Income Tax Bar Association Karachi
WORKSHOP ON SALES TAX
Pearl Continental Hotel, Karachi
21 – 22 July 2005
CONTENTS
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
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Core Concepts
Registration
Determination of tax
Book keeping, records and returns
Penalties and additional tax
Audit
Adjudication appeals and ADRC
Provincial sales tax on services
Rules
Case study
Questions & answers session
Income Tax Bar
Association
Karachi
CORE CONCEPTS
By
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
SYED MOHAMMAD SHABBAR ZAIDI
Partner
A. F. Ferguson & Co.
CORE CONCEPTS
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
 Scope of tax
 Liability of sales tax
 Taxable activity
 Registered person
 Taxable supplies
 Zero rating
 Exemption
 Taxable goods
 Goods
 Supply
 Time of supply
 Value of supply
 Tax fraud
 Tax period
CORE CONCEPTS
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Scope of tax
Income Tax Bar
Association
Karachi
REGISTRATION
By
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
ASIF ALI KHAN
Senior Manager
Taseer Hadi Khalid & Co.
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
 Registration
 Compulsory Registration
 De-registration
 Black listing and suspension of




registration
Change in registration particulars
Transfer of registration
Revision of registration certificate
Penalties
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Registration

Registered person
A person who is registered or is liable to be
registered under the Sales Tax Act 1990

Requirement of registration
Basic conditions
– Person should be engaged in making
taxable supplies in Pakistan (including
zero rating supplies)
– Taxable supplies should be in the course
or furtherance of any taxable activity
carried on
– Person should not already be registered
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Registration
Persons required to be registered
 Manufacturer having annual turnover from
taxable supplies, in any tax period during last
twelve months, exceeding Rs. 5,000,000
 Retailer having value of supplies exceeding
Rs. 5,000,000 in any period during the last
twelve months
 Importer
 Wholesaler (including Dealer)
 Distributor
 Person required to be registered for any
duty or tax collected or paid under sales tax
mode, under any Federal or Provincial law
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Registration
Persons required to be registered – cont’d
 Manufacturer
General criteria:
– A person who engages, whether
exclusively or not, in the production or
manufacture of goods, irrespective that
the raw material of which the goods are
produced or manufactured are owned by
him
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Registration
Persons required to be registered – cont’d
 Manufacturer - cont’d
Specific inclusion:
– A person who by any process or
operation:
 Assembles;
 Mixes;
 Cuts;
 Dilutes;
 Bottles;
 Packages;
 Repackages; or
prepare goods by any other manner
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Registration
Persons required to be registered – cont’d
 Manufacturer - cont’d
Specific inclusion:
– Any person who disposes of his assets in
any fiduciary capacity including:
 An assignee or trustee in bankruptcy
 Liquidator
 Executor
 Curator
 Manufacturer
 Producer
 Any other person
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Registration
Persons required to be registered – cont’d
 Manufacturer - cont’d
Specific inclusion:
– Any person, firm or company which owns,
holds, claims or uses any patents,
proprietary or other rights 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 such goods
Pearl Continental
21-22 July 2005
Exceptional case of manufacturer-cumexporter for refunds
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Registration
Persons required to be registered – cont’d
 Retailer
– A person supplying goods to general
public for the purpose of consumption
 Importer
– A person who lawfully imports goods in
Pakistan
 Wholesaler (including Dealer)
Any person who
– who carries on the business of buying and
selling goods by wholesale or of supplying
or distributing goods, directly or indirectly,
by wholesale for cash / deferred payment
or for commission or other valuable
consideration
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Registration
Persons required to be registered – cont’d
 Wholesaler (including Dealer) – cont’d
Any person who
– stores such goods belonging to others as
an agent for the purpose of sale
– supplying taxable goods to a person
whose income is not liable to tax under the
Income Tax Ordinance, 2001but has
deducted tax under section 153 of the
Ordinance
– in addition to making retail supplies is
engaged in wholesale business
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Registration
Persons required to be registered – cont’d
 Distributor
– A person appointed for a specified area by:
 manufacturer;
 importer; or
 any other person
to purchase goods from him for further
supply
– A person who in addition to being a
distributor is also engaged in supply of
goods as a wholesaler or a retailer
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Registration
Persons required to be registered – cont’d
 Under Federal Excise Act 2005
FED is collectible under sales tax mode on:
– advertisements on closed-circuit TV and
cable TV network
– facilities for inland travel by air or railway
– carriage of goods by air
– shipping agents authorised to transact
business on behalf of others
– telecommunication services in respect of
telephone, telegraph, telex and alike
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Registration
Persons required to be registered – cont’d
 Under Federal Excise Act 2005 – cont’d
– Person providing services liable to FED
are now required to be registered under
FED Act only. Earlier, such persons were
required to be registered under Sales Tax
Act
– Person already registered under Sales Tax
Act for provision of excisable services in
Sales Tax mode are not required to be
registered under FED Act
– Persons registered under Sales Tax Act,
which now provides services liable to FED
are also not required to be registered
under FED Act
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Registration
Persons required to be registered – cont’d
 Under Provincial Ordinance
– Person providing services of:
 advertisements on TV / Radio
 Courier
 Hotels / Clubs
– Person providing services as
 Custom agents
 Ship chandlers
 Stevedores
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Registration Procedure
Required
Person
If not
Complete
Registration
application (FORM
ST-1) & Stock
Declaration
(Annexure)
Central
Registration
Office
Local
Registration
Office
Pearl Continental
21-22 July 2005
Issuance of
Registration
Certificate
(Annexure B)
Completion of
verification
If Complete
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Registration Procedure – cont’d
Jurisdiction

Company
Area of registered office

Other person
Area of business activity

Other person having single manufacturing
unit, where business premises and unit
are in different areas
Area of manufacturing unit
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Registration Procedure – cont’d
Modes for filing of registration application
 If before LRO
– Through Registered AD mail
– Through Courier
 If directly before CRO
– Through Email at
staxregistration@cbr.gov.pk
– Forms should be signed & scanned
Timings for registration
 Once liable, should be registered before
making taxable supplies
 CRO to register within 7 days of filing of
application or reject within 15 days of filing
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Compulsory Registration
Conditions
 Liable person fails to apply for registration
 Inquiry by LRO / other office, authorized by
CBR, proves that the person is required to be
registered
Procedure
 Inquiry for requirement of registration
 Submission of written report to LRO
 issuance of notice by LRO and opportunity of
personal hearing if notice is replied by the
person contesting his liability to be registered
 Decision by the LRO & if registration required
transmission of the case to CRO
 if no reply to notice, LRO forwards cases to
CRO for compulsory registration
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Compulsory Registration – cont’d
Obligations
 Compulsorily registered person to comply
with all the provisions of the Act
 Failure may lead to access / examination of
record, documents etc. as provided in section
25 and consequently assessment of sales tax
payable under section 11 of the Act
Wrong compulsory registration
 Due to inadvertance, error or misconstruction
 Recommendation for de-registration by LRO
 Cancellation of registration by CRO
 Person shall not be liable to pay any tax,
default surcharge or penalty, subject to
section 3B
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
De-registration

Conditions
– discontinuance of business
– supplies becomes exempt from tax
– taxable turnover during last 12 months
falls below the threshold limits
– failure to file return for 6 consecutive
months
– tax obligations not to be affected
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
De-registration – cont’d
 Procedure – if application filed
– Application to LRO on ST-3 form
– Completion of audit or inquiry and
directions for discharge of liability
through final return by LRO
– LRO specifies the date of de-registration
not later than 3 months of the application
or dues clearance, whichever is earlier
– Cancellation of registration by CRO on
recommendation of LRO
 Procedure – failure to file returns
– LRO issues written notice and grants
opportunity of hearing
– LRO recommends CRO if no liability is
outstanding
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Black-listing & Suspension of Registration
Conditions
 Issuance of fake invoices
 Evasion of Tax
 Tax fraud
 Only Collector is empowered to take action
Procedure
 Confirmation of facts by the Collector
 Opportunity to clarify position
 Order in writing to blacklist or suspend registration
to affected person, CRO and STARR
 90 days time for completion of inquiry if records
produced
 90 days time for show cause on completion of
inquiry
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Change in Registration particulars
Conditions
 Change in name or address
 Change in other particulars
 Verification for change of business category
Procedure
 Notification of change on From ST-2 to
LRO/CRO within 14 days of such change
 Submission of Form ST-1 additionally for
change in address
 Submission of From ST-3 addtionally for
change in ownership
 Issuance of revised registration certificate by
CRO
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Transfer of registration
Conditions
 Discretionary powers of CRO
 Shifting of business activity
 Any other valid reason given by the registered
person
Procedure
 Issuance of intimation letter by CRO at own
motion or on application by the person
 Intimation letter to be issued to registered
person and the concerned Collectorates
 Transfer of records and responsibilities
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Revision of registration certificate
Conditions
 Conversion of multiple registration into single
registration
Procedure
 Application on ST-1 for single registration to
CRO
 Ascertainment of of tax liabilities by CRO from
concerned Collectorates / LTU / RTO
 Issuance of revised registration certificate by
CRO and merger of previous registration
number
REGISTRATION
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Penalties



Pearl Continental
21-22 July 2005
Failure to make an application for
registration
Rs.10,000 or 5% of the tax involved
whichever is higher
If not applied within 60 days of the start of
business activity
Imprisonment for a term which may extend to
3 years or with fine which may extend to
equivalent to amount of tax involved, or both.
Failure to notify changes in particulars of
registration
Rs.5,000
Income Tax Bar
Association
Karachi
DETERMINATION OF TAX
LIABILITY
By
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
RASHID MALIK
DETERMINATION OF TAX LIABILITY
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
 How is the tax liability determined
 Meaning of output tax
 Meaning of input tax
 Input tax not available
 Cash transactions
 Tax paid on stock before registration
 Debit notes and credit notes
 Refund of sales tax
DETERMINATION OF TAX LIABILITY
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
How is the tax liability determined
Income Tax Bar
Association
Karachi
BOOK KEEPING,
RECORDS AND RETURNS
By
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
MEHMOOD A. RAZZAK
Partner
Mehmood Idress Masood & Co.
BOOK KEEPING, RECORDS & RETURNS
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
 Records of supplies and purchases
 Retention of records
 Tax invoice
 Returns and types of returns
 Returns on certain occasions
 Tax period
 Due date
BOOK KEEPING, RECORDS & RETURNS
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Records of supplies and purchases
Income Tax Bar
Association
Karachi
PENALTIES &
ADDITIONAL TAX
By
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
MOHAMMAD ALI
Consultant
Qaiser Mufti Associates
PENALTIES & ADDITIONAL TAX
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005

Penalties

Additional tax
PENALTIES & ADDITIONAL TAX
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Penalties






Pearl Continental
21-22 July 2005
Non furnishing a return within the due date
Non issuance an invoice when required
Un-authorized issuance an invoice in which
an amount of tax is specified
Failure to notify material nature changes in
the particulars of registration
Failure to deposit the amount of tax due or
any part thereof in the time or manner laid
down under the Act
Repetition of erroneous calculation in the
return during a year whereby amount of tax
less than the actual tax due is paid
PENALTIES & ADDITIONAL TAX
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Penalties







Pearl Continental
21-22 July 2005
Failure to make application for registration
Failure to maintain records as required
Non compliance with the provisions of section
25
Failure to furnish the information required
under sub-section (5) of section 26
Whosoever commits, causes to commit or
attempts to commit the tax fraud
Violation of embargo placed on removal of
goods
Obstruction of the authorized officer in the
performance of his official duties
PENALTIES & ADDITIONAL TAX
Income Tax Bar
Association
Karachi
Penalties



Workshop
on Sales Tax

Pearl Continental
21-22 July 2005
Non compliance of section 73 of the Act
Failure to fulfill any of the conditions,
limitations or restrictions prescribed
Contravention of the provisions of this Act for
which no penalty has, specifically, been
provided
Where any officer of Sales Tax authorized to
act under this Act, acts or omits or attempts to
act or omit in a manner causing loss to the
sales tax revenue or otherwise abets or
connives in any such act
PENALTIES & ADDITIONAL TAX
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Additional Tax

If a registered person does not pay the tax
due or any part thereof, whether wilfully or
otherwise, in time or in the manner specified
under this Act, rules or notifications issued
thereunder or claims a tax credit, refund or
makes an adjustment which is not admissible
to him, or incorrectly applies the rate of zero
per cent to supplies made by him, he shall, in
addition to the tax due, pay default surcharge.
PENALTIES & ADDITIONAL TAX
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Additional Tax

For the first six months of default = @ 1.5%
per month of the amount of tax due or the
amount of refund erroneously made

From 7th months onwards = @ 1.5% per
month of the amount of tax due or the amount
of refund erroneously made

In case default is on account of tax fraud= @
2% per month of the amount of tax evaded or
the amount of refund fraudulently claimed, till
such time the entire liability including the
amount of default discharge is paid
Income Tax Bar
Association
Karachi
AUDIT, RULES & SPECIAL
PROCEDURES
By
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
ADNAN AHMAD MUFTI
Partner
Shekha & Mufti, Chartered Accountants
AUDIT, RULES & SPECIAL PROCEDURES
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
 Audit Suspended todate except by DRRA
 Modes of Audit of Sales Tax Records
 Routine Audit
 Investigative Audit
 Audit by Special Auditors
 Sales Tax Rules 2005
 Blacklisting & Suspension of Registration
 Credit and Debit Note
 Apportionment of Input Tax
 Sales Tax Special Procedures Rules 2005
 Minimum value addition by importers
 Minimum value addition by retailers
 Sales Tax on Electric Power & Gas
 Issuance of Tax Invoices against Advance
Payment Receipt
AUDIT, RULES & SPECIAL PROCEDURES
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
MODES OF AUDIT
AUDIT, RULES & SPECIAL PROCEDURES
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Routine Audit

At any time, but once a year, a registered person may
be asked to produce both manual or computerised
record lying in his possession or possession of his agent

Audit Observation to be replied in Fifteen (15) Days

Audit report, carrying quantification of charges or taxes,
issued

100% Penalty waived if unpaid principal tax alongwith
default surcharge is paid before receipt of notice of audit

75% penalty waived if unpaid principal tax alongwith
default surcharge is paid at any time before issuance of
show cause notice
AUDIT, RULES & SPECIAL PROCEDURES
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Routine Audit
Monitoring, Control and Procedure

Audits selected through Computer Programming

Collector / Additional Collector may also select audits
manually based on CBR’s directives

A particular audit team cannot audit the same registered
person more than once in 2 years

Audit Notice to be given to taxpayer 15 days before the
scheduled date of audit

Audit to be completed within 3 to 4 days unless
extended by Assistant Collector in writing
AUDIT, RULES & SPECIAL PROCEDURES
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Routine Audit
Monitoring, Control and Procedure

Audit reports prepared by auditors to be approved by
Deputy / Assistant Collector and finally by Additional
Collector within 14 days of commencement of audit

Audit report to be sent to taxpayer within 4 weeks

All correspondence, notices and orders sent to the
registered persons to bear the seal and signature with
contact details of the officer issuing it.

Auditors bound to affix their signatures and official seal on
records checked during audits

Audit Completion Certificate as per STGO
AUDIT, RULES & SPECIAL PROCEDURES
Income Tax Bar
Association
Karachi
Investigative Audit






goods and stocks
records, data, documents and correspondence
accounts and statements
utility bills and bank statements
information regarding nature and sources of funds or
assets with which the business is financed
 any other records or documents
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
The Collector or the authorized officer by CBR can inspect:

The aforesaid data can also be taken into custody by the
relevant officer

All government departments, local bodies, autonomous
bodies, corporations bound to supply requisite assistance
to such officer in connection with the investigation
AUDIT, RULES & SPECIAL PROCEDURES
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Audit by Special Auditors

Audit by Chartered Accountants of Cost & Management
Accountants

Audit to be conducted as per Terms of Reference

Special Auditor may conduct audit of records already
examined by Department

Audit of Retailer could involve surveillance, video filming

Retailer can opt for Special Audit
AUDIT, RULES & SPECIAL PROCEDURES
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Sales Tax Rules
2005
AUDIT, RULES & SPECIAL PROCEDURES
Income Tax Bar
Association
Karachi
Blacklisting & Suspension of Registration
 Collector may blacklist registration of registration
person if he has evidence that the supplier has
issued false invoices, or evaded tax or has
committed tax fraud
Workshop
on Sales Tax
 This troubles both the supplier and the buyer
 CBR Web Site carries names of blacklisted
persons and respective Collectorate
 What to be done to avoid hassle ?
Pearl Continental
21-22 July 2005
AUDIT, RULES & SPECIAL PROCEDURES
Income Tax Bar
Association
Karachi
Credit and Debit Note and Destruction of
Goods Rules
 Eventualities prescribed in Section 9 to be catered
through these rules
Workshop
on Sales Tax
 Time limit allowed is 180 days. Can be extended
for another 180 days
 No need to issue credit note if the buyer is an
unregistered person
 Goods unfit for consumption need to be destroyed
Pearl Continental
21-22 July 2005
 The time limit of 180 days not applicable where
supplier has paid entire tax on advances
AUDIT, RULES & SPECIAL PROCEDURES
Income Tax Bar
Association
Karachi
Apportionment of Input Tax
 Why apportionment ?
 What is “Residual Input” ?
Workshop
on Sales Tax
 The concept of “Provisional Adjustment” !
 Final adjustment to be made at the end of each
financial year
Pearl Continental
21-22 July 2005
AUDIT, RULES & SPECIAL PROCEDURES
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Sales Tax Special
Procedure Rules
2005
AUDIT, RULES & SPECIAL PROCEDURES
Income Tax Bar
Association
Karachi
Payment of Sales Tax by Commercial
Importers on Value Addition
 Registration status no more a relief !
 Applicable @ 10% to registered persons who
Workshop
on Sales Tax
import goods for subsequent supply to other
person
 Import for self use outside the ambit of tax under
the special procedure
 Deemed Supply at the Time of Import
Pearl Continental
21-22 July 2005
 If importer had sold his products at a higher value
addition in any tax period during last year, he shall
pay tax at such high rate
AUDIT, RULES & SPECIAL PROCEDURES
Income Tax Bar
Association
Karachi
Payment of Retail Tax on Value Addition
 Minimum value addition @ 10%
 Incidence of tax shifted to purchase instead of
sales
Workshop
on Sales Tax
 Certain Retail Sectors given benefit of low
percentage of value addition
 Audit once a year
 Retailer declaring 6% increase in his purchases
from that of last year exempted from audit
Pearl Continental
21-22 July 2005
AUDIT, RULES & SPECIAL PROCEDURES
Income Tax Bar
Association
Karachi
Payment of Sales Tax on Electric Power &
Natural Gas
 In case of registered consumers, the utility bill
issued by distribution company shall be treated as
a tax invoice
Workshop
on Sales Tax
 Registered consumers entitled to claim input tax
against aforesaid invoices in the tax period in
which the bill is paid provided the bill contains
registration number and address of the business
premises declared to the Collector of such
consumer
Pearl Continental
21-22 July 2005
AUDIT, RULES & SPECIAL PROCEDURES
Income Tax Bar
Association
Karachi
Issuance of Tax Invoices against Advance
Payment Receipt
 “Advance Payment Receipt” means the receipt
issued by the registered person at the time of
receipt of advance
Workshop
on Sales Tax
 No tax payable at the time of issuance of tax
invoice
 Input Tax admissible on the basis of Receipt
 Prescribed Format of Receipt not in agreement
Pearl Continental
21-22 July 2005
with section 2(44), Rule 110 and STGO
Income Tax Bar
Association
Karachi
AJUDICATION, APPEALS
& ADRC
By
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
NAVEEM MERCHANT
ADJUDICATION, APPEALS & ADRC
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
 Adjudication
 Appeals
 Alternate Dispute Resolution
ADJUDICATION, APPEALS & ADRC
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Adjudication
Income Tax Bar
Association
Karachi
PROVINCIAL SALES TAX
ON SERVICES
By
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
MAJID KHANDWALA
Partner
Ford Rhodes Sidat Hyder & Co.
PROVINCIAL SALES TAX ON SERVICES
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
 Services tax under the Ordinance
 Excisable services taxed under the Act
 Issues relating to services tax
PROVINCIAL SALES TAX ON SERVICES
Income Tax Bar
Association
Karachi
Services tax under the Ordinance
Enforced through
 Provincial Sales Tax Ordinances,2000
with effect from July 1, 2000
Workshop
on Sales Tax
 Islamabad Capital Territory (Tax On Services)
Ordinance, 2001
with effect from August 18, 2001
 All the provisions of the Sales Tax Act, 1990
made applicable
 Sales tax rate 15%
Pearl Continental
21-22 July 2005
PROVINCIAL SALES TAX ON SERVICES
Income Tax Bar
Association
Karachi
Services covered with effect from July 1, 2005




Workshop
on Sales Tax
Pearl Continental
21-22 July 2005




Hotels
Clubs
Caterers
Advertisement on TV and Radio excluding
– those sponsored by Government agency for
Health and Education
– those sponsored by Population Welfare
Division re Sathi educational promotion
campaign funded by USAID and
– those public service messages telecast on TV
by WWF and UNICEF
Customs agents
Ship Chandlers
Stevedores
Courier Services
PROVINCIAL SALES TAX ON SERVICES
Income Tax Bar
Association
Karachi
Service withdrawn with effect from July 1, 2005


Workshop
on Sales Tax
Pearl Continental
21-22 July 2005

Marriage Halls and lawns
Beauty Parlours, Beauty Clinics and Slimming
Clinics
Laundries and Drycleaners
FEDERAL EXCISE DUTY IN SALES TAX MODE
Income Tax Bar
Association
Karachi
Other services subject to Federal Excise Duty under Federal
Excise Act, 2005 to be levied and collected as if it were a Sales
Tax under the Sales Tax Act, 1990
SRO 648(1)/2005 dated July 1, 2005 specifies the following services –
Workshop
on Sales Tax








Pearl Continental
21-22 July 2005
Advertisement on closed circuit TV
Advertisement on cable TV network
Inland Travel by air
Travel by train in air-conditioned Sleeper and Parlour Class and First
Class Sleeper (12.5%)
Inland Carriage of good by air
Shipping Agents
Telecommunication Services (new additions)
– Payphone cards and prepaid calling cards
– Wireless Local Loop
Exempt telecommunication services
– Billings by internet service providers
– International leased line charges payable by registered software
exporting firms and licensed data and internet service providers
– Pager service
PROVINCIAL SALES TAX ON SERVICES
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
The Sales Tax Special Procedures Rules, 2005

Chapter IX - Special Procedure for Persons
Providing or Rendering Taxable Services

Contains General Provisions

Contains Specific Provisions as follows -

Part One – Custom House Agents and Ship
Chandlers

Part Two – Courier Services

Part Three – Advertisements on Television and
Radio
PROVINCIAL SALES TAX ON SERVICES
Income Tax Bar
Association
Karachi
General Provisions –Significant aspects



Workshop
on Sales Tax



Pearl Continental
21-22 July 2005



In the case of Hotels, Stevedores and Courier services – gross
amount charged is subject to tax.
In the case of Clubs, taxable service does not include
consideration received for membership fees, refundable
deposits or security.
Tax point in case of services provided over a period of time is
upon completion of service or receipt of money, whichever is
earlier.
Where an extended credit facility is provided, invoices may be
raised at the end of each month.
Input tax on purchases and imports and utilities like gas,
electricity and telephone (excluding mobile telephone?) may be
adjusted.
Input adjustment is permissible on paid (and not on payable)
basis.
Apportionment Rules apply
Provisions of Section 59 apply in case of new registrants.
A single registration may be obtained in the jurisdiction of the
Sales Tax Collectorate where he is assessed for income tax
purposes.
PROVINCIAL SALES TAX ON SERVICES
Income Tax Bar
Association
Karachi
Special Provisions – Part One
Customs Agents


Workshop
on Sales Tax
Taxable service does not include consideration received on
account of transportation charges, demurrage, wharfage, duties
and taxes, toll taxes, municipal charges, port charges, handling
charges, packing charges, labour payment and other
reimbursable expenses.
Minimum benchmark level for value of taxable service per
document is as follows -
S. No.
Document
Minimum value (Rs.)
Pearl Continental
21-22 July 2005
01
GD or Goods Declaration for home consumption or intobond filed
2000
02
Ex-bond GD or Goods Declaration filed
1,000
03
Pakistan Goods declaration for export filed
1,000
04
Rebate claims filed
0.25% of the amount
of rebate claim
05
GD or Goods Declaration filed at airport (AFU) including
baggage declaration.
500
06
Transit or transshipment permit
500
PROVINCIAL SALES TAX ON SERVICES
Income Tax Bar
Association
Karachi



Workshop
on Sales Tax
Ship Chandlers



Pearl Continental
21-22 July 2005
Audit once a year if tax deposited less than minimum benchmark
level per document
No routine audit if tax deposited in accordance with minimum
benchmark level per document
Audit once in three years if tax deposited twice or more than the
minimum benchmark level per document
Means a licensed person under the Customs Ship Chandlers
(Licensing) Rules, 1980
Who transacts business relating to supply of provisions and
stores on any conveyance proceeding to any foreign port,
airport or station
Taxable service does not include consideration received on
other accounts such as transportation charges, toll taxes,
municipal charges, port charges, handling charges, packing
charges, labour charges
PROVINCIAL SALES TAX ON SERVICES
Income Tax Bar
Association
Karachi
Special Provisions – Part Two
Courier Services



Workshop
on Sales Tax
Taxable Services is any service provided by a courier company
in relation to delivery of documents, goods or articles
No sales tax on office mail where the consignee and consignor
are the same person
Refund may be claimed in respect of courier services related to
export of goods where a goods declaration has been filed,
treating such services as zero rated ?
Special Provisions – Part Three
Advertisements on Television and Radio


Pearl Continental
21-22 July 2005
Input tax on advertisements routed through advertising agency
permissible
Invoice format specified to allow insertion of name of
advertising agency as well as the advertiser.
PROVINCIAL SALES TAX ON SERVICES
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Errors and Anomalies
Income Tax Bar
Association
Karachi
CASE STUDY
By
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
MUHAMMAD HANIF SHEIKH
CASE STUDY
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
 Sales tax on scrap and fixed assets
 Sales tax on advances
 Discounts
 Liability of sales tax
 Insurance
CASE STUDY
Income Tax Bar
Association
Karachi
Workshop
on Sales Tax
Pearl Continental
21-22 July 2005
Sales tax on scrap and fixed assets