Provisions Flashcards
Important Exempt supplies (4)
- Import to EPZ
- Imports/ donation to Govt hospital, NPO education and research institutions
- Supply to Govt hospitals, charitable hospital (>50 bed), teaching hospitals of statutory unis (>200 bed)
^(EXCLUDING SUPPLY OF ELEC.GAS)
Supply of Fixed Asset (other than stock in trade)
NO INPUT TAX ADJUSTMENT
e.g vehicles, furniture, office equipment
Self consumption of RM on production of taxable good
NO INPUT TAX ADJUSTMENT
What happens if exempt goods are exported?
They become zero-rated: input tax adjustment shall be allowed on them.
Zero Rated Supply (5 points)
- Taxable supply chargeable to tax at 0%
- Goods exported or specified in 5th Schedule
- Tax invoice needed
- Input tax is refundable
- Tax registration is needed for claiming refund
Exempt Supply
- Supply not chargeable to tax
- Specified by FBR via notifications or mentioned in 6th Schedule
- Tax invoice not needed
- Input tax is not adjustable or refundable
- No tax registration is needed
Turnover based exemption (4)
- Small manufacturers
- cottage industry and retailers
- are exempt from registration
- don’t charge sales tax on their supplies
Who is required to be registered?
- Importer
- Wholesaler/ Distributor
- Tier 1 retailer
- Manufacturer (other than cottage industry)
- Exporter who wants to claim input tax on 0%
Change in tax rates? (4 points: 2 main, 2 sub)
- Local Supply: Tax rate in force at the time of such supply.
- Import of goods: Tax rate in force at the time declaration is presented. (for home consumption or warehouse clearance)
Except
(a) If declaration is presented in advance, then tax rate in force on the date of manifest being delivered.
(b) Clearance from warehouse: If tax is not paid within 7 days, then rate in force on date of payment.
Further tax: charged when and how much?
3% on supply of goods to Unregistered Persons
Exceptions of further tax from URP
- Supply to Govt, Semi-govt, statutory reg bodies
- goods to end consumers by retailer
- electricity to domestic and agricultural consumers
- gas to domestic and CNG
- 0% goods
- 3rd schedule goods
- crystalline sugar, fertilizer, jet fuels
8th Schedule items (5)
Reduced rate: 10% on import of PM (no local substitute) 2% on fertilizer 10% flavored milk, cheese, butter 1% on gold, silver unworked
Import by a registered manufacturer for its own use (3)
- Post dated cheque (17-10)% submitted to custom
- returned after filing of first sales tax return after import
- Sale of such imported thing would be chargeable on normal Sales tax.
Who is liable to PAY sales tax?
- Supplier (making supplies to buyers and charging OPT)
- Importer (importing goods into Pak)
- Service provider (taxable)
When are sales tax paid?
- Importer: During payment of custom duty
- Supplier: Filing of tax returns
Exceptions to Exports being zero-rated (3)
- Export to any country notified by FBR:
- AFG, IRAN, CHINA
- AFG via Land route
- Export intended to be reimported
Important zero-rated supplies (4)
- Supply for consumption aboard conveyance proceeding outside Pakistan
- Electric and Gas supply to manufacturer cum exporters
- Supply for manufacture in EPZ
- Import/Supply to Gwadar Economic Zone (not vehicle)
Refund of Input Tax on Zero Rated Supply (4)
- Made within 45 days of return.
- Any tax, default surcharge or penalty payable shall be adjusted with the amount of refund
- FBR pays additional amount @ KIBOR in case of delayed refund
- Where Input tax credit or refund seems incorrect: proceedings shall be completed within 60D > 120D > 9M
(reasons in written) (extension by not below Asst. Comm.)
Tier 1 retailer conditions (7)
- Unit of national or international chain of stores
- Store in AC’ed shopping mall, plaza or center (not kiosks)
- Cummulative bill > 600k per annum
- Wholesaler+Retailer: Bulk import, supply of consumer goods, wholesale basis and retail basis
- Shop > 1000 sqft (2000sqft for furniture store)
- Acquired POS and accepts dc, cc or other digital services
- Person as per FBR
How much tax do Non Tier 1 retailers pay on their electric bill?
17%GST+3%FT+X%
X%= 5% if monthly bill < 20,000
X%= 10% if monthly bill > 20,000
Procedure for the admissibility of the input tax which is not claimed by omission in the relevant tax period
- May claim such input tax in the return for any of the next 6 tax periods
- May apply for the refund within one year
Document needed for input tax deduction (3)
- Input tax with own name, ntn
- Elec.gas: bill with reg no. and address of connection
- Goods declaration (bill of entry) for imports
- Treasure challan with name and ntn, for auction.
Can input tax be claimed on accrual basis? and can it lapse?
- Input tax can be claimed on accrual basis
- subject to payment within 180 days of issuance of tax invoice.
- if 180 days are lapsed, it shall be added back to tax liability.
Can sales tax can be claimed on electricity bills which are not in the name of the person?
- If bill is not in name of person
- NTN and address of such person is mentioned on bill as provided by the person in his application for registration.
Circumstances in which I/P cannot be claimed. (14)
- Exempt Goods
- Supply for production of taxable goods.
- Adjustment barred by provincial laws
- Fake invoices.
- Sales tax not deposited to govt. treasury by supplier.
- Discrepancy indecated by CREST.
- Goods and services not declared by supplier in his return.
- Not furnishing info to FBR
- Extra tax paid
- Vehicles (other than forklifts)
- Building material
- Import/purchase of agricultural machinery.
- Supply to URP with invoices without NTN NIC (>100k)
- FBR may specify
Example of extra tax
Upto 17%
On elec.gas of URP : 5% if bill > 15k
Conditions to pay through banking channel
Transaction > 50k (other than utility)
- made by crossed banking instrument
- within 180 days of tax invoice
- from bs bank ac to bs bank ac
What would happen if payment not made by banking channel?
- Buyer not allowed any input tax credit, zero rating etc.
- Supplier not allowed any input tax credit, zero rating etc. if amt not deposited in bs bank ac
Supply to URP - Limits
RP to RP: no limit
RP to URP:
1. 10m per month
2. 100m per year
(excess supply IP not allowed)
Exception of supply to URP limit (4)
- Fed/Prov/Loc Govt, dept, auth not engaged in supply making
- Foreign missions, diplo, privileged persons
- Registered person engaged in fertilizers (man and sup)
- All other persons not engaged in supply of taxable goods.
Residual Input Tax
Sales tax on RM and Capital Goods being used for;
- taxable
- exempt
supplies.
But, doesn’t include sales tax paid related;
- wholly to taxable supply
or
- wholly to exempt supply
Residual Input Tax Credit
Residual Input tax apportioned according to taxable supplies, exempt supplies and zero rated supplies with a formula.
Provisional adjustment
Monthly apportionment of input tax is treated as provisional adjustment
Final adjustment
At the end of each financial year the registered person shall
make final adjustment on the basis of taxable and exempt supplies of that year. (of provisional adjustments)
Provisions of restriction of input tax (3)
Lower of:
- Actual IP
- 90% of OP
Amount disallowed due to restriction: c/f to next period
FBR can increase limit of T-1 retailers to 95% if they integrate POS
Exceptions of restrictions of Input tax.
(100%)
- Input tax on acquisition of fixed assets
- Commercial importers subject to 3% value addition tax (imports>50% of his taxable supply)
- Zero rate supplier (zero rated supply>50% of his taxable supply)
- Non-manu RP making 3rd Schedule supply (>80% of total taxable supply)
- Persons in energy.elec.gas.co
- Oil marketing, petrol refineries, Pak steel mills
- Fertilizer manu
- Distributors (not Wholesalers)
- Telecom
- CNG, Petrol dealers
Reasons for issuance of debit credit note. (5)
When tax invoice is issued and tax return or invoice needs to be modified due to:
- cancellation of supplies
- return of goods
- change in value of supply
- change in nature of supply
- any other such event
If value of supply decreases, who issues what
Seller: Credit note
Buyer: Debit note
If value of supply increases, who issues what
Seller: Debit note
Buyer: Credit note
(condition of 180 days from tax invoice is also waived)
DESTRUCTION OF GOODS (normally) (4)
- Returned by the buyer on the ground that the same are unfit for consumption
- Required to be destroyed
- Destroyed under supervision of Sales tax dept.
- IPTC not admissible
Exception of NIC NTN required of the unregistered person
For RETAILER:
- Transaction amt <100 000 AND
- Supply to end consumer
Destruction of perishable goods
- Having an expiry date
- returned on account of being unfit for
consumption - credit note may be issued within 15 days
- adjustment allowed
Input tax on goods subsequently destroyed
Allowed
Input tax on wastage of Raw Materials during Manufacturing:
reclaimable.
if wastage can be sold then not reclaimable.
PURCHASE OF STOCKS BEFORE REGISTRATION
- Local supply purchaser : register within 30 days
(must hold tax invoice and verifiable unsold stock on reg date) - Importer: register within 60 days
Excess tax collection
- Pay the excess tax to govt if burden passed on to consumer
- claim refund after proving that burden has not passed to the consumer
Why supply of parts under warranty is exempt? (3)
- Price charged includes cost of warranty
- Parts used in in-house production of a final taxable good are exempt
- ^also clarified by FBR
Joint and several liability of R.P in supply chain where tax is unpaid
Where it is in reasonable knowledge of r.p receiving supply that the supplier has some or whole tax unpaid then such person shall be jointly and severally liable for payment of such unpaid tax.
