Sales Tax is a form of tax paid to a governing body for the sale of goods and services. Sales tax is an indirect tax and is generally charged at the point of purchase or exchange of certain taxable goods, charged as a percentage of the value of the product.
The sales tax depends on the government in power and the individual policies enforced by it, generally being simple to calculate and collect. In simple terms, the sales tax is an additional amount of money paid while purchasing goods or services.
ZA LLP provides you with a faculty that specialises in the ambit of taxation. Tax laws are similar to a living entity, always changing and growing and hence, it may become difficult to keep up with them, therefore, our experts are here to help you understand and abide by them. Nearly all business transactions generate taxes which become part of the revenue of the state. Sales taxes are one major type of taxes that generate the revenue for the state exchequer. Businesses that deal with supplying or importing goods or providing services are liable to pay sales taxes. ZA LLP can help register as taxpayers, settle disputes between taxpayers and taxation authorities regarding a multiplicity of matters such as assessment and charging of tax, assessing of offenses and their penalties, recovery of tax amount erroneously refunded, or any other breach or violation under The Sales Tax Act, 1990 and the rules thereunder.
UNDERSTANDING THE SALES TAX
A sales tax is a value added tax levied on sales. It is levied and paid only when the taxable supply is made in the course of a “taxable activity”. The value of the goods/supply is the one to be taxed. The nature of the sales tax is such that the burden of the tax is to be borne majorly by the consumer. This is because sales tax is an indirect tax. The registered supplier is just a means of collecting such tax and passing it on to the Government tax collecting authorities. The government has formed the Inland Revenue for the collection and assessment of taxes, subject to the Sales Tax Act 1990 and its subsequent amendments. Sales tax is bifurcated into two categories: sales tax on goods and sales tax on services. The legislation on sales tax on goods is done by the Federal Government and has been set to 17% since 2013. Certain items are taxed at reduced rates. The legislation for Sales Tax on SERVICES is the responsibility of the Provincial Governments and the following Acts were enacted by the relevant Provincial governments regarding sales tax on services:
- The Islamabad Capital Territory (Tax on Services) Ordinance, 2001.
- The Sindh Sales Tax on Services Act, 2011.
- The Punjab Sales Tax on Services Act, 2012.
- The Khyber Pakhtunkhwa Finance Act, 2013.
- The Balochistan Sales Tax on Services Act, 2015.
DISTINCTION BETWEEN INDIRECT AND DIRECT TAXES
Direct taxes are the kind of taxes whose burden is borne by the person on whom the tax is levied while indirect taxes are the kind of taxes the burden of which is always born by the end consumers and not the seller/importer of the supply (the entities on whom the tax is levied). The distinction between the two is laid down and guarded by the statutes and any shift of burden from the purchaser to the manufacturer or vice versa is deemed to be unlawful and is guarded by the statutes.
LIABILITY TO PAY THE TAX
The liability to pay the sales tax in case of goods being supplied lies upon the consumer whereas the liability to pay the sales tax of imports lies upon the importer according to section 3 of the Sales Act 1990.
SALES TAX REGISTRATION
Any person who deals in making taxable supplies in the course of advancement of taxable activities must register themselves with the Commissioner Inland Revenue. Following categories of such person(s) are included:
- A manufacturer not running a cottage factory
- A retailer liable to pay tax under the Act
- An importer
- An exporter who keeps the intention of obtaining a tax refund against his zero-rated supplies
- A wholesaler
- A dealer or distributer
- Any person who under any Federal or Provincial law is required to be registered “for the purpose of any duty or tax collected or paid as if it were a levy of sales tax to be collected under the Act”.
SALES TAX DEREGISTRATION
The Board or any officer with authorization in this behalf may, subject to the rules, deregister or blacklist a person who need not be registered as a taxpayer or is believed to have committed fraudulent activities, provided fake invoices or is believed to be a fake entity that does not in actuality exist may be deregistered or blacklisted. Any requests for tax refunds or input tax credit shall not, in this case, be entertained.
RECORD KEEPING AND MAINTAINING OF BOOKS
A registered person making taxable supplies is liable to hold extensive records on the double entry system at the business premises or the registered office. These may be maintained by the person themselves or by an agent acting on his behalf. Records regarding the goods purchased and supplied by the person with details of the description, value and quantity of the goods, along with further requirements under the Act must be maintained in a manner through which the liability of the tax during a tax period can be easily determined.
SALES TAX RETURNS
A person on the end of the tax period must furnish a correct return in the correct form through a bank or office designated by the Board. This return shall include the details of the purchases and the supplies made, the tax due and paid and any other prescribed information prescribing to the tax period.
SALES TAX SLAB RATES IN DISTINCT CATEGORIES
RETAIL PRICE ITEMS
Third Schedule to the Sales Tax Act 1990, In which items are charged sales tax at retail price. It deals with retail priced goods, a retail price is the cost paid for a good at retail stores. It is a term applied to the price that final consumers pay at retail outlets to differentiate from intermediate prices paid upward in the supply chain. The rate of tax will be 17% on retail price. It contains the 49 retail price items. Few items given below:
TAX RATES FOR RETAIL PRICE ITEMS [ SEC. 3(2)(A), 3RD SCHEDULE ]
| Serial No | Taxable Income | PCT Heading |
| 01 | Fruit juices and vegetable juices | 20.09 |
| 02 | Ice Cream | [2105.0000] |
| 03 | Aerated waters or beverages | 22.01 and 20.02 |
| 04 | Syrups and squashes | Respective headings |
| 05 | Cigarettes | 2402.2000 |
| 06 | Toilet soap | 3401.1100 and 3401.2000 |
| 07 | Detergents | 3402.2000 |
| 08 | Shampoo | 3305.1000 |
| 09 | Toothpaste | 3306.1010 |
| 10 | Shaving cream | 3307.1000 |
Table: Tax Rates for Retail Price Items
ZERO RATED GOODS
It deals with zero tax rate goods. Zero rated goods and services are taxable. But the legislator decided to rate it at a “0” rate (for now). Whenever the government feels the need to generate revenue. They can tax zero rated goods and services. The goods covered by this classification are items, some of few items have mentioned below:
ZERO RATED GOODS [ SEC. 4, 5TH SCHEDULE ]
| Entry No | Description of Goods |
| 02 | Supply to diplomats, diplomatic missions, privileged persons and privileged organizations which are covered under various Acts, Orders, Rules, Regulations and Agreements passed by the Parliament or issued or agreed by the Government of Pakistan. |
| 03 | Supplies to duty free shops. |
| 05 | Supplies of raw materials [components and goods for further] manufacture of goods in the Export Processing Zones. |
| 06 | Supplies of such locally manufactured plant and machinery to petroleum and gas sector Exploration and Production companies, their contractors and sub-contractors as may be specified by the Federal Government, by notification in the official Gazette, subject to such conditions and restrictions as may be specified in such notification. |
| 10 | Petroleum Crude Oil. |
Table: Zero Rated Goods
AMENDMENTS IN ZERO RATED GOODS
| Entry No | Description of Goods |
| 13 | Supplies of raw materials, components and goods for further manufacture of goods in the Gwadar Free Zone and export thereof, provided that in case of supply to tariff area of Pakistan, tax shall be charged on the value assessed on the Goods Declaration for import. |
| 14 | Supplies of locally manufactured plant and machinery of the following specifications, to manufacturers in the Gwadar Free Zone, subject to the conditions, restrictions and procedure given below, namely:plant and machinery, operated by power of any description, as is used for the manufacture or production of goods by that manufacturer.apparatus, appliances and equipment specifically meant or adapted for use in conjunction with the machinery specified in clause (i).mechanical and electrical control and transmission gear meant or adapted for use in conjunction with machinery specified in clause (i).parts of machinery as specified in clauses (i), (ii) and (iii), identifiable for use in or with such machinery. |
Table: Amendments in Zero Rated Goods
ZERO RATING APPLICABLE TO GWADAR PORT AND GWADAR FREE ZONE [ 5TH SCHEDULE ]
The Act has inserted below entries relating to Gwadar Port and Gwadar Free Zone which were earlier incorporated in Fifth Schedule of Act, 1990 through Tax Laws (Amendment) Ordinance, 2019. The below entries shall be effective from 01 June 2020 and subject to certain conditions, restrictions and procedures.
EXEMPTED GOODS
The supply of goods or import of goods specified in the Sixth Schedule are exempted from tax under this Act. It deals with exempted items, meaning thereby goods or services are not taxable. If goods or businesses are “exempted” then the government doesn’t tax the sale of the goods. Few items are given below:
EXEMPTED GOODS [ SEC. 13(1), 6TH SCHEDULE ]
| Serial No | Description | PCT Heading |
| 11 | Eggs including eggs for hatching | [0407.1100, 0407.1900] and [0407.2100, 0407.2900] |
| 22 | Sugar beet | 1212.9100 |
| 23 | Sugarcane | [1212.9300] |
| 33 | Currency notes, bank notes, shares, stocks and bonds | [49.07] |
| 49 | Import of all goods received, in the event of a natural disaster or other catastrophe, as gifts and relief consignments, including goods imported for the President’s Fund for Afghan Refugees, relief goods donated for Afghan Refugees, gifts for President’s Fund for Assistance of Palestine and gifts received by Pakistani organizations from Church World Services or the Catholic Relief Services | 99.07, 99.08 and 99.11 |
| 52 | Goods imported by or donated to hospitals run by the Federal Government or a Provincial Government; and non-profit making educational and research institutions. | 99.13, 99.14 and 99.15 |
| 74 | Flavoured milk, excluding that sold in retail packing under a brand name | 0402.9900 |
| 77 | Butter, excluding that sold in retail packing under a brand name | 0405.1000 |
| 78 | Desi ghee, excluding that sold in retail packing under a brand name | 0405.9000 |
| 93 | Bicycles | 87.12 |
| 94 | Wheelchairs | 8713.1000 and 8713.9000 |
Table: Exempted Goods
AMENDMENTS IN GWADAR FREE ZONE
EXEMPTIONS APPLICABLE TO GWADAR FREE ZONE [ 6TH SCHEDULE ]
The Act has inserted below entry relating to Gwadar Free Zone which was earlier incorporated in Sixth Schedule of Act, 1990 through Tax Laws (Amendment) Ordinance, 2019. The below entry shall be effective from 01 June 2020.
| Entry No | Description of Goods |
| 100D | Machinery, equipment, materials and goods imported either for exclusive use within the limits of Gwadar Free Zone, or for making exports therefrom, subject to the conditions that such machinery, equipment, materials and goods, are imported by investors of Gwadar Free Zone, and all the procedures, limitations and restrictions as are applicable on such goods under the Customs Act, 1969 (Act IV of 1969) and rules made thereunder shall, mutatis mutandis, apply provided that if any of such goods is taken out of the Zone for purpose other than the export, the tax on the same shall be paid by the importer. |
Table: Exemptions applicable to Gwadar Free Zone
EXTENSION OF PERIOD OF EXEMPTIONS [ 6TH SCHEDULE ]
Import and supply of ships and all floating crafts including tugs, dredgers, survey vessels and other specialized crafts purchased or bare-boat chartered by a Pakistan entity and flying the Pakistan flag is exempt from levy of Sales Tax till the year 2020. The Finance Bill proposed extension of said exemption till 2023 however, the Act has extended the exemption till 2030.
NEW EXEMPTIONS [ TABLE 1 ]
| Entry No | Description of Goods | PCT Heading |
| 154 | Dietetic foods intended for consumption by children suffering from inherent metabolic disorder subject to the conditions that the importer shall acquire approval and quota from Ministry of National Health Services, Regulations and Coordination. | Respective headings |
| 155 | Oil cake and other solid residues, whether or not ground or in the form of pellets | 2306.1000 |
| 156 | Import of CKD kits by local manufacturers of following Electric Vehicles:Road Tractors for semi-trailers (Electric Prime Movers)Electric BusesThree-Wheeler Electric RickshawThree-Wheeler Electric LoaderElectric TrucksElectric Motorcycle | 8701.20608702.40908703.80308704.90308704.90598711.6090 |
Table: New Exemptions [ Table I ]
NEW EXEMPTIONS [ TABLE III ]
| Entry No | Description of Goods | PCT Heading | Conditions |
| 20 | Plant and machinery for the assembly / manufacturing of electric vehicles | Respective headings | The exemption shall be admissible on one-time basis for setting up the new assembly and/or manufacturing facility of the vehicles and expansion in the existing units to the extent of electric vehicles specific plant and machinery, duly approved/ certified and determined by the Engineering Development Board (EDB) |
Table: New Exemptions [ Table III ]
The Finance Bill proposed new exemption on dietic foods at entry number 154 in Table-I of Sixth Schedule, however, Act has also introduced some other exemptions as tabulated above.
SUBSTITUTIONS OF EXEMPTIONS [ SIXTH SCHEDULE ]
Serial number 15A has been substituted whereby exemptions provided on parts and components for manufacturing LED lights and bulbs are being substituted as follows:
| Entry No | Description of Goods | PCT Heading |
| 15A | Parts and Components for manufacturing LED lights: | |
| Housing /shell. Shell cover and base cap for all kinds of LED lights and bulbs | Respective Headings | |
| Bare and stuffed Metal Clad Printed Circuit Boards (MCPCB) for (LED) | 8534.0000 | |
| Constant Current Power Supply for of LED Lights and Bulbs (1- 300W) | 8504.4090 | |
| Lenses for LED lights and bulbs | 9001.9000 |
Table: Substitution of Exemptions
The above exemption shall be available only if imported by LED light manufacturers registered under the Act, 1990 and subject to annual quota determination by the Input Output Co-Efficient organization.
GOODS AT REDUCED TAX RATE UNDER [ SEC. 3(2)(AA), 8TH SCHEDULE ]
The goods specified in the Eighth schedule shall be charged to tax. The Schedule contains the taxable goods like dairy, poultry products, fertilizers and natural gas etc. It also contains the reduced tax rate goods. It consists of 70 taxable goods / items. Some items are given below:
| Serial No | Description | PCT Heading | Rate of Sales Tax | Condition |
| 1 | Soyabean meal | 2304.0000 | [10%] | |
| 5 | Raw cotton and ginned cotton | Respective headings | [10%] | On import |
| 8 | Yogurt | 0403.1000 | 10% | Sold in retail packing under a brand name |
| 9 | Cheese | 0406.1010 | 10% | Sold in retail packing under a brand name |
| 10 | Butter | 0405.1000 | 10% | Sold in retail packing under a brand name |
| 22 | Soyabean seed | 1201.1000 | [10%] | On import by solvent extraction industries, subject to the condition that no refund of input tax shall be admissible |
| 25 | Agricultural tractors | [8701.9220 and 8701.9320] | [5%] | |
| 45 | Following machinery for poultry sector | Import and supply | ||
| (i) Machinery for preparing feeding stuff | 8436.1000 | 7% | ||
| (ii) Incubators, brooders and other poultry equipment | 8436.2100 and 8436.2900 | 7% | ||
| (iii) Insulated sandwich panels | Respective heading | 7% | ||
| (iv) Poultry sheds | 9406.1020 and 9406.9020 | 7% | ||
| (v) Evaporative air-cooling system | 8479.6000 | 7% | ||
| (vi) Evaporative cooling pad | 8479.9010 | 7% | ||
| 46 | Multimedia projectors | 8528.6210 | 10% | Nil |
| 58 | LPG | 2711.1910 | 10% | Imports thereof and local supplies of such imported LPG |
| 60 | Fat filled milk | 1901.9090 | 10% | If sold in retail packing under a brand name or trademark |
| 61 | Silver, in unworked condition | 7106.1000, 7106.9110 and 7106.9190 | 1% | |
| 62 | Gold, in unworked condition | 7108.1100, 7108.1210 and 7108.1290 | 1% | |
| 63 | Articles of jewellery, or parts thereof, of precious metal or of metal clad with precious metal. | 71.13 | 1.5% of value of gold, plus 0.5% of value of diamond, used therein, plus 3% of making charges | No input tax adjustment to be allowed except of the tax paid on gold |
| 64 | Prepared Food, foodstuff and sweetmeats supplied by restaurants, bakeries, caterers and sweetmeat shops | Respective headings | 7.5% | Supplies only, subject to condition that no input tax shall be adjusted |
| 67 | LNG imported for servicing CNG sector and local supplies thereof | 2711.1100, 2711.2100 | 5% | |
| 68 | Frozen prepared or preserved sausages and similar products of poultry meat or meat offal | 1601.0000 | 8% |
Table: Goods At Reduced Tax Rate
AMENDMENTS IN REDUCED RATES [ EIGHTH SCHEDULE ]
| Entry No | Description of Goods | Rate of Sales Tax | |
| Existing | Revised | ||
| 56 | Potassium Chlorate (KCLO3) | 17% along with rupees 70 per kilogram | 17% along with rupees 80 per kilogram |
| 66 | Supplies as made from retail outlets as are integrated with Board’s computerized system for real-time reporting of sales | 14% | 12% |
Table: Amendments in Reduced Rates
Cake and other solid residues, whether or not ground or in the form of pellets were subjected to reduced rate of sales tax of 5% under Eighth Schedule. The Act has omitted Cake and other solid residues from Eighth Schedule and inserted the same in Sixth Schedule thereby rendering them exempt from sales tax
NEW ITEMS IN REDUCED RATES [ EIGHTH SCHEDULE ]
| Entry No | Description of Goods | PCT Heading | Rate |
| 70 | Following locally manufactured electric vehicles (Local supplies only) | ||
| (i) Road Tractors for semi-trailers (Electric Prime Movers) | 8701.2060 | 1% | |
| (ii) Electric Buses | 8702.4090 | 1% | |
| (iii) Three-Wheeler Electric Rikshaw | 8703.8030 | 1% | |
| (iv) Three-Wheeler Electric Loader | 8704.9030 | 1% | |
| (v) Electric Trucks | 8704.9059 | 1% | |
| (vi) Electric Motorcycle | 8711.6090 | 1% |
Table: New Items in Reduced Rates
CELLULAR MOBILE PHONES (CMOS) TAXED [ SEC. 3(3B), 9TH SCHEDULE ]
The goods specified in the Ninth Schedule of this Act shall be charged to tax. It deals with CMOs (Cellular Mobile Phones) at the time of supply and in the form of CKD (complete knock-down), SKD (semi-knocked down), and CBU (complete built up). CKD, it is a kit of entirely unassembled parts of a product. It means that the product arrives in various parts and requires assembly before use. Products which are imported as separate parts and then assembled are known as CKD. SKD, it is a kit of the partially assembled parts of a product. In general, excise duty is more on finished products as compared to knock-down packing. It is recommended method to save duty. There are some advantages of knock-down packed (partially finished) products. 1) It takes less money to transport the item as volume is smaller. 2) Another benefit is the overall cost of knock-down product is lower then finished product as it involves lesser labour (which further saves duty). 3) Overall cost of product can be further reduced by avoiding parts of product where can be cheaply sourced. CBU refers to several mobile phones which are direct bought in ready shape for its sale. It certainly demands very high charges like Excise duty.
SUBSTITUTION OF NINTH SCHEDULE
Through Finance Bill, the charge of fixed sales tax on smart phones up to the value of USD 30 was proposed to be amended, however, the Act has substituted Ninth Schedule which is tabulated below:
SALES TAX ON SUPPLY (PAYABLE AT THE TIME OF SUPPLY BY CMOS)
| Serial No | Description / Specification of Goods | Sales tax on supply (payable at the time of supply by CMOs) |
| 1 | Subscriber Identification Module (SIM) Cards | Rs.250 |
Table: Sales tax on supply (payable at the time of supply by CMOs)
CELLULAR MOBILE PHONES IN CKD/CBU FORM
| Serial No | Description / Specification of Goods | Sales tax on CBUs at the time of import or registration (IMEI number by CMOs) | Sales tax on import in CKD/SKD condition | Sales tax on supply of locally manufactured mobile phones in CBU condition in addition to tax under column |
| 1 | Cellular mobile phones or satellite phones to be charged on the basis of import value per set, or equivalent value in rupees in case of supply by the manufacturer, at the rate as indicated against each category: | |||
| A | Not exceeding US$ 30 (excluding smart phones) | Rs.130 | Rs.10 | Rs.10 |
| B | Not exceeding US$ 30 (smart phones) | Rs.200 | Rs.10 | Rs.10 |
| C | Exceeding US$ 30 but not exceeding US$ 100 | Rs.200 | Rs.10 | Rs.10 |
| D | Exceeding US$ 100 but not exceeding US$ 200 | Rs.1,680 | Rs.10 | Rs.10 |
| E | Exceeding US$ 200 but not exceeding US$ 350 | Rs.1,740 | Rs.1,740 | Rs.10 |
| F | Exceeding US$ 350 but not exceeding US$ 500 | Rs.5,400 | Rs.5,400 | Rs.10 |
| G | Exceeding US$ 500 | Rs.9,270 | Rs.9,270 | Rs.10 |
Table: Cellular Mobile Phones in CKD/CBU Form
FIXED RATE ITEMS [ SEC. 3(1B), TENTH SCHEDULE ]
It deals with tax on bricks and cement or concrete blocks. If the suppliers are bricks manufacturing plants in Lahore, Rawalpindi and Islamabad districts. They will pay monthly tax Rs.12,500. If the supplier’s manufacturing plants in Attock, Chakwal, Jehlum etc. They will pay monthly tax Rs. 10,000. Similarly, if the supplier’s having manufacturing units in Khushab, Mianwali, Bhakar, Layyah etc. They will pay monthly tax Rs. 7,500. The tax on bricks shall be paid on fixed basis at the rates specified in the table below:
| Serial No | Region or Area | Tax Payable per Month |
| 1 | Lahore, Rawalpindi and Islamabad districts | Rs.12,500 |
| 2 | Attock, Chakwal, Jehlum, Mandi Bahauddin, Sargodha, Gujrat, Sialkot, Narowal, Gujranwala, Hafizabad, Sheikhupura, Kasur, Nankana Sahib, Chiniot, Faisalabad, Jhang, Toba Tek Singh, Okara and Sahiwal districts | Rs.10,000 |
| 3 | Khushab, Mianwali, Bhakar, Layyah, Muzaffarghar, Dera Ghazi Khan, Rajanpur, Multan, Lodhran, Khanewal, Vehari, Bahawalpur, Pakpattan, Bahawalnagar, Rahim Yar Khan districts; and Sindh, Khyber-Pakhtunkhwa and Baluchistan provinces | Rs.7,500 |
Table: Fixed Rate Items
AMENDMENT
Through Finance Bill no change was proposed in the Tenth Schedule which specifies fixed rates of sales tax on different items. The Act has introduced fixed rate of sales tax on cement or concrete blocks. The goods specified under Tenth Schedule through Act is as follows:
| Serial No | Description / Specification of Goods | Sales Tax |
| 1 | Paver | Rs. 2 per sq. ft |
| 2 | Hollow block (Volume less than 1 cubic feet) | Rs. 3 per piece |
| 3 | Solid block (Volume less than 1 cubic feet) | Rs. 3 per piece |
| 4 | Kerb Stone (Volume less than 1 cubic feet) | Rs. 5 per piece |
| 5 | Kerb stone (Volume greater than 1 cubic feet) | Rs. 10 per piece |
Table: Amendment in New Fixed Rate Items
It is also specified that no input tax adjustment shall be allowed against fixed sales tax paid under Tenth Schedule.
SALES TAX WITHHOLDING PROVISIONS [ SEC. 3(7), ELEVENTH SCHEDULE ]
It deals with withholding tax by the recipient of goods.
AMENDMENTS
The rate of withholding tax was enacted in Eleventh Schedule through Finance Act, 2019. A withholding agent is required to withhold tax as per the supplier category as to registered or unregistered person.
The Act has substituted the words “registered person” with “active taxpayer”. The existing and revised rates are given below:
| Serial No | Withholding Agent | Supplier Category | Rate or Extent of Deduction |
| 1 | Federal and provincial government department; autonomous bodies; and public sector organizations.Companies as defined in the Income Tax Ordinance, 2001 (XLIX of 2001) | (Active Taxpayers) | 1/5th of Sales Tax as Shown on invoice. |
| 2 | Federal and provincial government department; autonomous bodies; and public sector organizations.Companies as defined in the Income Tax Ordinance, 2001 (XLIX of 2001) | (Active Taxpayers) Registered as a wholesaler, dealer or distributor. | 1/10th of Sales Tax as Shown on invoice. |
| 3 | Federal and provincial government departments; autonomous bodies; and public sector organizations. | (Persons other than Active Taxpayers) | Whole of the tax involved or as applicable to supplies on the basis of gross value of supplies. |
| 4 | Companies as defined in the Income Tax Ordinance, 2001 (XLIX of 2001) | (Persons other than Active Taxpayers) | 5% of gross value of supplies. |
| 5 | Registered persons as recipient of advertisement services. | Person providing advertisement services | Whole of sales tax applicable |
| 6 | Registered persons purchasing cane molasses. | (Persons other than Active Taxpayers) | Whole of sales tax applicable |
Table: Amendments in Sales Tax Withholding Provisions
It is further stated that albeit sales tax withholding rate is specified for active taxpayers however, sales tax withholding is not applicable on the supplies made by an active taxpayer to another registered person as per exception (viii) specified in Eleventh Schedule.
Further, through Finance Bill, no change was proposed in the exceptions on which sales tax withholding is not applicable, however, the Act has inserted a new exception in Eleventh Schedule vis-a-vis sales tax withholding is not applicable on supply of sand, stone, gravel / crush and clay to low-cost housing schemes sponsored or approved by Naya Pakistan Housing and Development Authority.
VALUE ADDITION TAX [ SEC. 7A(2), TWELFTH SCHEDULE]
It deals with Value Addition Tax (VAT).
RELAXATION OF CONDITION FOR INAPPLICABILITY OF VALUE ADDITION TAX
Value addition tax is not applicable on raw materials and intermediary goods meant for use in an industrial process which are subject to customs duty at the rate less than 16%.
The Act has relaxed the said condition and exempted the charging of value addition tax on all raw materials and intermediary goods imported by a manufacturer for in-house consumption.
SALES TAX ON SERVICES
ISLAMABAD CAPITAL TERRITORY
According to the Islamabad Capital Territory (Tax on Services) Ordinance, 2001 the sales tax on services included in the Schedule are to be taxed on 16% except for services provided by call centres which are to be taxed on 17%. In the case of services provided by property developers, tax is charged at Rs. 100/- per square yard for land development and Rs.50/- per square feet for building construction.
SINDH
The sales tax on services in Sindh is charged on 13% on the services noted in the schedule, except for telecommunication services which are taxed on the rate of 19.5% as per the Sindh Sales Tax on Services Act, 2011. In the case of services provided by race clubs, tax is charged at Rs. 200/- per entry pass. Certain other services are chargeable at reduced rates.
PUNJAB
The Punjab Sales Tax on Services Act, 2012 levies a 16% sales tax on all services excluding telecommunication services which is taxed on the rate of 19.5%. Certain other services are chargeable at reduced rates. In the case of services provided by construction services, tax is charged at Rs. 100/- per square yard for land development, Rs.50/- per square feet for building construction and for freight forwarding agent Rs. 400/- per bill of lading.
BALOCHISTAN
The service tax on telecommunication as set by the Balochistan Sales Tax on Services Act, 2015 is 19.5% as per the schedule. The same schedule sets the rate on tax for “Services provided or rendered by hotels, motels, boatels, resorts, guesthouses, farmhouses, restaurants, caterers, clubs, marriage halls, lawns, mandap, pandal, shamiana, messes and hostels, advertisements, transportation, services provided or rendered by persons authorized to transact business on behalf of others, sale and purchase or hire of movable or immovable goods or property” and more on 15% and certain other services are at variable rates.
KHYBER PAKHTUNKHWA
The tax charged on telecommunication services in Khyber Pakhtunkhwa is 19.5% as per the Khyber Pakhtunkhwa Finance Act 2013. In the case of event management, exhibition and carnival services, tax will be charge at 8% tax rate. It is 5% on services provided or rendered by beauty parlours, beauty and fitness related centres, auto workshops, contractual execution, medical, HRM, veterinary and allied sciences, law, financial, business planning and IT based system development. The rate of tax will be 2% on services provided related to construction, IT based, photographic recording, telecasting, cable TV operators, ride hail services, indenters, auctioneers, online market place (OMP) and installation or erection services. The tax rate is 10% on services related to advertisement on T.V, cable, newspapers, multimedia, bill boards, franchise services, security, evaluation, market research, private detection agencies, dry port, airport, storage and ware housing and terminal services. The rate of tax will be 15% on services provided or rendered by hotels, motels, guest houses, resorts, launderers and dry cleaners including carpet or sofa set or similar furniture items cleaners, customs, property and shipping agents, stock brokers, automobile, electrical, plant and machinery dealers, exploration and production or mining of minerals, oil, gas including licensing, renting, leasing surveys, banking and insurance companies, inter city transportation, courier services, visa acquisition, advisory or consultancy services and inland carriage of goods by air and transport.
OFFENCES AND PENALTIES [ SEC. 33 ]
Whoever commits any offence described in column (1) of the Table below shall, in addition to and not in derogation of any punishment to which he may be liable under any other law, be liable to the penalty mentioned against that offence in column (2) thereof:
| Relevant Section | Offences | Penalties |
| Sec. 26 | Non filing of returns. | Ten Thousand rupees, a person files a return within ten days of the due date, he shall pay a penalty of two hundred rupees for each day of default. |
| Sec. 23 | Non issuance of invoices. | Five Thousand rupees or three percent of the amount of the tax involved, whichever is higher. |
| Sec. 3, 7 and 23 | Issuance of invoices without authority. | Ten Thousand rupees or five percent of the amount of the tax involved, whichever is higher. |
| Sec. 14 | Non notification change in the particulars of registration. | Five Thousand rupees. |
| Sec. 3, 6, 7 and 48 | Failure of deposit the amount of tax due. | Ten Thousand rupees or five percent of the amount of the tax involved, whichever is higher.Within ten days from the due date, the defaulter will give five hundred rupees for each day of default.No penalty shall be imposed when any miscalculation is made for the first time during a year.If the amount of tax due is not paid even after the expiry of a period of sixty days of issuance of the notice. Imprisonment for three years or with fine which may extend to amount equal to the amount of tax involved or with both. |
| Sec. 7 and 26 | Repetition of miscalculation in the return for tax less than the actual tax due during the year. | Five Thousand rupees or three percent of the amount of the tax involved, whichever is higher. |
| Sec. 14 | Non filing of registration application. | Ten Thousand rupees or five percent of the amount of tax involved, whichever is higher.Non filing after sixty days, he shall be liable, upon conviction and imprisonment for three years or with fine which may extend to an amount equal to the amount of tax involved or with both. |
| Sec. 22 and 24 | Non maintenance of records. | Ten Thousand rupees or five percent of the amount whichever is higher. |
| Sec. 25 | Where a registered person who, without any reasonable cause, in non compliance with Sec. 25, fails to produce the record on receipt of first notice. | Five Thousand rupees. |
| Receipt of second notice. | Ten Thousand rupees. | |
| Receipt of third notice. | Fifty Thousand rupees. | |
| Sec. 26 | Non filing of information required by the board through a notification issued under Sec. 26(5). | Ten Thousand rupees. |
| Sec. 2(37) and General | Filing of false documentsDestruction / alteration of recordMaking of false statement | Twenty Five Thousand Rupees or One Hundred Percent of the Amount of tax involved, whichever is higher. Conviction and imprisonment of three years or with fine which may extend to an amount equal to the loss of tax involved, or with both. |
| Sec. 25, 38 and 38A | Any person who obstructs the access of an authorized officer to the business premises, registered office or to any other place where records, stocks or accounts are kept. | Twenty-Five Thousand Rupees or One-Hundred Percent of the Amount of tax involved, whichever is higher. Conviction and imprisonment of five years or with fine which may extend to an amount equal to the loss of tax involved, or with both. |
| Sec. 2(37) | Fraud, connives or abets in commissioning of tax fraud. | Twenty-Five Thousand rupees or one hundred percent of the amount of tax involved, whichever is higher. Conviction and imprisonment of five years or with fine which may extend to an amount equal to the loss of tax involved, or with both. |
| Sec. 48 | Violation of any embargo placed or removal of goods in connection with recovery of tax. | Twenty-Five Thousand rupees or ten percent of the amount of the tax involved, whichever is higher. Conviction and imprisonment of one year or with fine which may extend to amount equal to the amount of tax involved, or with both. |
| Sec. 31 and General | Any person who obstructs the authorized officer in the performance of his official duties. | Twenty-Five Thousand rupees or one hundred percent of the amount of tax involved, whichever is higher. |
| Sec. 73 | Certain transactions not admissible: Payment exceeding Rs.50,000 shall be made by a cross cheque. | Five thousand rupees or three percent of the amount of tax involved, whichever is higher. |
| Sec. 71 and General | Non fulfilment of any condition prescribed in a notification issued under any of the provisions of this Act. | Five Thousand Rupees or three percent of the amount of tax involved, whichever is higher. |
| General | Sales Tax officer causing loss to the sales tax revenue. | Conviction and imprisonment for three year or with fine equal to the amount of tax involved, or with both. |
| General | Contravention with provision of this Act (or the rules made thereunder) for which no penalty has, specifically, been provided in this section. | Five Thousand Rupees or three percent of the amount of tax involved, whichever is higher. |
| Sec. 26(5) | Non filing of the summary of sale or purchase invoices. | Omitted by the Finance Act, 2008 |
Table: Offences and Penalties
FURTHER TAX [ SEC. 3 (1A) ]
It is a type of tax. It will be levied on unregistered buyer. When, we are selling taxable goods to unregistered buyer. Then, we will levy / charge further tax at @ 3% to unregistered buyer.
Where taxable supplies are made to a person who has not obtained sales tax registration number, there shall be charged, levied and paid a further tax at the rate of [three] percent of the value in addition to the rate specified in sub sections (1), (1B), (2), (5), (6) and Sec. 4.
APPLICATION
- It extends to the whole of Pakistan.
- It will be only levied on unregistered buyer.
- We will levy further tax @ 3% to unregistered buyer.
- Further tax is applicable on all taxable kind of goods except zero rated and exempted goods.
EXTRA TAX [ SEC. 3 (5) ]
It is a type of tax. It applies on specific goods. It will also apply on supply of electricity and natural gas. Extra tax deals with Sales Tax Special Procedure Rules 2007. It shall apply to the supplies of electric power and natural gas consumed by persons having industrial or commercial connections.
MODE AND MANNER OF COLLECTION OF EXTRA TAX ON NATURAL GAS AND ELECTRICITY
- Every person supplying electric power or natural gas, shall charge and collect extra tax at the rate notified by the Federal Government, from every consumer having an industrial or commercial connection, where the bill for a month is in excess of rupees fifteen thousand, and the consumer’s name does not appear on the Active Taxpayer’ List.
- The amount of extra tax shall be shown separately in the bill or invoice for electric power or natural gas issued by the supplier.
- The supplier shall collect and pay the amount of extra tax in the manner given in section 6 of the Act.
MODE AND MANNER OF COLLECTION OF EXTRA TAX ON SPECIFIED GOODS
Extra amount of sales tax at the rate of [2]% of value of supplies shall be levied and collected on the supplies of all specified [ ] goods by manufacturers and importers in addition to the tax payable under sub-sections (1) and (2) of section 3 of the Act.
| Serial No | Specified Goods |
| 1 | Household electrical goods, including air conditioners, refrigerators, deep freezers, televisions, recorders and players, electric bulbs, tube-lights, fans, electric irons, washing machines and telephone sets. |
| 2 | Household gas appliances, including cooking range, oven, geysers and gas heaters. |
| 3[] | |
| 4 | Auto-parts and accessories. |
| 5 | Lubricating oils, brake fluids, transmission fluid, and other vehicular fluids and maintenance products. |
| 6 | Tyres and tubes |
| 7 | Storage batteries |
| 8 | Arms and Ammunitions |
| 9 | Paints, distempers, enamels, pigments, colours, varnishes, gums, resins, dyes, glazes, thinners, blacks, cellulose lacquers and polishes sold in retail packing. |
| 10 | Tiles |
| 11 | Biscuits, confectionary, chocolates, toffees, and candies. |
Table: Extra Tax on Specified Goods
Serial # 3 omitted by SRO # 775(I)/2018 dated June 21, 2018. Earlier it was:
| Serial No | Specified Goods |
| 3 | Foam or spring mattresses and other foam products for household use. |