification the effect that supplier is NAT and no IPT credit shall be
o sub/to submission of post-dated cheque equal to difference in (2) Change of business category as 'manufacturer' shall be admissible against such invoice.
through field offices or a third party authorized by Board.
duties/taxes to be availed as manufacturer to customs. allowed sub/to fulfillment of all requirements applicable for
(6) In case, the field office, during scrutiny after registration, finds registration of manufacturers [as specified in R 5]. RESTORATION AS AN ACTIVE TAXPAYER:
(4) If certain requirements [specified at R 5 (2)] are not fulfilled within 60
that any document provided is non-genuine or fake or wrong (3) In/c/of approval of change, revised registration certificate
days of issuance of temp/registration, temp/ registration shall be NAT may be restored as active taxpayer, if
disabled and post-dated cheques en-cashed. o it may request through the system shall be issued through computerized system, which shall be
o to provide the missing document effective from the date person applied for change. (a) RP files return or statement along with payment of any
(5) Person holding temp/ registration shall file monthly return but shall tax due under the Act or ITO-2001
not issue ST invoice and if such invoice is issued, IPT credit shall not o in 15 days (4) CIR may, based on available info or particulars and after
o failing which RP shall be taken off from ST Active (b) RTO/LTO, on satisfying itself after conducting such
be admissible against them. making inquiry as deemed necessary and after providing audit or other investigation as may be necessary,
Taxpayer List reasonable OOBH to person, by an order in writing, make
(6) No ST refund shall be paid to person during period of temp/ reg’n and o subject to approval of the Member (IR-Operations), FBR.] recommends to Board for restoration; and
IPT may be c/f to subsequent tax periods. modifications in registration of the person. (c) Board issues an order to such effect.
Page 1/2
 10) DE-REGISTRATION, BLACKLISTING AND SUSPENSION OF
REGISTRATION § 21
(1) Board or any authorized officer may de-register RP or class of RP not required to be
registered.
(2) If CIR is satisfied that RP is found to have issued fake invoices or has committed tax
fraud, he may blacklist or suspend his registration in/acc/with procedure prescribed
by Board by notification.
(3) During suspension, invoices issued shall not be entertained for refund or IPT credit
(4) Once person is blacklisted, refund or IPT claimed
o against invoices issued by him, whether prior or after black listing,
o shall be rejected through order (self-speaking + appealable) and
o after affording OOBH to person.
(5) If Board, CIR or any officer authorized by Board has reasons to believe that RP is
engaged in
o issuing fake or flying invoices
o claiming fraudulent IPT or refunds
o does not physically exist
o does not conduct actual business
o is committing any other fraudulent activity
Board, CIR or such Officer may after recording reasons in writing, block refunds or
IPT adjustments and direct concerned CIR for further investigation and appropriate
legal action.
11) DEREGISTRATION
(1) Every RP (i) who ceases to carry on business, (ii) whose supply becomes exempt,
or (iii) who ceases to remain registered
o shall apply to CIR for cancellation of registration
o CIR, on application or on his own initiative, may issue order of de-registration
or cancellation of registration
o from date specified him on order, but not later than
(a) 90 days from date of application or
(b) date all dues outstanding against person are deposited – w/ever/later
o Such person shall be caused to be de-registered through computerized system.
(2) Audit proceedings or inquiry may be initiated upon application for deregistration
of RP for de-registration
o CIR shall complete audit or inquiry
o within 90 days from date of application and
o direct applicant to discharge any outstanding liability which may have been
raised by filing final return
o Note: Person shall not be de-registered unless he provides record for purpose
of audit or inquiry.
(3) After receipt of deregistration application by CIR, RP’s obligation to file return shall
remain suspended until he is de-registered or his application is rejected.
(4) If CIR conducts audit or inquiry of applicant to determine his liability, CIR shall
require applicant in writing to provide the requisite records.
o On receipt of complete requisite records, entry to this effect shall be made in
computerized system,
o which shall automatically de-register applicant on expiry of 90 days thereof.
(3) If RP fails to file return for 6 consecutive months, CIR, after issuing notice in writing
and after giving OOBH to such person, shall
o issue order of de-registration of such person and
o computerized system shall be caused to deregister the person accordingly.
(4) For a person whose registration is cancelled
o his obligations and liabilities
o relating to period when he conducted business as RP
o shall not be affected
o by the fact that his registration has been cancelled or
o that he has ceased to be a RP.
12) PROCEDURE OF BLACKLISTING
UNIFORM PROCEDURE TO BE FOLLOWED BY RTOs/LTOs
IN CASE OF BLACKLISTING
(i) In case offence is confirmed, CIR shall, after giving OOBH,
o issue appealable self-speaking order for blacklisting of RP, and
o shall proceed to take legal and penal action
(ii) Order of blacklisting shall contain
o reasons for blacklisting
o time period for which refund or IPT – claimed by B/L person or by any other
RP on invoices issued by him from date of his registration – shall be
inadmissible
o recovery to be paid or penalties to be imposed.
(iii) Blacklisting order shall be issued
o within 90 days of issuance of notice of hearing.
o In case blacklisting order is not issued within this time period suspension
of RP shall become void ab-initio.
(iv) Copies of order shall be endorsed to RP, LTUs/RTOs, FBR/PRAL computer
system, STARR computer system and Customs Wing computer system.
o LTU/RTO shall circulate lists to their refund sections, audit sections & other
staff to ensure implementation of order in letter and spirit by all.
(v) LTUs / RTOs shall further circulate copies of order along with computer system-
generated list of invoices issued by blacklisted persons to all officers of IRS
having jurisdiction over RPs who have claimed credit of IPT or refund on
strength of the invoices issued by the said blacklisted persons.
(vi) OIR receiving shall SCN to RP for rejecting IPT or refund claimed against
invoices circulated and further proceed to decide the matter through self-
speaking appealable order and after giving OOBH to such person.
13) PROCEDURE OF SUSPENSION
UNIFORM PROCEDURE TO BE FOLLOWED BY RTOs/LTOs
IN CASE OF SUSPENSION
(i) If CIR is SATISFIED that RP has issued fake invoices, evaded tax or committed
tax fraud, CIR may suspend registration of such person through system, without
prior notice, pending further inquiry.
BASIS FOR SATISFACTION may include following:
(A) non-availability of RP at given address
(B) refusal to allow access to business premises or to furnish records
(C) abnormal tax profile such as taking excessive IPT, its continuous c/f or
sudden increase in turnover
(D) making substantial purchases from or making supplies to other
blacklisted or suspended person
(E) non-filing of sales tax returns
(F) on recommendation of CIR of any other jurisdiction
(G) any other reason to be specified by CIR
(ii) Suspension of registration shall take place through written order of CIR giving
reasons for suspension. Order shall be endorsed to RP, all LTUs/RTOs, FBR‘s
computer system, STARR computer system and Customs Wing computer
system for information and necessary action.
(iii) RP who does not file return for 6 consecutive months shall be caused to be
suspended through system without any notice.
(iv) If buyers/suppliers of person whose reg’n is suspended belong to another LTU/
RTO, and buyers/suppliers are also req’d to be suspended, CIR shall intimate
Chief Commissioner of concerned LTU/RTO in whose jurisdiction
buyers/suppliers fall, in writing explaining complete facts of case and reasons
on basis of which these buyers/suppliers are to be suspended, to initiate
proceedings for suspension/blacklisting of buyers/suppliers.
(v) No IPT adjustment/refund shall be admissible to RP during currency of
suspension. Similarly, no IPT adjustment/refund shall be allowed to any other
RP on strength of invoices issued by suspended person (whether issued prior
to or after suspension), during the currency of suspension.
(vi) CIR shall, within 7 days of issuance of suspension order, issue SCN (through
reg’d post or courier service) to RP to provide OOBH with 15 days of issuance
of notice clearly indicating he will be blacklisted in case
(A) there is no response to notice
(B) he has not provided required record
(C) he has not allowed access to his business record or premises
(D) any other reason specified by CIR
(vii) If SCN is not issued within 7 days of suspension 6) REVISED RETURN
order, the order shall become void ab-initio. (1) RP may file revised return to correct omission or
(viii) In case of non-availability of suspended person at
wrong declaration. Conditions:
given address, notice may be affixed on the main
o Approval of CIR is given to revise return
notice Board of LTU/RTO o Revision is done within 120 days of filing
(ix) On receipt of reply to notice and after giving an (2) Approval of CIR is not required if revised return is
opportunity of hearing to RP, if CIR is satisfied, he
o filed within 60 days of filing &
may order for revoking of suspension of RP.
o tax payable in revised return is more or
refund claimed is less than original return
1) MONTHLY RETURN
Every RP shall, not later than due date, furnish true,
complete and correct return in prescribed form
7) BENEFITS OF REVISION/PENALTY WAIVER
If RP wishes
o to a designated bank or any other office specified
o to file revised return voluntarily along with deposit
by the Board,
of tax short paid or evaded along with D/S,
o indicating purchases and supplies made during tax
whenever it comes to his notice, before receipt of
period, tax due and paid and
o such other information, as may be prescribed. AUDIT NOTICE – No penalty.
o to deposit tax pointed out by OIR during audit or at
2) QUARTERLY RETURN any time before SCN, he may deposit evaded
Board may, by NIOG, require any person or class of amount of tax, D/S and 25% of penalty with revised
persons to submit return on quarterly basis. return.
o to deposit amount after issuance of SCN, he shall
3) ANNUAL RETURN deposit evaded ST amount, D/S and full amount of
Every RP, being pvt or public limited coy, shall file penalty along with revised return and thereafter,
annual sales tax return, for financial year by 30th SCN shall stands abated.
September of following financial year, with CIR.
8) ELECTRONIC RETURN
4) SPECIAL RETURN (1) Every RP req’d to file return or other statement
In addition to regular return: shall file return or statement electronically.
(1) BOARD: RP shall furnish special return
(2) In case RP fails to fill in relevant data or
o within such date
o in such form indicating info such as quantity information in any applicable column of return or
manufactured or produced, purchases made, any annexure, return shall be treated as invalid.
goods supplied or payment of arrears made (3) RP filing returns electronically shall make
o for such period
payment of amount of tax due in any of
as Board may, by NIOG, specify. designated branches of NBP on prescribed
(2) CIR: CIR may require any person whether, registered
payment challan or through electronic payment
or not, to furnish return (whether on his own behalf
system devised for this purposes.
or as agent/trustee) in prescribed form and such
(4) RP shall enter data of supplies in Annexure-C and
person shall furnish return not later than date
specified by CIR in this regard. data of Dr/Cr Notes in Annexure-I and submit the
said data by 10th of next month.
(5) As soon as supplier submits data of Annexure-C &
5) FINAL RETURN Annexure-I (complete or partial), the data shall be
If person applies for de-registration, he shall before de-
immediately available to respective buyers in his
registration, furnish final return to CIR in specified form
'‘Purchase Data" and "Debit or Credit Note Data".
in manner and time directed by CIR.
(6) Buyer shall load data in his Annexure-A from
"Purchase Data" and in his Annexure-I from
6) RETURN DEEMED TO BE MADE
“Debit or Credit Note Data” to prepare his return.
Return purporting to be made on behalf of person by
(7) Data relating to purchases made from un-
his duly appointed representative shall, for all
purposes, be deemed to have been made by him or registered person shall be manually entered by
under his authority unless proved to the contrary. the RP in Annexure- A.
9) DUE DATES & EXTENSION OF DUE DATE
o “Due date” means 15th of month following end of tax period, or such other date as Board may, by NIOG, specify and
different dates may be specified for furnishing of different parts or annexures of the return.
o Where due date is 15th, tax shall be deposited by 15th and return submitted electronically by 18th of next month.
o Where RP operates in different sectors for which different dates of filing of return have been prescribed in any rules
made under STA-1990, or FE Act, 2005, such person shall file single return for all such sectors by due date applicable
to his major activity in terms of ST or FED payable.
o RP req’d to furnish return may apply, in writing, to CIR (by due date) for an extension of time to furnish return.
o On application, if CIR is satisfied that applicant is unable to furnish return by due date because of (a) absence from Pakistan;
(b) sickness or other misadventure; or (c) any other reasonable cause, CIR may, by order in writing, grant applicant an
extension of time for furnishing the return.
o Extension of time shall not exceed 15 days from due date for furnishing return, unless exceptional circumstances justifying
longer extension of time.
o If CIR has not granted extension, CC may, on application by RP, grant extension or further extension for period not exceeding
15 days, unless exceptional circumstances justifying longer extension of time.
Extension of time shall not, for purpose of charge of D.S, change due date for payment of sales tax.
o
Page 2/2
 X
E S TA T # 5 FOR MARCH 2024 SALES TAX MASTER SHEET-5 (Record/Audit/Dr&Cr Notes)
SAL SHEE ATTEMPT ONLY
SIR TARIQ TUNIO - CSS (COMMISSIONER FBR) + CA TEACHER (CAF-02 TAX) 0332-2130867
STT STER
MA 1) RECORDS
§ RP making taxable supplies shall maintain and keep:
o at his business premises or registered office
o in English or Urdu language
§ Record and documents are required to be retained for
o 6 years after end of tax period to which it relates or
o till finalization of any pending proceedings (including assessment,
appeal, revision, reference, petition or alternative dispute
resolution).
§ Following record of goods purchased, imported and supplied (including
zero-rated & exempt supplies) is required to be maintained:
(1) 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
(2) 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
(3) records of goods imported shall show the description, quantity
and value of goods and the amount of tax paid on imports;
(4) records of zero-rated and exempt supplies
(5) double entry sales tax accounts
(6) invoices, debit/credit notes, bank statements, banking
instruments (in terms of § 73), inventory records, utility bills,
salary and labour bills, cash book, rental agreements, sale
purchase agreements and lease agreements
(7) Record relating to Gate passes, inward or outward and transport
receipts
(8) Electronic version of records mentioned at serial number (1) to (7)
above.
(9) such other records as may be specified by Board.
§ Company is required to submit copy of annual audited accounts, along
with certificate by auditors certifying payment of due tax by RP.
§ Board may require RP/class of RPs to declare and use only as many
number of business bank accounts as may be specified by Board in NIOG
to make or receive payments on account of purchase and sale
transactions and to make payment of due tax from such accounts only.
2) TAX INVOICES
RP making taxable supply shall issue serially numbered tax invoice at the
time of supply of goods containing following particulars, in Urdu or English
language, namely:
(1) name, address and registration number of supplier
(2) name, address and registration number of recipient
[in case of supplies by manufacturer or importer to unregistered
distributor, NIC or NTN of unregistered distributors]
(3) date of issue of invoice
(4) description including count, denier and construction in case of
textile yarn and fabric, and quantity of goods
(5) value exclusive of tax
(6) amount of sales tax
(7) value inclusive of tax
§ Not more than one tax invoice shall be issued for taxable supply
§ No person other than a registered person or person paying retail tax
shall issue invoice.
§ Board may, by NIOG, may require RP making taxable supply to issue
invoices to another RP electronically.
3) AUDIT (ACCESS TO RECORD)
(1) As and when CIR requires, RP is required
§ to produce record or documents,
§ maintained STA-90 or any other law,
which are in possession/control of RP or in possession/
§
control of his agent.
(2) Where record or documents have been kept on electronic data
§ access shall be allowed to OIR authorized by CIR and
§ use of machine on which such data is kept shall be allowed.
(3) OIR authorized by CIR on basis of record obtained may, once
in a year, conduct audit.
(4) If CIR has information or sufficient evidence showing that RP is
involved in tax fraud or evasion of tax, he may authorize OIR,
not below the rank of AC, to conduct inquiry or investigation.
(5) After completion of Audit, OIR
§ shall pass assessment order
§ after obtaining the RP’s explanation on all issues raised in
audit
(6) CIR may conduct audit proceedings electronically through
video links, or any other facility as prescribed by Board.
(7) OIR may conduct audit of records of RP if the same were
earlier audited by office of the Auditor-General of Pakistan.
WAIVER OF PENALY:
If RP wishes to deposit amount of tax short paid or amount of tax
evaded along with D/S voluntarily:
o whenever it comes to his notice before receipt of notice of audit
– no penalty shall be recovered from him
o during audit, or at any time before issuance of SCN he may
deposit the evaded amount of tax, D/S, and – 25% of the penalty
o after issuance of SCN, he shall deposit evaded tax amount, D/S,
and full amount of penalty & thereafter SCN shall stand abated.
4) DRAWING OF SAMPLES
(1) Where OIR considers it necessary
o to take sample of any goods or raw materials
o for determining their liability to ST
o for purpose of establishing their value
o for any other reason
he may remove minimum quantity of goods or R/M sufficient
to enable proper examination/ analysis.
(2) At the time of taking sample person in possession of goods
o shall be informed and
o given the opportunity
o to sign representative samples, and
o take a corresponding sample for his record.
(3) Any sample taken shall be taken against proper receipt and
copy of which shall be kept in record by RP and LTO or RTO.
5) TRANSACTION BETWEEN ASSOCIATES
CIR or OIR may
§ for transaction b/w persons who are associates
§ determine transfer price of taxable supplies b/w the persons
§ as is necessary to reflect FMV of supplies
§ in an arm’s length transaction.
5) DR & CR NOTES (For Theory Question)
ADJUSTMENT OF DEBIT AND CREDIT NOTES
Adjustment of debit/credit notes against output tax is permitted under STA-90. Dr/Cr notes are issued where RP has issued tax invoice
in respect of a supply and due to the following circumstances, there is need for making amendemetn in the invoice:
(1) Cancellation of supply or
(2) Return of goods or
(3) A change in the nature of supply or
(4) Change in the value of the supply or
(5) Some such event the amount shown in the tax invoice or
(6) Return needs to be modified.
APPLICABILITY (RULE 19)
The above adjustment can only be made where a registered person has issued a tax invoice in respect of a supply made by him and
as a result of the issuance of debit / credit note; the amount shown in the tax invoice or the return needs to be modified.
CANCELLATION OR RETURN OF SUPPLY (RULE 20)
In case a registered person has made a supply, and such supply or part thereof is cancelled or returned, the buyer or the recipient
shall issue a debit note (in duplicate) in respect of such supply or part thereof, indicating the quantity being returned or the supply of
which has been cancelled, its value determined on the basis of the value of supply as shown in the tax invoice issued by the supplier
and the amount of related sales tax paid thereon, as well as the following, namely:-
i. name and registration number of the recipient;
ii. name and registration number of the supplier;
iii. number and date of the original sales tax invoice;
iv. the reason of issuance of the debit note; and
v. signature and seal of the authorized person issuing the note.
§ The original copy of the debit note shall be sent to the supplier and the duplicate copy shall be retained for record.
§ In the case of cancellation of supplies made to, or return of goods by, an unregistered person, the supplier shall issue a credit note
providing the same particulars as are specified above and keep a copy for record.
CHANGE IN VALUE OF SUPPLY OR AMOUNT OF SALES TAX (RULE 21)
Where for any valid reason the value of supply or the amount of sales tax mentioned in the invoice issued has increased, the supplier
shall issue a debit note (in duplicate), with the following particulars, namely:
- name and registration number of the supplier;
- name and registration number of the recipient;
- number and date of the original sales tax invoice;
- original value and sales tax as in original invoice;
- the revised value and sales tax;
- the difference of value and sales tax adjustable;
- the reason for revision of value; and
- signature and seal of the authorized person issuing the note.
Where, for any valid reason, the value of supply or the amount of sales tax mentioned in the invoice issued has decreased, the supplier
shall issue a credit note (in duplicate), with the same particulars as specified above. The original copy of the note shall be sent to the
recipient and the duplicate shall be retained for record.
ADJUSTMENT OF INPUT AND OUTPUT TAX (RULE 22)
• The buyer shall not be entitled to claim input tax in respect of the supply which has been cancelled or returned to the
supplier or in respect of which the amount of tax was reduced.
• Where the buyer has already claimed input tax credit in respect of such supplies, he shall reduce or increase the amount of
input tax by the corresponding amount as mentioned in the Debit Note or Credit Note, as the case may be, in the return for
the period in which the respective note was issued.
• Wherethesupplierhasalreadyaccountedfortheoutputtaxinthesalestaxreturn for the supplies against which Debit Note was
issued subsequently, he may increase or reduce the amount of output tax by the corresponding amount as mentioned in
the Debit Note, in the return for the period in which the respective note was issued.
• Provided that in case of return of supplies by an unregistered person, the adjustment as aforesaid can be made against the
Credit Note issued by the supplier.
• The adjustments as herein before noted which lead to reduction in output tax or increase in input tax can only be made if
the corresponding Debit Note or Credit Note is issued within one hundred and eighty days of the relevant supply
• Provided that the Collector may, at the request of the supplier, in specific cases, by giving reasons in writing, extend the
period of one hundred and eighty days by a further one hundred and eighty days.
• Where the goods relating to a returned or cancelled supply are subsequently supplied to the original buyer or some other
person with or without carrying out any repairs, the supplier shall charge sales tax thereon in the normal manner and
account for it in his return for the period in which these goods were supplied.
DESTRUCTION OF GOODS (RULE 23)
Where any goods are returned by the buyer on the ground that the same are unfit for consumption and are required to be destroyed
by the supplier, the goods shall be destroyed after obtaining permission from the Collector of sales tax having jurisdiction, and under
the supervision of an inland revenue officer of sales tax not below the rank of an Assistant Collector as may be deputed by the Collector
for the purpose and the input tax credit in respect of goods so destroyed shall not be admissible.
 FOR THIS
ATTEMPT ONLY
SIR TARIQ TUNIO - CSS (COMMISSIONER FBR) + CA TEACHER (CAF-02 TAX) 0332-2130867
Def 1: SALES TAX
“SALES TAX” means the tax, additional tax, or default surcharge
levied under STA-90, fine, penalty or fee imposed or charged under
the Act; and any other sum payable under the provisions of the Act
or the rules made thereunder.
Def 2: TAXABLE SUPPLY
"TAXABLE SUPPLY" means supply of taxable goods made by
importer; manufacturer, wholesaler (including dealer), distributor
or retailer other than supply of goods which is exempt u/§ 13 &
includes supply of goods chargeable to tax at 0% u/§ 4.
Def 3 & 4: TAXABLE GOODS & GOODS
"TAXABLE GOODS" means all goods other than those which have
been exempted u/§ 13;
"GOODS" include every kind of movable property other than
actionable claims, money, stocks, shares and securities.
Def 5 & 6: EXEMPT & ZERO-RATED SUPPLY
“EXEMPT SUPPLY" means a supply which is exempt from tax u/§
13.
“ZERO-RATED SUPPLY" means a taxable supply which is charged to
tax at the rate of zero per cent u/§ 4.
Def 7: IMPORTER
Importer is any person who imports any goods into Pakistan
Def 8: MANUFACTURER
▪ Manufacturer 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 person who by any process or operation assembles, mixes,
cuts, dilutes, bottles, packages, repackages or prepares goods
by any other manner;
▪ 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;
▪ 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.
▪ For the purpose of refund under the Act, only such person shall
be treated as manufacturer-cum-exporter who owns or has his
own manufacturing facility to manufacture or produce the
goods exported or to be exported.
SALE S T A X MAST E R SH E E T - 6 ( D efin it io n s )
Def 9: RETAILER
Means a person supplying goods to general public for the purpose of consumption.
Provided that any person, who combines the business of import and retail or
manufacture or production with retail, shall notify and advertise wholesale prices
and retail prices separately, and declare the address of retail outlets.
Def 10: RETAIL PRICE
With reference to 3rd Schedule, means price fixed by manufacturer or importer,
in/c/of imported goods, inclusive of all duties, charges and taxes (other than ST) 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; Provided that board may through a general
order specify zones or areas for the purpose of determination of highest retail price
for any brand or variety of goods.
Def 11: DISTRIBUTOR
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.
Def 12: 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 who deducts income tax at source under the Income
Tax Ordinance, 2001.
Def 13: OPEN MARKET PRICE
Means the consideration in money which that supply or a similar supply
would generally fetch in an open market.
Def 14: SIMILAR SUPPLY
In relation to the open market price of goods, means any other supply of
goods which closely or substantially resembles the characteristics,
quantity, components and materials of the aforementioned goods;
Def 15: MANUFACTURE OR PRODUCE
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;
Process of printing, publishing, lithography and engraving; and
Process and operations of assembling, mixing, cutting, diluting, bottling,
packaging, repacking or preparation of goods in any other manner.
Def 16: DUE DATE
In relation to the furnishing of a return means the 15thday of the month
following the end of the tax period, or such other date as the Board may,
by notification in the official Gazette, specify and different dates may be
specified for furnishing of different parts or annexures of the return.
Def 17: PROVINCIAL SALES TAX
Means tax levied under the provincial laws or laws relating to Islamabad
Capital Territory, declared by Federal Government through notification in
the official Gazette to be provincial sales tax for the purpose of input tax.
Def 18: TAX PERIOD
Means a period of one month or such other period as the Board with the
approval of the Federal Minister in-chagre may, by notification in the
official Gazette, specify.
Def 19: E-INTERMEDIARY
Means a person appointed as e-intermediary under section 52A for filing
of electronic returns and such other documents as may be prescribed by
the Board from time to time, on behalf of a person registered under
section 14.
Def 20: TIME OF SUPPLY
In relation to,
1. (a) a supply of goods, other than under hire purchase
agreement, means the time at which the goods are delivered or
made available to the recipient of the supply
2. (b) asupplyofgoodsunderahirepurchaseagreement,meansthetim
eatwhichtheagreement is entered into; and
3. (c) services, means the time at which the services are rendered
or provided;
Provided in respect of clause (a), (b) or (c) above where any part payment
is received for a supply in a tax period
1. (a) itshallbeaccountedforinthereturnforthattaxperiod;and
2. (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.
Def 21: COMPANY
Means
(a) a company as defined in the Companies Ordinance, 1984;
(b) a body corporate formed by or under any law in force in Pakistan;
(c) a modaraba;
(d) a body incorporated by or under the law of a country outside Pakistan
relating to incorporation of companies;
(e) a trust, a co-operative society or a finance society or any other society
established or constituted by or under any law for the time being in force;
or
(f) a foreign association, whether incorporated or not, which the Board
has, by general or special order, declared to be a company for the purposes
of the Income Tax Ordinance 2001