Sales Tax Rules in Pakistan

SALES TAX BASICS

SALES TAX BASICS

Before Registration and Filing of your Sales Tax Return, it is recommended that one should establish basic understanding regarding these processes. Knowledge of basic concepts would not only ensure that the tasks are performed easily but also in the prescribed manner.

Sales Tax is a tax levied by the Federal Government under the Sales Tax Act, 1990, on sale and supply of goods and on the goods imported into Pakistan. Sales Tax on services is levied by the Federal Government under The Islamabad Capital Territory (Tax on Services) Ordinance, 2001.

INPUT TAX

Input tax is the tax paid by registered person on the taxable goods and services purchased or acquired by him. This also includes the sales tax paid on imports.

OUTPUT TAX

It is the sales tax charged and levied on the sale or supply of goods or services on which sales tax is leviable.

SCOPE OF SALES TAX

GOODS

Sales tax applies to the following:

All goods are taxable except those that have been exempted under section 13 as mentioned under 6th Schedule of the Sales Tax Act, 1990. For sales tax purposes goods include every kind of movable property other than actionable claims, money, stocks, shares and securities.

IMPORTS INTO PAKISTAN

All goods imported into Pakistan are liable to sales tax at the time of import, except goods specifically exempted under section 13 as mentioned in Sixth Schedule to the Act.

EXEMPT GOODS

Under section 13 of The Sales Tax Act 1990, the Sixth Schedule of the Sales Tax Act, 1990 specifically and explicitly mentions those goods on which exemption of sales tax is available. Other exemptions are available through various notifications (SROs) issued by the Government under section 13.Sales Tax guide would help answer a lot of basic questions and avoid unnecessary mistakes or errors that normally a person is prone to making during registration and filing of their Sales Tax Return.

SALES TAX DUE DATES

Taxpayers belonging to their respective categories have to file Sales Tax returns in monthly, quarterly or annual return format.

MONTHLY RETURN

Under the standard procedure a registered person is required to file monthly return Annexure C on 10th and Payment on 15th and e-file return by the 18th day of the month following the period in which the supplies were made, in the designated Branches of National Bank of Pakistan. In case of certain categories as mentioned below Procedure has been devised to file return on monthly and quarterly basis.

QUARTERLY RETURN

The taxpayers falling exclusively in the category of CNG required to file the return on quarterly basis.

ANNUAL RETURN

A manufacturer is to file annual Sales Tax return, for a financial year by the 30th September of the following financial year.

APPEAL TO COMMISSIONER APPEALS

An appeal can be filed with the Collector (appeals) against the order-in-original passed by the Additional Collector, Deputy Collector, Assistant Collector and Superintendent.

LIMITATION OF APPEAL

An appeal before the Collector (appeals), has to be filed within thirty days of the receipt of decision or order passed by the Additional Collector, Deputy Collector, Assistant Collector or Superintendent.

CONDONATION OF DELAY

An appeal preferred after the expiry of thirty days may be admitted by the Collector (appeals). If he is satisfied that the appellant has sufficient cause for not preferring the appeal within the specified period.

SETTLEMENT OF APPEAL

The Collector of Sales Tax (appeals) may, after giving both parties to the appeal an opportunity of being heard, pass such order as deemed fit, confirming, varying, altering, setting aside or annulling the decision or order appealed against.

APPEAL TO THE APPELLATE TRIBUNAL

An appeal can be filed against the order of the Collector (appeals) before the Appellate Tribunal.

LIMITATION AND COMPUTATION OF TIME

The limitation for preferring an appeal against any order or decision of an officer of Sales Tax under the Act is 60 days from the date of receipt of such order or decision. The day on which the order is passed and the period up to issue and receipt of the order is to be excluded in computing the period of limitation of 60 days.

CONDONATION OF DELAY

The Appellate Tribunal has been empowered to condone the delay in filing the appeal, if it is satisfied that the appellant had sufficient cause for not filing the appeal within time.

REFERENCE TO HIGH COURT

PERSONS LEGIBLE TO FILE REFERENCE TO THE HIGH COURT

The person aggrieved by the order of Appellate Tribunal may prefer an application to the High Court.

LIMITATION OF TIME

The reference has to be filed within ninety days of the communication of the order of the Appellate Tribunal.

ISSUES ON WHICH REFERENCE CAN BE FILED

Reference to the High Court can be filed if a question of law arises out of the Appellate Tribunal’s order, against which application is being preferred.

SALES TAX RATES

1	6%
2	17%
3	0%
Slabs	Sales Tax rates

Three different rates in the slabs have been maintained unless they happen to be exempt from sales tax under the sixth schedule to the Sales Tax Act, 1990.

Sales tax on services is 16% alongwith reduced rate implemented through S.R.O 495 (I)/2016 in Islamabad Capital territory.

INCOME TAX DUE DATES

Person	Due dates
Individual & Association of Person (AOP)	On or before 30th September
Company	On or before 31st December
Company having a special tax year	On or before 30th September

INCOME TAX REFUND

Refund can be only claimed if the person has filed their Income Tax Return electronically. A manual Return does not entitle you to a refund.

The refund amount should be clearly reflected in your Income Tax Return in Iris.

Refund resulting from the Income Tax Return can be claimed by filing a separate application in Iris. To check the status of your application, please visit your relevant Regional Tax Office (RTO).

The refund can also be claimed later on after submitting your Income Tax Return, but within two years from the date of filling of return (date of assessment) or from the date on which the tax was paid, whichever is later.

INCOME TAX appeal

RIGHT OF APPEAL

Most appeals arise on account of disagreement between the taxpayer and the tax collectors (Inland Revenue department) regarding the quantification of the taxable income and tax liability thereon as well as levy of default surcharge, penalties, etc.

To resolve such disagreements, law lays down the procedure, which gives the taxpayer right of appeal before the Commissioner (appeals) and if still not satisfied, a further right of appeal before the Appellate Tribunal and Higher Courts of the country.

PERSONS ELIGIBLE TO APPEAL

Any person dissatisfied with any order passed by a Commissioner/Officer Inland Revenue has the right of appeal.

In case of an Individual, the Individual himself; in case of an Association of Person (AOP), any partner or member of the association; and in case of a Company the principal officer.

In case of a deceased individual, the legal representatives of the deceased; and in case of an individual under legal disability or a non-resident person, his/her/it’s “representative”.

REQUIREMENTS FOR MAKING AN APPEAL

In order to make an appeal person has to submit the tax due along with the return of income, on the basis of income declared.

TIME LIMIT FOR MAKING AN APPEAL

Time limit for filing an appeal before the Commissioner (appeals) is thirty (30) days from the date of receipt of notice of demand relating to an assessment, penalty or any other order.

Sales Tax Rates

1	6%
2	17%
3	0%
Slabs	Sales Tax rates

Three different rates in the slabs have been maintained unless they happen to be exempt from sales tax under the sixth schedule to the Sales Tax Act, 1990.Sales tax on services is 16% along with reduced rate implemented through S.R.O 495 (I)/2016 in Islamabad Capital territory.