Sales tax 1990

Only extracts of important points, for full coverage refer the Act
Registered person
• registered person” means a person who is registered or is liable to be
registered under this Act

• Provided that a person liable to be registered but not registered

under this Act shall not be entitled to any benefit available to a
registered person under any of the provisions of this Act or the rules
made thereunder
Taxable supplies
• “taxable supply” means a supply of taxable goods made by an
importer, manufacturer, wholesaler (including dealer), distributor or
retailer other than a supply of goods which is exempt and includes a
supply of goods chargeable to tax at the rate of zero per cent;
Scope (section 3)
Subject to the provisions of this Act, there shall be charged, levied and
paid a tax known as sales tax at the rate of 5 [seventeen] per cent of
the value of
• taxable supplies made 6 […] by a registered person in the course or
furtherance of any 7 [taxable activity] carried on by him; and
• goods imported into Pakistan, 8 [irrespective of their final destination
in territories of Pakistan]
where taxable supplies are made to a person who has not obtained
registration number, there shall be charged, levied and paid (unless
specified otherwise) a further tax at the rate of three percent.
Scope (Cont’d)
• taxable supplies 3 [and import of goods] specified in the Third
Schedule shall be charged to tax at the rate of seventeen per cent of
the retail price (refer 3rd schedule for list of goods)
• in case these goods are also specified in eighth schedule (schedule for
reduced rates), rates specified in eights schedule are used.
• the amount of sales tax shall be legibly, prominently and indelibly
printed or embossed by the manufacturer or the importer, in case of
imported goods on each article, packet, container, package, cover or
label, as the case may be
Scope (Cont’d)
• goods specified in the Eighth schedule shall be charged to tax at such
rates and subject to such conditions and limitations as specified
therein
• the 6 Federal Government may, subject to such conditions and
restrictions as it may impose, by notification in the official Gazette,
declare that in respect of any taxable goods, the tax shall be charged,
collected and paid in such manner and at such higher or lower rate or
rates as may be specified in the said notification
Liability to pay tax
The liability to pay the tax shall be
• in the case of supply of goods, of the person making the supply, and
• in the case of goods imported into Pakistan, of the person importing
the goods.
• the Board, with the approval of the Federal Minister-in charge, may,
by a notification in the official Gazette, specify the goods in respect of
which the liability to pay tax shall be of the person receiving the
supply.
Zero rating (section 4)
• the following goods shall be charged to tax at the rate of zero percent:
• goods exported, or the goods specified in the Fifth Schedule;
• supply of stores and provisions for consumption aboard a conveyance
proceeding to a destination outside Pakistan
• such other goods, as the Federal Government may specify by
notification in the official Gazette, whenever circumstances exist to
take immediate action for the purposes of national security, natural
disaster, national food security in emergency situations and
implementation of bilateral and multilateral agreements
Time and manner of payment (section 6)
• Imported goods – tax paid by imported - in the same manner and at
the same time as if it were a duty of customs payable
• Taxable supplies – tax paid by registered person supplying the goods.

• The tax due on taxable supplies shall be paid by any of the following
modes, namely:-
• (i) through deposit in a bank designated by the Board; and
• (ii) through such other mode and manner as may be specified by the
Board
Determination of tax liability (section 7)
• for the purpose of determining his tax liability in respect of taxable
supplies made during a tax period, a registered person shall be entitled to
deduct input tax from the output tax (excluding the amount of further
tax) that is due from him in respect of that tax period (tax period=one
month).
• where a registered person did not deduct input tax within the relevant
period, he may claim such tax in the return for any of the six succeeding
tax periods.
• Provided, as may be relevant for the case, he should hold valid tax
invoice, electricity / gas bill in case of such supply, bill of entry / goods
declaration for imports, treasury challan for goods purchased in auction
Tax credit not allowed for the following
(section 8)
• goods [or services] used or to be used for any purpose other for taxable
supplies made or to be made by him;
• any other goods or services which the [Federal Government] may, by a
notification in the official Gazette, specify
• the goods or services in respect of which sales tax has not been
deposited in the Government treasury by the respective supplier;
• Fake invoices
• purchases made by such registered person, in case he fails to furnish
the information required by the Board through a notification under
section 26
Tax credit not allowed for the following
(section 8)
• goods and services not related to the taxable supplies made by the
registered person
• goods and services acquired for personal or non-business
consumption;
• vehicles falling in Chapter 87 of the First Schedule to the Customs Act,
1969 (IV of 1969), parts of such vehicles, electrical and gas appliances,
furniture furnishings, office equipment (excluding electronic cash
registers), but excluding such goods acquired for sale or re-sale
• services in respect of which input tax adjustment is barred under the
respective provincial sales tax law;
Tax credit not allowed for the following
(section 8)
• from the date to be notified by the Board, such goods and services which, at the
time of filing of return by the buyer, have not been declared by the supplier in
his return or he has not paid amount of tax due as indicated in his return
• the input goods 8 [or services] attributable to supplies made to un-registered
person, on pro-rata basis, for which sale invoices do not bear the NIC number or
NTN as the case may be, of the recipient
• If a registered person deals in taxable and non-taxable supplies, he can reclaim
only such proportion of the input tax as is attributable to taxable supplies in such
manner as may be specified by the Board
• No person other than a registered person shall make any deduction or reclaim
input tax in respect of taxable supplies made or to be made by him
Refund of input tax (section 10)
• If the input tax paid during a tax period exceeds the output tax on account of
zero rated local supplies or export made during that tax period, the excess
amount of input tax shall be refunded to the registered person not later than
forty-five days of filing of refund claim
• If a registered person is liable to pay any tax, default surcharge or penalty
payable under any law administered by the Board, the refund of input tax shall
be made after adjustment of unpaid outstanding amount of tax or, as the case
may, default surcharge and penalty
• Provided that in case of excess input tax against supplies other than zero-rated or
exports, such excess input tax may be carried forward to the next tax period,
along with the input tax as is not adjustable, and shall be treated as input tax for
that period.
Returns (section 26)
• Every registered person shall furnish not later than the due date a
true [complete] and correct return in the prescribed form to a
designated bank [or any other office] specified by the Board,
indicating the purchases and the supplies made during a tax period,
the tax due and paid and such other information, as may be
prescribed
• Provided also that the return filed electronically on the web or any
magnetic media or any other computer readable media as may be
specified by the Board shall also be deemed to be a return.