sale tax provisions

Question 1

1. What are exempt supplies?

Answer 1

Answer: Exempt supplies refer to certain imports and supplies of goods that are not subject to sales tax.

Question 2

2. Provide an example of an exempt supply.

Answer 2

Answer: An example of an exempt supply is the publication of books, journals, and newspapers, where the supply of these items does not attract sales tax.

Question 3

3. Can input tax be reclaimed for exempt supplies?
   .

Answer 3

Answer: No, input tax cannot be reclaimed for exempt supplies

Question 4

4. What are some examples of goods that fall under exempt supplies?

Answer 4

Answer: Examples of goods that fall under exempt supplies include live animals, agricultural produce, holy books, imported samples, goods imported by diplomats or privileged persons, personal baggage imported by overseas Pakistanis, and more.

Question 5

1. Explain the concept of exempt supplies and provide examples.

Answer 5

• Exempt supplies are certain imports and supplies of goods that are not subject to sales tax.
• Examples of exempt supplies include live animals, agricultural produce not subject to further manufacture, holy books, imported samples, goods imported by diplomats or privileged persons, personal baggage imported by overseas Pakistanis, and more.

Question 6

2. ## Discuss the difference between zero-rated supplies and exempt supplies.

Answer 6

Zero-rated supplies and exempt supplies are both not subject to sales tax, but there are differences in input tax treatment.
- Input tax on zero-rated supplies is refundable from the Federal Board of Revenue (FBR), allowing businesses to reclaim the tax paid on inputs.
- Input tax on exempt supplies is not adjustable or refundable, meaning businesses cannot reclaim the tax paid on inputs for exempt supplies.

Question 7

3. Provide examples to illustrate the concept of exempt supplies in different scenarios.

Answer 7

• Example 1: If a manufacturer of cars also manufactures wheels within their premises for use in the cars, the in-house consumption of wheels is exempt from sales tax. However, if the wheels are acquired from outside or provided to any other entity, they would not be exempt.
• Example 2: Books are exempt from sales tax, but if a books publishing house sets up a paper manufacturing unit in-house, the paper used in-house would not be exempt and would be subject to sales tax.
• Example 3: A manufacturer of tea using the tea they produce to serve employees in the canteen is considered a ‘supply’ for sales tax purposes. However, if a distributor of stationery uses stationery in-house for office purposes, it does not constitute a ‘supply’ as the stationery is purchased, not manufactured.

Question 8

4. Explain the zero-rated status of the export of exempt goods.

Answer 8

• The export of exempt goods by a manufacturer is zero-rated, meaning no sales tax is charged on the export. Input tax paid, if any, can be reclaimed by the manufacturer.

Question 9

5. ## Discuss the differences between zero-rated supplies and exempt supplies.

Answer 9

Both zero-rated supplies and exempt supplies do not attract output tax.
- Input tax, if leviable, can only be reclaimed in respect of zero-rated supplies, not exempt supplies.
- Zero-rated supplies are taxable supplies charged at a 0% tax rate, while exempt supplies are supplies that are not subject to sales tax.
- A tax invoice is required for zero-rated supplies, indicating the sales tax at 0%. No sales tax invoice is required for exempt supplies.
- Sales tax registration is required for businesses claiming input tax refund on zero-rated supplies, whereas it is not required for businesses engaged exclusively in exempt supplies.

Question 10

1. What is the purpose of the 6th Schedule in relation to exempt supplies?

Answer 10

Answer: The 6th Schedule provides a list of items that are considered exempt supplies and are not subject to sales tax.

Question 11

2. Can imported samples of taxable goods be subject to sales tax?

Answer 11

Answer: No, imported samples of taxable goods are exempt from sales tax.

Question 12

3. What are the conditions for goods produced in and exported from Pakistan to be subsequently imported within one year?

Answer 12

Answer: Goods produced in and exported from Pakistan must be imported back within one year of their export to qualify for exemption from sales tax.

Question 13

4. Are goods imported by government hospitals and non-profit educational institutions exempt from sales tax?

Answer 13

Answer: Yes, goods imported by government hospitals and non-profit educational institutions are exempt from sales tax.

Question 14

1. Explain the different categories of exempt supplies listed in the given content.

Answer 14

• The 6th Schedule provides a comprehensive list of exempt supplies, including items such as live animals, agricultural produce not subject to further manufacture, holy books, imported samples, goods imported by diplomats or privileged persons, personal baggage imported by overseas Pakistanis, and more.
• Additionally, specific exemptions are granted for goods imported temporarily for subsequent export, replacement goods supplied free of cost in lieu of defective goods imported, goods produced in and exported from Pakistan which are subsequently imported in Pakistan within
  one year of their export , and goods imported or donated to government hospitals and non-profit educational and research institutions.
• The exemption also extends to certain goods supplied to government hospitals, charitable hospitals, and teaching hospitals of statutory universities, as well as promotional and advertising material of no commercial value distributed by exhibitors.

Question 15

2. Discuss the concept of supply of fixed assets as an exempt supply.

Answer 15

• The supply of fixed assets, such as vehicles, furniture, or office equipment, as a resale or transfer being a depreciable asset, is considered an exempt supply.
• Input tax adjustment is not available for fixed assets being a depreciable asset, meaning businesses cannot reclaim the sales tax paid on such assets when reselling them.

Question 16

3. Explain the specified goods and machinery that are exempt from sales tax.

Answer 16

• Certain specified goods are exempt, including energy saver lamps, pharmaceutical raw materials and finished products (with few exceptions), laptops, computers, notebooks, and their parts for assembly or manufacturing.
• Specified machinery and capital goods are also exempt under certain conditions, such as equipment for coal firing systems, machinery for power generation, and networking equipment for educational and training institutions.

Question 17

4. Are goods imported by government hospitals and non-profit institutions exempt from sales tax?

Answer 17

Answer: Yes, goods imported by government hospitals and non-profit educational and research institutions are exempt from sales tax.

Question 18

1. Explain exempt supplies and provide an example.

Answer 18

• Exempt supplies are imports and supplies of goods that are not subject to sales tax.
• For instance, the publication of books, journals, and newspapers falls under exempt supplies, where the supply of these items does not attract sales tax.

Question 19

2. What are some examples of important exempt items?

Answer 19

• Live animals, agricultural produce not subject to further manufacture, holy books, imported samples, goods imported by diplomats or privileged persons, personal baggage of overseas Pakistanis, and more are considered important exempt items.

Question 20

3. Discuss the concept of exempt supplies for government hospitals and non-profit institutions.

Answer 20

• Goods imported by or donated to government hospitals and non-profit educational and research institutions are exempt from sales tax.
• Similarly, goods excluding electricity and natural gas supplied to government hospitals, charitable hospitals of 50 beds or more, or teaching hospitals of statutory universities with 200 or more beds are also exempt from sales tax.

Question 21

5. Give an example illustrating the difference between zero-rated supplies and exempt supplies.

Answer 21

• Suppose a manufacturer exports exempt goods. The export of these exempt goods would be zero-rated, allowing the manufacturer to claim a refund of input tax paid on inputs used in the manufacturing process.
• In contrast, if the goods were classified as zero-rated supplies, the manufacturer would charge sales tax at 0% on the exported goods and also be eligible for input tax refund.

Question 22

1. What are zero-rated supplies?

Answer 22

Answer: Zero-rated supplies are goods that are subject to sales tax at a rate of 0%. Output tax on these supplies is 0%, but input tax may still be incurred and can be reclaimed.

Question 23

5. Can promotional and advertising material, such as brochures and pamphlets, be subject to sales tax?

Answer 23

Answer: No, promotional and advertising material of no commercial value that is distributed free of cost by exhibitors is exempt from sales tax.

Question 24

2. Are exports included in zero-rated supplies?

Answer 24

Answer: Yes, exports of goods are considered zero-rated supplies, except for specific cases mentioned by the Federal Government, such as exports to certain countries or goods intended for re-importation.
– For example, there may be restrictions on zero-rated supplies to specific countries, such as Afghanistan, Iran, or China, as notified by the government.

Question 25

3. Give examples of items that fall under zero-rated supplies.

Answer 25

Answer: Examples of items under zero-rated supplies include supplies to diplomats, raw materials and components for manufacturing in Export Processing Zones (EPZs), locally produced plant and machinery in EPZs, goods supplied to duty-free shops, and more.
 Supply of stores and provisions for consumption aboard conveyance proceeding outside Pakistan e.g.
international flight or ship
 Packing materials used for zero rated supplies
 Electric and gas consumed by manufacturer-exporters
 Other specified items subject to certain conditions including bicycles, pencils, pens etc.

Question 26

4. How is input tax refund on zero-rated supplies processed?

Answer 26

Answer: Input tax refund on zero-rated supplies should be made within 45 days of filing the return. However, if there are outstanding taxes, surcharges, or penalties, the refund may be adjusted against them. In case of suspected incorrect claims, proceedings against the claimant should be completed within 60 days.

Question 27

5. What is the difference between zero-rated supplies and exempt supplies?

Answer 27

Answer: Zero-rated supplies are subject to sales tax at a 0% rate, while exempt supplies are not subject to sales tax. Input tax paid on zero-rated supplies is refundable, but input tax on exempt supplies is not adjustable or refundable.

Question 28

1. Explain zero-rated supplies and provide examples.

Answer 28

• Zero-rated supplies are goods that are subject to sales tax at a rate of 0%.
• Examples of zero-rated supplies include exports of goods, supplies to diplomats, raw materials for manufacturing in EPZs, goods for duty-free shops, and electric and gas consumed by manufacturer-exporters.

Question 29

2. Discuss the process of input tax refund on zero-rated supplies.

Answer 29

• Input tax refund on zero-rated supplies should be made within 45 days of filing the return.
• If the registered person has outstanding taxes, surcharges, or penalties, the refund may be adjusted against these amounts.
• Proceedings against a claimant suspected of incorrect input tax credit or refund should be completed within 60 days.
• In case of delayed refund, the FBR should pay an additional amount to the registered person based on the Karachi Inter-bank Offered Rate (KIBOR) per annum if there is no dispute regarding the refund claim.

Question 30

4. Explain the concept of VAT and its application in the sales tax system.

Answer 30

• Sales tax is a Value Added Tax (VAT) system, an indirect tax collected from the entire supply chain, including importers, manufacturers, wholesalers, and retailers.
• VAT is a percentage tax levied on the price of goods supplied or taxable services rendered.
• The VAT system utilizes input tax adjustment to shift the ultimate tax burden to the final consumer and relieve intermediaries from tax liability.

Question 31

5. Who is liable to pay sales tax, and when is it paid?

Answer 31

• The liability to pay sales tax lies with the person making the supply, importing goods into Pakistan, or providing taxable services.
• Sales tax is paid at the time of customs duty payment for imported goods and at the time of filing sales tax returns for supplies made or services provided in Pakistan.

Question 32

2. What are the conditions for a cottage industry to be required to register under the Sales Tax Act, 1990?

Answer 32

Answer: A cottage industry must meet the following conditions: (a) no industrial connection of gas or electricity, (b) located in a residential area, (c) total labor force not exceeding 10 workers, and (d) annual turnover from all supplies not exceeding Rs10 million.

Question 33

4. What is further tax, and when is it charged?

Answer 33

Answer: Further tax is an additional 3% tax charged on supplies made to unregistered persons. However, it is not charged in specific cases such as supplies to the government, end consumers, or items falling under the 3rd Schedule.

Question 34

5. How is fixed tax applied in the sales tax system?

Answer 34

Answer: Fixed tax is applied on certain goods or activities based on a predetermined amount or capacity, regardless of the actual value of supply. For example, fixed tax is imposed on monthly basis for bricks and on items like mobile phones and satellite phones.

Question 35

1. Explain the concept of further tax and its exceptions.

Answer 35

• Further tax is an additional 3% tax charged on supplies made to unregistered persons.
• Further tax is not charged in certain cases, including supplies to the government, end consumers, and items falling under the 3rd Schedule.
• Further tax does not become part of the output tax and is payable directly to the FBR.

Question 36

2. Discuss the conditions and requirements for registering a cottage industry under the Sales Tax Act, 1990.

Answer 36

• A cottage industry must fulfill the following conditions: no industrial connection of gas or electricity, location in a residential area, a labor force of no more than 10 workers, and an annual turnover from all supplies not exceeding Rs10 million.
• If a cottage industry meets these conditions, registration under the Sales Tax Act, 1990, is not required.

Question 37

3. Explain the application of fixed tax in the sales tax system.

Answer 37

• Fixed tax is levied on specific goods or activities based on a predetermined amount or capacity, irrespective of the actual value of supply.
• Examples of fixed tax include monthly fixed tax on bricks and fixed tax on items like mobile phones, satellite phones, and SIM card activations.
• The purchaser cannot claim input tax credit for fixed sales tax paid.

Question 38

4. What is the liability to pay sales tax and when is it paid?

Answer 38

• The liability to pay sales tax lies with the person making the supply, importing goods into Pakistan, or providing taxable services.
• Sales tax is paid at the time of customs duty payment for imported goods and at the time of filing sales tax returns for supplies made or services provided in Pakistan.
• The sales tax rates applicable at the time of supply or import declaration determine the tax amount to be paid.

Question 39

5. Discuss the change in tax rates and its implications.

Answer 39

• Taxable supplies in Pakistan are charged at the rate in force at the time of supply.
• Import of goods is charged at the rate in force at the time of declaration, except for cases where advance declarations or clearance from the warehouse are involved.
• Failure to pay tax within seven days of the declaration for clearance from the warehouse results in the tax being charged at the rate in force on the actual payment date.

Question 40

3. What are the consequences if a person is found to have claimed incorrect input tax credit or refund?

Answer 40

Answer: Proceedings against such a person should be completed within 60 days, extendable up to 120 days by an officer of rank not below Additional Commissioner, and up to 9 months by the Board with written reasons.

Question 41

4. How is additional amount calculated for delayed refunds?

Answer 41

Answer: In case of delayed refunds without dispute, the additional amount paid by the FBR is calculated at the Karachi Inter-bank Offered Rate (KIBOR) per annum.

Question 42

5. Are the additional amounts received on delayed refunds taxable?

Answer 42

Answer: Yes, any additional amount received on delayed refunds from the sales tax department is taxable.

Question 42

5. Are the additional amounts received on delayed refunds taxable?

Answer 42

Answer: Yes, any additional amount received on delayed refunds from the sales tax department is taxable.

Question 43

1. Explain the refund process for input tax on zero-rated supplies.

Answer 43

• Refund of input tax on zero-rated supplies should be made within 45 days of return.
• If a registered person has unpaid outstanding amounts of tax, default surcharge, or penalty, the refund will be made after adjusting these amounts.
• If there is reason to believe that a person has claimed incorrect input tax credit or refund, proceedings against them should be completed within 60 days, extendable up to 120 days by an officer of rank not below Additional Commissioner, and up to 9 months by the Board with written reasons.
• In case of delayed refund, the FBR will pay an additional amount calculated at the Karachi Inter-bank Offered Rate (KIBOR) per annum if there is no dispute in the claim.

Question 44

2. Discuss the concept of VAT and its implementation in the sales tax system.

Answer 44

• VAT (Value Added Tax) is an indirect tax collected at each stage of the supply chain, from importers to retailers.
• VAT utilizes a system of tax credits, known as input tax adjustment, to shift the burden of tax onto the final consumer and relieve intermediaries from the tax burden.
• In Pakistan’s sales tax system, VAT is implemented with registered persons paying sales tax based on the value of their taxable supplies.
• VAT aims to place the ultimate tax burden on the final consumer while allowing businesses to claim input tax adjustments.

Question 45

3. Explain the liability to pay sales tax and the parties involved in the supply chain.

Answer 45

• The liability to pay sales tax lies with the person making the supply, importing goods, or providing taxable services.
• In the supply chain, the liability is passed from one party to another until it reaches the final consumer.
• Importers, manufacturers, wholesalers, and retailers are all involved in the supply chain and have different responsibilities for collecting and paying sales tax.

Question 46

5. Explain the concept of fixed tax and its application in the sales tax system.

Answer 46

• Fixed tax is a predetermined tax amount or rate applied to specific goods or activities, regardless of the actual value of supply.
• Examples of fixed tax include monthly fixed tax on bricks and fixed tax on items like mobile phones and satellite phones.
• Fixed tax is different from the regular sales tax rate and may have specific conditions or exemptions associated with it.

Question 47

Q2. Can you provide examples of items that fall under zero-rated supplies?

Answer 47

A2. Certainly! Here are some examples of items falling under zero-rated supplies:
- Goods exported from Pakistan
- Supplies made to diplomats, diplomatic missions, and privileged persons
- Supply of raw materials and components for further manufacturing in Export Processing Zones (EPZs)
- Locally produced plant and machinery in EPZs (subject to certain conditions)
- Supplies made to duty-free shops
- Electric and gas consumed by manufacturer-exporters
- Packing materials used for zero-rated supplies
- Specified items such as bicycles, pencils, pens, etc.

Question 48

Q4. Explain the concept of VAT and its implementation in the sales tax system.

Answer 48

A4. VAT (Value Added Tax) is an indirect tax system that is applied at each stage of the supply chain. Its objective is to tax the value added at each stage of production and distribution, ultimately shifting the tax burden to the final consumer. In the sales tax system, VAT is implemented through the following steps:
- Importers, manufacturers, wholesalers, and retailers are registered and required to charge sales tax on their taxable supplies.
- At each stage, the tax charged on the value added is known as the output tax.
- The registered person can deduct the input tax paid on purchases from the output tax liability, reflecting the tax only on the value added.
- This input tax adjustment ensures that the ultimate burden of the tax falls on the final consumer, while businesses can recover the tax they paid on their inputs.

Question 49

Q5. How does the liability to pay sales tax work in the supply chain?

Answer 49

A5. The liability to pay sales tax is determined based on the role of each party in the supply chain:
- Importers are liable to pay sales tax on imported goods at the time of payment of customs duty.
- Manufacturers are responsible for paying sales tax on the value of their taxable supplies.
- Wholesalers and distributors charge sales tax on the value of taxable supplies made to other businesses or retailers.
- Retailers, specifically Tier 1 retailers, are required to be registered and charge sales tax on supplies made to end consumers.
- The liability to pay sales tax is passed from one party to another along the supply chain until it reaches the final consumer.

Question 50

4. Sales tax rates:

Answer 50

• The standard sales tax rate is 18%.
  
  • Further tax of 3% is charged on supplies to unregistered persons, except for specific exemptions.
  • Reduced rates are applicable to certain goods as specified in the 8th Schedule, such as flavored milk, silver and gold in unworked condition, and articles of jewelry.

Question 51

3. Further tax:

Answer 51

• Further tax is an additional tax charged at a rate of 3% on taxable supplies made to unregistered persons.
  
  • Further tax is not applicable in certain cases, including supplies to government bodies, sales directly to end consumers, and items falling under the 3rd Schedule.

Question 52

6. Change in tax rates:

Answer 52

• Taxable supplies in Pakistan are charged at the rate in force at the time of supply.
  
  • For imports, the tax rate is determined based on the date the declaration is presented, either on the arrival of the conveyance or the date of the manifest.
  • If tax payment for warehouse clearance is delayed beyond 7 days, the tax rate applicable is the rate in force on the date of actual payment.

Question 53

5. Fixed tax:

Answer 53

• Fixed tax may be imposed on certain items, such as bricks and mobile phones, at a predetermined monthly rate.
  
  • Bricks are subject to fixed tax rates based on the location of the manufacturing facility.
  • Mobile phones and satellite phones are also subject to fixed sales tax, and input tax cannot be claimed for the fixed sales tax paid.

Question 54

Exception of Zero Rated supplies?

Answer 54

1. Goods not eligible for zero-rated supplies:
   
   • Certain goods may not be eligible for zero-rated supplies even if they are exported. These goods are specified by the Federal Government through notifications.
   • For example, there may be restrictions on zero-rated supplies to specific countries, such as Afghanistan, Iran, or China, as notified by the government.
2. Goods intended for re-importation:
   
   • Zero-rated supplies do not apply to goods that are exported with the intention of being re-imported into Pakistan.
   • If the goods are exported temporarily and are expected to be re-imported, they will not qualify for zero-rated supplies.

Question 55

Q: What are the exemptions provided in the sales tax system in Pakistan?

Answer 55

A: The sales tax system in Pakistan provides exemptions in two categories:

1. Turnover-based exemption: Small manufacturers known as cottage industries and retailers (excluding specified Tier 1 retailers) are exempt from registration and do not charge sales tax on their supplies. This exemption is based on their annual turnover, and as long as their turnover remains below a certain threshold, they are not required to register for sales tax.
2. Items-based exemption: Certain products are exempt from sales tax regardless of turnover. Examples include books and pharmaceutical products. These items are exempt from sales tax irrespective of the turnover of the businesses involved in their production or supply.

Question 56

Q: Who is required to register for sales tax in the import process?

Answer 56

A: Importers are required to register for sales tax in Pakistan. They are responsible for paying sales tax at the time of import and subsequently charging sales tax on the value of their taxable supplies.

Question 57

Q: What are the registration requirements for wholesalers and distributors?

Answer 57

A: Wholesalers and distributors are required to register for sales tax in Pakistan. They must charge sales tax on the value of their taxable supplies.

Question 58

Q: Do all retailers in Pakistan need to register for sales tax?

Answer 58

A: No, only Tier 1 retailers, which are specified retailers as per the regulations, are required to register for sales tax. Other retailers may qualify for the turnover-based exemption and are not obligated to register or charge sales tax on their supplies.

Question 59

Q: Are cottage industries exempt from sales tax registration?

Answer 59

A: Yes, cottage industries, which are small-scale manufacturers, are exempt from sales tax registration as per the specified conditions in Table 2 of the 6th Schedule. They are not required to charge sales tax on their supplies.

Question 60

Q: Do manufacturers other than cottage industries need to register for sales tax?

Answer 60

A: Yes, manufacturers other than cottage industries are required to register for sales tax in Pakistan. They must charge sales tax on the value of their taxable supplies.

Question 61

Q: What is the retail price and how is sales tax charged on items falling under the Third Schedule?

Answer 61

A:
- The retail price is the price set by the manufacturer or importer for a particular variety of items, inclusive of all charges and taxes except sales tax.
- Sales tax is charged at a rate of 18% (or reduced rate as specified in 8th Schedule) on the recommended retail price.
- The sales tax amount charged on the initial supply is also applicable to subsequent supplies of the same item.

Question 62

3. Explain the liability to pay sales tax and the parties involved in the supply chain.

Answer 62

• The liability to pay sales tax lies with the person making the supply, importing goods, or providing taxable services.
• In the supply chain, the liability is passed from one party to another until it reaches the final consumer.
• Importers, manufacturers, wholesalers, and retailers are all involved in the supply chain and have different responsibilities for collecting and paying sales tax.

Question 63

5. Explain the concept of fixed tax and its application in the sales tax system.

Answer 63

• Fixed tax is a predetermined tax amount or rate applied to specific goods or activities, regardless of the actual value of supply.
• Examples of fixed tax include monthly fixed tax on bricks and fixed tax on items like mobile phones and satellite phones.
• Fixed tax is different from the regular sales tax rate and may have specific conditions or exemptions associated with it.

Question 64

4. Sales tax rates:

Answer 64

• The standard sales tax rate is 18%.
  
  • Further tax of 3% is charged on supplies to unregistered persons, except for specific exemptions.
  • Reduced rates are applicable to certain goods as specified in the 8th Schedule, such as flavored milk, silver and gold in unworked condition, and articles of jewelry.

Question 65

Q: What is the definition of a retailer?

Answer 65

A:
- A retailer is a person who supplies goods to the general public for consumption.
- If a retailer combines import and retail or manufacturing with retail, they must declare and advertise wholesale and retail prices separately and provide the addresses of their retail outlets.

Question 66

Q: Who are Tier-1 retailers?

Answer 66

A:
- Tier-1 retailers, also known as specified retailers, include:
1. Retailers operating as part of a national or international chain of stores.
2. Retailers operating in air-conditioned shopping malls, plazas, or centers (excluding kiosks).
3. Retailers with cumulative electricity bills exceeding Rs. 1,200,000 in the preceding 12 months.
4. Wholesalers-cum-retailers engaged in bulk import and supply of consumer goods to retailers and general consumers.
5. Retailers with shops measuring 1,000 square feet or more (2,000 square feet or more for furniture retailers).
6. Retailers accepting payment through debit or credit cards or other digital services.
7. Any other persons prescribed by the Federal Board of Revenue (FBR).

Question 67

Q: What is the sales tax rate for retailers other than Tier-1?

Answer 67

A:
- For retailers other than Tier-1, the sales tax is charged through their monthly electricity bills:
1. Sales tax at 5% when the monthly bill amount does not exceed Rs. 20,000.
2. Sales tax at 7.5% when the monthly bill amount exceeds Rs. 20,000.
- The electricity supplier collects and deposits the tax directly without adjusting it against input tax.

Question 68

Q: Which goods are covered under the Third Schedule?

Answer 68

A:
- The Third Schedule includes goods such as:
1. Cigarettes
2. Juices, ice cream, syrups, aerated water, and beverages
3. Mineral/bottled water
4. Detergents, shampoo, soap, toothpaste, shaving cream, cosmetics, shoe polish/cream
5. Tea, powder drinks, milky drinks
6. Toilet paper and tissue paper
7. Spices sold in retail packing with brand name and trademark
8. Cement sold in retail packing

Question 69

Q: What are the special rates of tax for certain goods?

Answer 69

A:
- The Federal Government has directed to charge sales tax at a rate of 25% on the import and subsequent supply of goods such as:
1. Aerated water or beverages
2. Cigarettes, cigars, and e-cigarettes
3. Cosmetic and shaving items
4. Tissue papers
5. Household articles including crockery, kitchenware, and tableware
6. Home appliances in CBU (Completely Built-Up) condition
7. Ice cream
8. Fruit and vegetable juices
9. Mattress and sleeping bags
10. Shampoos

Question 70

Q: Can the Federal Board of Revenue (FBR) specify areas or zones for determining high retail prices?

Answer 70

A:
- Yes, the FBR has the authority to designate areas or zones for determining high retail prices for specific brands or varieties of goods.

Question 71

Q: Are Tier-1 retailers required to advertise separate wholesale and retail prices?

Answer 71

A:
- Yes, Tier-1 retailers who combine import and retail or manufacturing with retail must notify and advertise wholesale and retail prices separately. They are also required to declare the addresses of their retail outlets.

Question 72

Q: What is the tax rate for retailers other than Tier-1 on their monthly electricity bills?

Answer 72

A:
- Retailers other than Tier-1 are charged sales tax on their monthly electricity bills as follows:
1. 5% sales tax when the monthly bill amount is up to Rs. 20,000.
2. 7.5% sales tax when the monthly bill amount exceeds Rs. 20,000.

Question 73

Q: Are Tier-1 retailers required to have a certain shop size?

Answer 73

A:
- Yes, Tier-1 retailers must have a shop size of 1,000 square feet or more (2,000 square feet or more for furniture retailers) to qualify as Tier-1 retailers.

Question 74

Q1: What documents must a registered person hold to deduct input tax during the tax period for taxable supplies?

Q2: Can input tax be claimed on electric and gas bills paid by a registered consumer?
A2:
Yes, input tax paid on electric and gas bills can be claimed by a registered consumer. In such cases, the gas or electric bill itself is considered a tax invoice for sales tax purposes, provided it contains the NTN (National Tax Number) and address of the business premises declared to the Commissioner of such consumer. However, it is essential to ensure that the electric or gas connection’s name is either in the name of the registered person or, if not, their NTN is mentioned on the bill along with the address provided in the application for sales tax registration.

Answer 74

A1:
- Tax invoice in their name bearing their NTN for supplies of goods or services.
- Goods declaration (bill of entry) for imported goods.
- Treasury challan in their name for goods purchased in auction.

Question 75

Q2: Can input tax be claimed on electric and gas bills paid by a registered consumer?

Answer 75

A2:
- Yes, input tax paid with electric and gas bills can be claimed by a registered consumer if the bill contains their NTN and address of the business premises declared to the Commissioner.

Question 76

Q3: In what circumstances can input tax not be claimed by a registered person?

Answer 76

A3:
- Supply of exempt goods and services.
- Goods and services not related to taxable supplies or acquired for personal/non-business use.
- Sales tax on services where input tax adjustment is barred under provincial sales tax laws.
- Input tax on fake invoices.
- Goods where sales tax has not been deposited into the government treasury by the supplier.
- Purchases with discrepancies indicated by CREST or input tax not verifiable in the supply chain.

Question 77

1: What documents must a registered person hold to deduct input tax during the tax period for taxable supplies?
A1:
A registered person can deduct their input tax during the tax period for the purpose of taxable supplies made or to be made. To do so, they must possess the following documents:
- Tax Invoice: The tax invoice must be in the name of the registered person and bear their NTN (National Tax Number). This applies to supplies of goods or services.
- Goods Declaration (Bill of Entry): In the case of goods imported by the registered person, they must possess the goods declaration or bill of entry.
- Treasury Challan: If the registered person acquires goods through an auction, they must hold the treasury challan in their name, which should also bear their NTN.

Question 78

1: What documents must a registered person hold to deduct input tax during the tax period for taxable supplies?

Answer 78

A1:
A registered person can deduct their input tax during the tax period for the purpose of taxable supplies made or to be made. To do so, they must possess the following documents:
- Tax Invoice: The tax invoice must be in the name of the registered person and bear their NTN (National Tax Number). This applies to supplies of goods or services.
- Goods Declaration (Bill of Entry): In the case of goods imported by the registered person, they must possess the goods declaration or bill of entry.
- Treasury Challan: If the registered person acquires goods through an auction, they must hold the treasury challan in their name, which should also bear their NTN.

Question 78

1: What documents must a registered person hold to deduct input tax during the tax period for taxable supplies?

Answer 78

A1:
A registered person can deduct their input tax during the tax period for the purpose of taxable supplies made or to be made. To do so, they must possess the following documents:
- Tax Invoice: The tax invoice must be in the name of the registered person and bear their NTN (National Tax Number). This applies to supplies of goods or services.
- Goods Declaration (Bill of Entry): In the case of goods imported by the registered person, they must possess the goods declaration or bill of entry.
- Treasury Challan: If the registered person acquires goods through an auction, they must hold the treasury challan in their name, which should also bear their NTN.

Question 79

Q3: In what circumstances can input tax not be claimed by a registered person?

Answer 79

A3:
There are several circumstances in which a registered person is not entitled to reclaim or deduct their input tax. These circumstances include:
1. Supply of Exempt Goods and Services: Input tax cannot be claimed on supplies of goods and services that are exempt from sales tax.
2. Goods and Services for Personal/Non-business Use: Input tax cannot be claimed on goods and services acquired for personal or non-business use, for example, if a manufacturer purchases tissue papers for their own use, they cannot reclaim input tax on such goods.
3. Sales Tax on Services: Input tax adjustment is barred under the respective provincial sales tax laws for certain services, and therefore, input tax cannot be claimed for such services.
4. Input Tax on Fake Invoices: Input tax claimed on fake invoices or fraudulent transactions is not allowed.
5. Goods with Unpaid Sales Tax: Input tax cannot be reclaimed on goods where the supplier has not deposited the sales tax into the government treasury.
6. Discrepancies in CREST or Unverifiable Input Tax: Input tax cannot be claimed for purchases with discrepancies indicated by the CREST (Computerized Risk-Based Evaluation of Sales Tax) or input tax that is not verifiable in the supply chain.

Question 80

Q4: What is the concept of extra tax, and what is an example of it?
A4:
Extra tax is an additional tax imposed by the Federal Government on specified items, and it can be levied up to a maximum of 18% in addition to the normal sales tax. An example of extra tax is the 5% extra tax charged on supplies of electric power and natural gas to unregistered persons or those not included in the Active Taxpayers List (ATL) having industrial or commercial connections, provided their monthly bill exceeds Rs. 15,000. However, the extra tax of 5% is not applicable in the case of supply of natural gas to CNG stations.

Question 81

Q4: What is the concept of extra tax, and what is an example of it?

Answer 81

A4:
Extra tax is an additional tax imposed by the Federal Government on specified items, and it can be levied up to a maximum of 18% in addition to the normal sales tax. An example of extra tax is the 5% extra tax charged on supplies of electric power and natural gas to unregistered persons or those not included in the Active Taxpayers List (ATL) having industrial or commercial connections, provided their monthly bill exceeds Rs. 15,000. However, the extra tax of 5% is not applicable in the case of supply of natural gas to CNG stations.

Question 82

Q5: Can a registered person claim input tax if they did not deduct it during the relevant tax period?

Answer 82

A5:
- Yes, if a registered person did not deduct input tax within the relevant tax period, they can still claim it in the return for any of the next 6 tax periods.

Question 82

Q6: What is the alternative option for a registered person to claim input tax if not done within the relevant tax period or the next 6 tax periods?
A6:
- Alternatively, the registered person may apply for a refund of the unclaimed input tax within one year under section 66. The Commissioner has the power to grant an extension of these time limits in special cases.

Question 83

Q6: What is the alternative option for a registered person to claim input tax if not done within the relevant tax period or the next 6 tax periods?

Answer 83

A6:
- Alternatively, the registered person may apply for a refund of the unclaimed input tax within one year under section 66. The Commissioner has the power to grant an extension of these time limits in special cases.

Question 84

Q5: Can a registered person claim input tax if they did not deduct it during the relevant tax period?

Q7: What is CREST, and how does it relate to input tax adjustment?
A7:
- CREST stands for “Computerised Risk-Based Evaluation of Sales Tax.” It is a computerized program used by the sales tax department for analyzing and cross-matching sales tax returns.
- Input tax adjustment may be affected if a discrepancy is indicated by the CREST system. However, discrepancies are allowed on a provisional basis, and the registered person is advised by the FBR (Federal Board of Revenue) to contact the supplier and persuade them to disclose their relevant output tax.
- If the supplier does not declare their relevant output tax, the input tax allowed earlier provisionally would be adjusted or recovered.

Q8: Is provisional adjustment of input tax allowed if a registered person does not have a tax invoice?
A8:
- No, provisional adjustment of input tax is not allowed if a registered person does not have a tax invoice. The existence of a tax invoice bearing the name and NTN of the registered person is a basic condition for claiming input tax.
- However, if a registered person has a tax invoice for their purchases, and a discrepancy is indicated by the CREST system, provisional adjustment of input tax would be allowed.

Q9: What are the goods specified by the FBR for which input tax cannot be reclaimed?
A9:
- The FBR has specified the following goods acquired otherwise than stock in trade by a registered person, in respect of which input tax shall not be reclaimed:
1. Food, beverages, garments, and consumption on entertainment.
2. Gifts and giveaways, including dairies and calendars.
3. Supply of electricity and gas to residential colonies.
4. Office equipment (excluding electronic fiscal cash registers), furniture, and fixtures like crockery and cutlery.

Q10: Is extra tax applicable to all specified items, and what is an example of it?
A10:
- No, the Federal Government may collect extra tax on any specified item up to a maximum of 18% in addition to the normal sales tax. It is not applicable to all items.
- An example of extra tax is the 5% extra tax levied on supplies of electric power and natural gas to unregistered or non-ATL (Active Taxpayers List) persons having industrial or commercial connections, whose bill in any month exceeds Rs. 15,000. However, this extra tax is not charged in the case of natural gas supply to CNG stations.

Answer 84

A5:
- Yes, if a registered person did not deduct input tax within the relevant tax period, they can still claim it in the return for any of the next 6 tax periods.

Question 85

Q7: What is CREST, and how does it relate to input tax adjustment?
A7:
- CREST stands for “Computerised Risk-Based Evaluation of Sales Tax.” It is a computerized program used by the sales tax department for analyzing and cross-matching sales tax returns.
- Input tax adjustment may be affected if a discrepancy is indicated by the CREST system. However, discrepancies are allowed on a provisional basis, and the registered person is advised by the FBR (Federal Board of Revenue) to contact the supplier and persuade them to disclose their relevant output tax.
- If the supplier does not declare their relevant output tax, the input tax allowed earlier provisionally would be adjusted or recovered.

Question 85

Q5: Can a registered person claim input tax if they did not deduct it during the relevant tax period?

Q7: What is CREST, and how does it relate to input tax adjustment?
A7:
- CREST stands for “Computerised Risk-Based Evaluation of Sales Tax.” It is a computerized program used by the sales tax department for analyzing and cross-matching sales tax returns.
- Input tax adjustment may be affected if a discrepancy is indicated by the CREST system. However, discrepancies are allowed on a provisional basis, and the registered person is advised by the FBR (Federal Board of Revenue) to contact the supplier and persuade them to disclose their relevant output tax.
- If the supplier does not declare their relevant output tax, the input tax allowed earlier provisionally would be adjusted or recovered.

Q8: Is provisional adjustment of input tax allowed if a registered person does not have a tax invoice?
A8:
- No, provisional adjustment of input tax is not allowed if a registered person does not have a tax invoice. The existence of a tax invoice bearing the name and NTN of the registered person is a basic condition for claiming input tax.
- However, if a registered person has a tax invoice for their purchases, and a discrepancy is indicated by the CREST system, provisional adjustment of input tax would be allowed.

Q9: What are the goods specified by the FBR for which input tax cannot be reclaimed?
A9:
- The FBR has specified the following goods acquired otherwise than stock in trade by a registered person, in respect of which input tax shall not be reclaimed:
1. Food, beverages, garments, and consumption on entertainment.
2. Gifts and giveaways, including dairies and calendars.
3. Supply of electricity and gas to residential colonies.
4. Office equipment (excluding electronic fiscal cash registers), furniture, and fixtures like crockery and cutlery.

Q10: Is extra tax applicable to all specified items, and what is an example of it?
A10:
- No, the Federal Government may collect extra tax on any specified item up to a maximum of 18% in addition to the normal sales tax. It is not applicable to all items.
- An example of extra tax is the 5% extra tax levied on supplies of electric power and natural gas to unregistered or non-ATL (Active Taxpayers List) persons having industrial or commercial connections, whose bill in any month exceeds Rs. 15,000. However, this extra tax is not charged in the case of natural gas supply to CNG stations.

Answer 85

A5:
- Yes, if a registered person did not deduct input tax within the relevant tax period, they can still claim it in the return for any of the next 6 tax periods.

Question 86

Q7: What is CREST, and how does it relate to input tax adjustment?

Answer 86

A7:
- CREST stands for “Computerised Risk-Based Evaluation of Sales Tax.” It is a computerized program used by the sales tax department for analyzing and cross-matching sales tax returns.
- Input tax adjustment may be affected if a discrepancy is indicated by the CREST system. However, discrepancies are allowed on a provisional basis, and the registered person is advised by the FBR (Federal Board of Revenue) to contact the supplier and persuade them to disclose their relevant output tax.
- If the supplier does not declare their relevant output tax, the input tax allowed earlier provisionally would be adjusted or recovered.

Question 87

Q5: Can a registered person claim input tax if they did not deduct it during the relevant tax period?

Q7: What is CREST, and how does it relate to input tax adjustment?
A7:
- CREST stands for “Computerised Risk-Based Evaluation of Sales Tax.” It is a computerized program used by the sales tax department for analyzing and cross-matching sales tax returns.
- Input tax adjustment may be affected if a discrepancy is indicated by the CREST system. However, discrepancies are allowed on a provisional basis, and the registered person is advised by the FBR (Federal Board of Revenue) to contact the supplier and persuade them to disclose their relevant output tax.
- If the supplier does not declare their relevant output tax, the input tax allowed earlier provisionally would be adjusted or recovered.

Q8: Is provisional adjustment of input tax allowed if a registered person does not have a tax invoice?
A8:
- No, provisional adjustment of input tax is not allowed if a registered person does not have a tax invoice. The existence of a tax invoice bearing the name and NTN of the registered person is a basic condition for claiming input tax.
- However, if a registered person has a tax invoice for their purchases, and a discrepancy is indicated by the CREST system, provisional adjustment of input tax would be allowed.

Q9: What are the goods specified by the FBR for which input tax cannot be reclaimed?
A9:
- The FBR has specified the following goods acquired otherwise than stock in trade by a registered person, in respect of which input tax shall not be reclaimed:
1. Food, beverages, garments, and consumption on entertainment.
2. Gifts and giveaways, including dairies and calendars.
3. Supply of electricity and gas to residential colonies.
4. Office equipment (excluding electronic fiscal cash registers), furniture, and fixtures like crockery and cutlery.

Q10: Is extra tax applicable to all specified items, and what is an example of it?
A10:
- No, the Federal Government may collect extra tax on any specified item up to a maximum of 18% in addition to the normal sales tax. It is not applicable to all items.
- An example of extra tax is the 5% extra tax levied on supplies of electric power and natural gas to unregistered or non-ATL (Active Taxpayers List) persons having industrial or commercial connections, whose bill in any month exceeds Rs. 15,000. However, this extra tax is not charged in the case of natural gas supply to CNG stations.

Answer 87

A5:
- Yes, if a registered person did not deduct input tax within the relevant tax period, they can still claim it in the return for any of the next 6 tax periods.

Question 88

Q8: Is provisional adjustment of input tax allowed if a registered person does not have a tax invoice?
A8:
- No, provisional adjustment of input tax is not allowed if a registered person does not have a tax invoice. The existence of a tax invoice bearing the name and NTN of the registered person is a basic condition for claiming input tax.
- However, if a registered person has a tax invoice for their purchases, and a discrepancy is indicated by the CREST system, provisional adjustment of input tax would be allowed.

Question 89

Q8: Is provisional adjustment of input tax allowed if a registered person does not have a tax invoice?

Answer 89

A8:
- No, provisional adjustment of input tax is not allowed if a registered person does not have a tax invoice. The existence of a tax invoice bearing the name and NTN of the registered person is a basic condition for claiming input tax.
- However, if a registered person has a tax invoice for their purchases, and a discrepancy is indicated by the CREST system, provisional adjustment of input tax would be allowed.

Question 90

Q5: Can a registered person claim input tax if they did not deduct it during the relevant tax period?

Q7: What is CREST, and how does it relate to input tax adjustment?
A7:
- CREST stands for “Computerised Risk-Based Evaluation of Sales Tax.” It is a computerized program used by the sales tax department for analyzing and cross-matching sales tax returns.
- Input tax adjustment may be affected if a discrepancy is indicated by the CREST system. However, discrepancies are allowed on a provisional basis, and the registered person is advised by the FBR (Federal Board of Revenue) to contact the supplier and persuade them to disclose their relevant output tax.
- If the supplier does not declare their relevant output tax, the input tax allowed earlier provisionally would be adjusted or recovered.

Q8: Is provisional adjustment of input tax allowed if a registered person does not have a tax invoice?
A8:
- No, provisional adjustment of input tax is not allowed if a registered person does not have a tax invoice. The existence of a tax invoice bearing the name and NTN of the registered person is a basic condition for claiming input tax.
- However, if a registered person has a tax invoice for their purchases, and a discrepancy is indicated by the CREST system, provisional adjustment of input tax would be allowed.

Q9: What are the goods specified by the FBR for which input tax cannot be reclaimed?
A9:
- The FBR has specified the following goods acquired otherwise than stock in trade by a registered person, in respect of which input tax shall not be reclaimed:
1. Food, beverages, garments, and consumption on entertainment.
2. Gifts and giveaways, including dairies and calendars.
3. Supply of electricity and gas to residential colonies.
4. Office equipment (excluding electronic fiscal cash registers), furniture, and fixtures like crockery and cutlery.

Q10: Is extra tax applicable to all specified items, and what is an example of it?
A10:
- No, the Federal Government may collect extra tax on any specified item up to a maximum of 18% in addition to the normal sales tax. It is not applicable to all items.
- An example of extra tax is the 5% extra tax levied on supplies of electric power and natural gas to unregistered or non-ATL (Active Taxpayers List) persons having industrial or commercial connections, whose bill in any month exceeds Rs. 15,000. However, this extra tax is not charged in the case of natural gas supply to CNG stations.

Answer 90

A5:
- Yes, if a registered person did not deduct input tax within the relevant tax period, they can still claim it in the return for any of the next 6 tax periods.

Question 91

Q9: What are the goods specified by the FBR for which input tax cannot be reclaimed?
A9:
- The FBR has specified the following goods acquired otherwise than stock in trade by a registered person, in respect of which input tax shall not be reclaimed:
1. Food, beverages, garments, and consumption on entertainment.
2. Gifts and giveaways, including dairies and calendars.
3. Supply of electricity and gas to residential colonies.
4. Office equipment (excluding electronic fiscal cash registers), furniture, and fixtures like crockery and cutlery.

Question 92

Q5: Can a registered person claim input tax if they did not deduct it during the relevant tax period?

Q7: What is CREST, and how does it relate to input tax adjustment?
A7:
- CREST stands for “Computerised Risk-Based Evaluation of Sales Tax.” It is a computerized program used by the sales tax department for analyzing and cross-matching sales tax returns.
- Input tax adjustment may be affected if a discrepancy is indicated by the CREST system. However, discrepancies are allowed on a provisional basis, and the registered person is advised by the FBR (Federal Board of Revenue) to contact the supplier and persuade them to disclose their relevant output tax.
- If the supplier does not declare their relevant output tax, the input tax allowed earlier provisionally would be adjusted or recovered.

Q8: Is provisional adjustment of input tax allowed if a registered person does not have a tax invoice?
A8:
- No, provisional adjustment of input tax is not allowed if a registered person does not have a tax invoice. The existence of a tax invoice bearing the name and NTN of the registered person is a basic condition for claiming input tax.
- However, if a registered person has a tax invoice for their purchases, and a discrepancy is indicated by the CREST system, provisional adjustment of input tax would be allowed.

Q9: What are the goods specified by the FBR for which input tax cannot be reclaimed?
A9:
- The FBR has specified the following goods acquired otherwise than stock in trade by a registered person, in respect of which input tax shall not be reclaimed:
1. Food, beverages, garments, and consumption on entertainment.
2. Gifts and giveaways, including dairies and calendars.
3. Supply of electricity and gas to residential colonies.
4. Office equipment (excluding electronic fiscal cash registers), furniture, and fixtures like crockery and cutlery.

Q10: Is extra tax applicable to all specified items, and what is an example of it?
A10:
- No, the Federal Government may collect extra tax on any specified item up to a maximum of 18% in addition to the normal sales tax. It is not applicable to all items.
- An example of extra tax is the 5% extra tax levied on supplies of electric power and natural gas to unregistered or non-ATL (Active Taxpayers List) persons having industrial or commercial connections, whose bill in any month exceeds Rs. 15,000. However, this extra tax is not charged in the case of natural gas supply to CNG stations.

Answer 92

A5:
- Yes, if a registered person did not deduct input tax within the relevant tax period, they can still claim it in the return for any of the next 6 tax periods.

Question 93

Q9: What are the goods specified by the FBR for which input tax cannot be reclaimed?

Answer 93

A9:
- The FBR has specified the following goods acquired otherwise than stock in trade by a registered person, in respect of which input tax shall not be reclaimed:
1. Food, beverages, garments, and consumption on entertainment.
2. Gifts and giveaways, including dairies and calendars.
3. Supply of electricity and gas to residential colonies.
4. Office equipment (excluding electronic fiscal cash registers), furniture, and fixtures like crockery and cutlery.

Question 94

Q5: Can a registered person claim input tax if they did not deduct it during the relevant tax period?

Q7: What is CREST, and how does it relate to input tax adjustment?
A7:
- CREST stands for “Computerised Risk-Based Evaluation of Sales Tax.” It is a computerized program used by the sales tax department for analyzing and cross-matching sales tax returns.
- Input tax adjustment may be affected if a discrepancy is indicated by the CREST system. However, discrepancies are allowed on a provisional basis, and the registered person is advised by the FBR (Federal Board of Revenue) to contact the supplier and persuade them to disclose their relevant output tax.
- If the supplier does not declare their relevant output tax, the input tax allowed earlier provisionally would be adjusted or recovered.

Q8: Is provisional adjustment of input tax allowed if a registered person does not have a tax invoice?
A8:
- No, provisional adjustment of input tax is not allowed if a registered person does not have a tax invoice. The existence of a tax invoice bearing the name and NTN of the registered person is a basic condition for claiming input tax.
- However, if a registered person has a tax invoice for their purchases, and a discrepancy is indicated by the CREST system, provisional adjustment of input tax would be allowed.

Q9: What are the goods specified by the FBR for which input tax cannot be reclaimed?
A9:
- The FBR has specified the following goods acquired otherwise than stock in trade by a registered person, in respect of which input tax shall not be reclaimed:
1. Food, beverages, garments, and consumption on entertainment.
2. Gifts and giveaways, including dairies and calendars.
3. Supply of electricity and gas to residential colonies.
4. Office equipment (excluding electronic fiscal cash registers), furniture, and fixtures like crockery and cutlery.

Q10: Is extra tax applicable to all specified items, and what is an example of it?
A10:
- No, the Federal Government may collect extra tax on any specified item up to a maximum of 18% in addition to the normal sales tax. It is not applicable to all items.
- An example of extra tax is the 5% extra tax levied on supplies of electric power and natural gas to unregistered or non-ATL (Active Taxpayers List) persons having industrial or commercial connections, whose bill in any month exceeds Rs. 15,000. However, this extra tax is not charged in the case of natural gas supply to CNG stations.

Answer 94

A5:
- Yes, if a registered person did not deduct input tax within the relevant tax period, they can still claim it in the return for any of the next 6 tax periods.

Question 95

Q5: Can a registered person claim input tax if they did not deduct it during the relevant tax period?

Q7: What is CREST, and how does it relate to input tax adjustment?
A7:
- CREST stands for “Computerised Risk-Based Evaluation of Sales Tax.” It is a computerized program used by the sales tax department for analyzing and cross-matching sales tax returns.
- Input tax adjustment may be affected if a discrepancy is indicated by the CREST system. However, discrepancies are allowed on a provisional basis, and the registered person is advised by the FBR (Federal Board of Revenue) to contact the supplier and persuade them to disclose their relevant output tax.
- If the supplier does not declare their relevant output tax, the input tax allowed earlier provisionally would be adjusted or recovered.

Q8: Is provisional adjustment of input tax allowed if a registered person does not have a tax invoice?
A8:
- No, provisional adjustment of input tax is not allowed if a registered person does not have a tax invoice. The existence of a tax invoice bearing the name and NTN of the registered person is a basic condition for claiming input tax.
- However, if a registered person has a tax invoice for their purchases, and a discrepancy is indicated by the CREST system, provisional adjustment of input tax would be allowed.

Q9: What are the goods specified by the FBR for which input tax cannot be reclaimed?
A9:
- The FBR has specified the following goods acquired otherwise than stock in trade by a registered person, in respect of which input tax shall not be reclaimed:
1. Food, beverages, garments, and consumption on entertainment.
2. Gifts and giveaways, including dairies and calendars.
3. Supply of electricity and gas to residential colonies.
4. Office equipment (excluding electronic fiscal cash registers), furniture, and fixtures like crockery and cutlery.

Q10: Is extra tax applicable to all specified items, and what is an example of it?
A10:
- No, the Federal Government may collect extra tax on any specified item up to a maximum of 18% in addition to the normal sales tax. It is not applicable to all items.
- An example of extra tax is the 5% extra tax levied on supplies of electric power and natural gas to unregistered or non-ATL (Active Taxpayers List) persons having industrial or commercial connections, whose bill in any month exceeds Rs. 15,000. However, this extra tax is not charged in the case of natural gas supply to CNG stations.

Answer 95

A5:
- Yes, if a registered person did not deduct input tax within the relevant tax period, they can still claim it in the return for any of the next 6 tax periods.

Question 96

Q11: Can a registered person claim input tax on goods purchased for personal or non-business use?

Q20: What are some examples of items on which extra tax is levied?
A20:
- Some examples of items on which extra tax is levied include supplies of electric power and natural gas to unregistered or non-ATL persons with industrial or commercial connections, whose bill in any month exceeds Rs. 15,000. However, this extra tax is not charged for the supply of natural gas to CNG stations.

Answer 96

A11:
- No, input tax cannot be claimed on goods and services not related to taxable supplies or acquired for personal or non-business use. For example, if a manufacturer purchases tissue papers for their own use, they will be considered a direct consumer of such goods, and input tax cannot be reclaimed.

Question 97

Q12: Under what circumstances is input tax not allowed on services, even if the registered person has paid it?

Answer 97

A12:
- Input tax adjustment is barred on services in respect of which input tax adjustment is prohibited under the respective provincial sales tax laws.

Question 98

Q5: Can a registered person claim input tax if they did not deduct it during the relevant tax period?

Q7: What is CREST, and how does it relate to input tax adjustment?
A7:
- CREST stands for “Computerised Risk-Based Evaluation of Sales Tax.” It is a computerized program used by the sales tax department for analyzing and cross-matching sales tax returns.
- Input tax adjustment may be affected if a discrepancy is indicated by the CREST system. However, discrepancies are allowed on a provisional basis, and the registered person is advised by the FBR (Federal Board of Revenue) to contact the supplier and persuade them to disclose their relevant output tax.
- If the supplier does not declare their relevant output tax, the input tax allowed earlier provisionally would be adjusted or recovered.

Q8: Is provisional adjustment of input tax allowed if a registered person does not have a tax invoice?
A8:
- No, provisional adjustment of input tax is not allowed if a registered person does not have a tax invoice. The existence of a tax invoice bearing the name and NTN of the registered person is a basic condition for claiming input tax.
- However, if a registered person has a tax invoice for their purchases, and a discrepancy is indicated by the CREST system, provisional adjustment of input tax would be allowed.

Q9: What are the goods specified by the FBR for which input tax cannot be reclaimed?
A9:
- The FBR has specified the following goods acquired otherwise than stock in trade by a registered person, in respect of which input tax shall not be reclaimed:
1. Food, beverages, garments, and consumption on entertainment.
2. Gifts and giveaways, including dairies and calendars.
3. Supply of electricity and gas to residential colonies.
4. Office equipment (excluding electronic fiscal cash registers), furniture, and fixtures like crockery and cutlery.

Q10: Is extra tax applicable to all specified items, and what is an example of it?
A10:
- No, the Federal Government may collect extra tax on any specified item up to a maximum of 18% in addition to the normal sales tax. It is not applicable to all items.
- An example of extra tax is the 5% extra tax levied on supplies of electric power and natural gas to unregistered or non-ATL (Active Taxpayers List) persons having industrial or commercial connections, whose bill in any month exceeds Rs. 15,000. However, this extra tax is not charged in the case of natural gas supply to CNG stations.

Answer 98

A5:
- Yes, if a registered person did not deduct input tax within the relevant tax period, they can still claim it in the return for any of the next 6 tax periods.

Question 99

Q16: Can input tax be reclaimed on goods for which the sales tax has not been deposited into the government treasury by the supplier?

Answer 99

A16:
- No, input tax cannot be reclaimed on goods in respect of which the supplier has not deposited the sales tax into the government treasury. The registered person must ensure that the supplier has complied with tax payment obligations.

Question 100

Q17: In the case of acquisitions made through auctions, what document is required to claim input tax?

Answer 100

A17:
- In the case of goods purchased through auctions, a registered person must hold a treasury challan in their name bearing their NTN to claim input tax.

Question 101

Q18: How long does a registered person have to apply for a refund of unclaimed input tax under section 66?

Answer 101

A18:
- A registered person has one year to apply for a refund of unclaimed input tax under section 66.

Question 102

Q19: Can input tax be reclaimed on supply of electricity and gas to residential colonies?

Answer 102

A19:
- No, input tax cannot be reclaimed on the supply of electricity and gas to residential colonies.

Question 103

Q1: How should payments exceeding Rs. 50,000 (excluding utility bills) be made in business transactions?

Answer 103

A1:
- Payments exceeding Rs. 50,000 must be made by a crossed banking instrument.
- The payment should be made within 180 days of the tax invoice issuance date (extendable on reasonable grounds).
- The payment should be made from the buyer’s business bank account to the supplier’s business bank account.

Question 104

Q2: What are the consequences if the conditions for payments exceeding Rs. 50,000 are not met?

Answer 104

A2:
- If the conditions are not met, the buyer won’t be allowed any input tax credit or zero rating.
- The supplier won’t be allowed input tax credit or zero rating if the amount received is not deposited in the declared business bank account.

Question 105

Q3: How is input tax apportioned for registered persons supplying taxable and exempt goods?

Answer 105

A3:
- Input tax relating wholly to taxable supplies is fully adjustable/reclaimable.
- Input tax relating wholly to exempt supplies is not admissible.
- Sales tax on goods and services used for both taxable and exempt supplies shall be apportioned based on the given formula.

Question 106

Q5: Can a registered person claim input tax if they did not deduct it during the relevant tax period?

Q7: What is CREST, and how does it relate to input tax adjustment?
A7:
- CREST stands for “Computerised Risk-Based Evaluation of Sales Tax.” It is a computerized program used by the sales tax department for analyzing and cross-matching sales tax returns.
- Input tax adjustment may be affected if a discrepancy is indicated by the CREST system. However, discrepancies are allowed on a provisional basis, and the registered person is advised by the FBR (Federal Board of Revenue) to contact the supplier and persuade them to disclose their relevant output tax.
- If the supplier does not declare their relevant output tax, the input tax allowed earlier provisionally would be adjusted or recovered.

Q8: Is provisional adjustment of input tax allowed if a registered person does not have a tax invoice?
A8:
- No, provisional adjustment of input tax is not allowed if a registered person does not have a tax invoice. The existence of a tax invoice bearing the name and NTN of the registered person is a basic condition for claiming input tax.
- However, if a registered person has a tax invoice for their purchases, and a discrepancy is indicated by the CREST system, provisional adjustment of input tax would be allowed.

Q9: What are the goods specified by the FBR for which input tax cannot be reclaimed?
A9:
- The FBR has specified the following goods acquired otherwise than stock in trade by a registered person, in respect of which input tax shall not be reclaimed:
1. Food, beverages, garments, and consumption on entertainment.
2. Gifts and giveaways, including dairies and calendars.
3. Supply of electricity and gas to residential colonies.
4. Office equipment (excluding electronic fiscal cash registers), furniture, and fixtures like crockery and cutlery.

Q10: Is extra tax applicable to all specified items, and what is an example of it?
A10:
- No, the Federal Government may collect extra tax on any specified item up to a maximum of 18% in addition to the normal sales tax. It is not applicable to all items.
- An example of extra tax is the 5% extra tax levied on supplies of electric power and natural gas to unregistered or non-ATL (Active Taxpayers List) persons having industrial or commercial connections, whose bill in any month exceeds Rs. 15,000. However, this extra tax is not charged in the case of natural gas supply to CNG stations.

Answer 106

A5:
- Yes, if a registered person did not deduct input tax within the relevant tax period, they can still claim it in the return for any of the next 6 tax periods.

Question 107

Q5: Can a registered person claim input tax if they did not deduct it during the relevant tax period?

Q7: What is CREST, and how does it relate to input tax adjustment?
A7:
- CREST stands for “Computerised Risk-Based Evaluation of Sales Tax.” It is a computerized program used by the sales tax department for analyzing and cross-matching sales tax returns.
- Input tax adjustment may be affected if a discrepancy is indicated by the CREST system. However, discrepancies are allowed on a provisional basis, and the registered person is advised by the FBR (Federal Board of Revenue) to contact the supplier and persuade them to disclose their relevant output tax.
- If the supplier does not declare their relevant output tax, the input tax allowed earlier provisionally would be adjusted or recovered.

Q8: Is provisional adjustment of input tax allowed if a registered person does not have a tax invoice?
A8:
- No, provisional adjustment of input tax is not allowed if a registered person does not have a tax invoice. The existence of a tax invoice bearing the name and NTN of the registered person is a basic condition for claiming input tax.
- However, if a registered person has a tax invoice for their purchases, and a discrepancy is indicated by the CREST system, provisional adjustment of input tax would be allowed.

Q9: What are the goods specified by the FBR for which input tax cannot be reclaimed?
A9:
- The FBR has specified the following goods acquired otherwise than stock in trade by a registered person, in respect of which input tax shall not be reclaimed:
1. Food, beverages, garments, and consumption on entertainment.
2. Gifts and giveaways, including dairies and calendars.
3. Supply of electricity and gas to residential colonies.
4. Office equipment (excluding electronic fiscal cash registers), furniture, and fixtures like crockery and cutlery.

Q10: Is extra tax applicable to all specified items, and what is an example of it?
A10:
- No, the Federal Government may collect extra tax on any specified item up to a maximum of 18% in addition to the normal sales tax. It is not applicable to all items.
- An example of extra tax is the 5% extra tax levied on supplies of electric power and natural gas to unregistered or non-ATL (Active Taxpayers List) persons having industrial or commercial connections, whose bill in any month exceeds Rs. 15,000. However, this extra tax is not charged in the case of natural gas supply to CNG stations.

Answer 107

A5:
- Yes, if a registered person did not deduct input tax within the relevant tax period, they can still claim it in the return for any of the next 6 tax periods.

Question 107

Q4: Is there any restriction on adjusting input tax against output tax for a particular tax period?
A4:
- Yes, a registered person is not allowed to adjust input tax in excess of 90% of the output tax for a particular tax period.
- However, this restriction is not applicable to certain specified cases.

Question 108

Q4: Is there any restriction on adjusting input tax against output tax for a particular tax period?

Answer 108

A4:
- Yes, a registered person is not allowed to adjust input tax in excess of 90% of the output tax for a particular tax period.
- However, this restriction is not applicable to certain specified cases.

Question 109

Q5: Can a registered person claim input tax if they did not deduct it during the relevant tax period?

Q7: What is CREST, and how does it relate to input tax adjustment?
A7:
- CREST stands for “Computerised Risk-Based Evaluation of Sales Tax.” It is a computerized program used by the sales tax department for analyzing and cross-matching sales tax returns.
- Input tax adjustment may be affected if a discrepancy is indicated by the CREST system. However, discrepancies are allowed on a provisional basis, and the registered person is advised by the FBR (Federal Board of Revenue) to contact the supplier and persuade them to disclose their relevant output tax.
- If the supplier does not declare their relevant output tax, the input tax allowed earlier provisionally would be adjusted or recovered.

Q8: Is provisional adjustment of input tax allowed if a registered person does not have a tax invoice?
A8:
- No, provisional adjustment of input tax is not allowed if a registered person does not have a tax invoice. The existence of a tax invoice bearing the name and NTN of the registered person is a basic condition for claiming input tax.
- However, if a registered person has a tax invoice for their purchases, and a discrepancy is indicated by the CREST system, provisional adjustment of input tax would be allowed.

Q9: What are the goods specified by the FBR for which input tax cannot be reclaimed?
A9:
- The FBR has specified the following goods acquired otherwise than stock in trade by a registered person, in respect of which input tax shall not be reclaimed:
1. Food, beverages, garments, and consumption on entertainment.
2. Gifts and giveaways, including dairies and calendars.
3. Supply of electricity and gas to residential colonies.
4. Office equipment (excluding electronic fiscal cash registers), furniture, and fixtures like crockery and cutlery.

Q10: Is extra tax applicable to all specified items, and what is an example of it?
A10:
- No, the Federal Government may collect extra tax on any specified item up to a maximum of 18% in addition to the normal sales tax. It is not applicable to all items.
- An example of extra tax is the 5% extra tax levied on supplies of electric power and natural gas to unregistered or non-ATL (Active Taxpayers List) persons having industrial or commercial connections, whose bill in any month exceeds Rs. 15,000. However, this extra tax is not charged in the case of natural gas supply to CNG stations.

Answer 109

A5:
- Yes, if a registered person did not deduct input tax within the relevant tax period, they can still claim it in the return for any of the next 6 tax periods.

Question 110

Q5: Explain the conditions for payments exceeding Rs. 50,000 in business transactions and the consequences of non-compliance.

Answer 110

A5:
- Payments exceeding Rs. 50,000 must be made through a crossed banking instrument.
- The payment should be made within 180 days of the tax invoice issuance date, which can be extended by the Commissioner on reasonable grounds.
- The payment should be from the buyer’s business bank account to the supplier’s business bank account.
Consequences of non-compliance:
- The buyer won’t be allowed any input tax credit or zero rating if the payment conditions are not met.
- The supplier won’t be allowed input tax credit or zero rating if the amount received on account of supply is not deposited in the declared business bank account.

Question 111

Q6: Explain the apportionment of input tax rules for registered persons supplying both taxable and exempt goods.

Answer 111

A6:
- Input tax wholly related to taxable supplies is fully adjustable.
- Input tax wholly related to exempt supplies is not admissible.
- Sales tax on goods and services used for both taxable and exempt supplies shall be apportioned based on the given formula.
- Residual input tax credit is calculated based on sales tax on raw material and capital goods used for both taxable and exempt supplies, excluding sales tax related wholly to taxable or wholly to exempt supplies.
- The monthly apportionment of input tax is provisional, and at the end of each financial year, the registered person shall make final adjustments based on taxable and exempt supplies of that year.

Question 112

Q5: Can a registered person claim input tax if they did not deduct it during the relevant tax period?

Q7: What is CREST, and how does it relate to input tax adjustment?
A7:
- CREST stands for “Computerised Risk-Based Evaluation of Sales Tax.” It is a computerized program used by the sales tax department for analyzing and cross-matching sales tax returns.
- Input tax adjustment may be affected if a discrepancy is indicated by the CREST system. However, discrepancies are allowed on a provisional basis, and the registered person is advised by the FBR (Federal Board of Revenue) to contact the supplier and persuade them to disclose their relevant output tax.
- If the supplier does not declare their relevant output tax, the input tax allowed earlier provisionally would be adjusted or recovered.

Q8: Is provisional adjustment of input tax allowed if a registered person does not have a tax invoice?
A8:
- No, provisional adjustment of input tax is not allowed if a registered person does not have a tax invoice. The existence of a tax invoice bearing the name and NTN of the registered person is a basic condition for claiming input tax.
- However, if a registered person has a tax invoice for their purchases, and a discrepancy is indicated by the CREST system, provisional adjustment of input tax would be allowed.

Q9: What are the goods specified by the FBR for which input tax cannot be reclaimed?
A9:
- The FBR has specified the following goods acquired otherwise than stock in trade by a registered person, in respect of which input tax shall not be reclaimed:
1. Food, beverages, garments, and consumption on entertainment.
2. Gifts and giveaways, including dairies and calendars.
3. Supply of electricity and gas to residential colonies.
4. Office equipment (excluding electronic fiscal cash registers), furniture, and fixtures like crockery and cutlery.

Q10: Is extra tax applicable to all specified items, and what is an example of it?
A10:
- No, the Federal Government may collect extra tax on any specified item up to a maximum of 18% in addition to the normal sales tax. It is not applicable to all items.
- An example of extra tax is the 5% extra tax levied on supplies of electric power and natural gas to unregistered or non-ATL (Active Taxpayers List) persons having industrial or commercial connections, whose bill in any month exceeds Rs. 15,000. However, this extra tax is not charged in the case of natural gas supply to CNG stations.

Answer 112

A5:
- Yes, if a registered person did not deduct input tax within the relevant tax period, they can still claim it in the return for any of the next 6 tax periods.

Question 113

Q7: Explain the restriction on input tax adjustment for a particular tax period and its exceptions.

Answer 113

A7:
- The restriction on input tax adjustment for a particular tax period is that a registered person cannot adjust input tax in excess of 90% of the output tax.
- In case of lower profit margin, the registered person is required to pay 10% of the output tax to the FBR.
- Input tax disallowed due to this restriction is carried forward to the next period and treated as input tax of that period.
- The restriction is not applicable in certain cases, such as persons registered in electrical energy sector and gas distribution companies, oil marketing companies, fertilizers manufacturers, and more.

Question 114

Q5: Can a registered person claim input tax if they did not deduct it during the relevant tax period?

Q7: What is CREST, and how does it relate to input tax adjustment?
A7:
- CREST stands for “Computerised Risk-Based Evaluation of Sales Tax.” It is a computerized program used by the sales tax department for analyzing and cross-matching sales tax returns.
- Input tax adjustment may be affected if a discrepancy is indicated by the CREST system. However, discrepancies are allowed on a provisional basis, and the registered person is advised by the FBR (Federal Board of Revenue) to contact the supplier and persuade them to disclose their relevant output tax.
- If the supplier does not declare their relevant output tax, the input tax allowed earlier provisionally would be adjusted or recovered.

Q8: Is provisional adjustment of input tax allowed if a registered person does not have a tax invoice?
A8:
- No, provisional adjustment of input tax is not allowed if a registered person does not have a tax invoice. The existence of a tax invoice bearing the name and NTN of the registered person is a basic condition for claiming input tax.
- However, if a registered person has a tax invoice for their purchases, and a discrepancy is indicated by the CREST system, provisional adjustment of input tax would be allowed.

Q9: What are the goods specified by the FBR for which input tax cannot be reclaimed?
A9:
- The FBR has specified the following goods acquired otherwise than stock in trade by a registered person, in respect of which input tax shall not be reclaimed:
1. Food, beverages, garments, and consumption on entertainment.
2. Gifts and giveaways, including dairies and calendars.
3. Supply of electricity and gas to residential colonies.
4. Office equipment (excluding electronic fiscal cash registers), furniture, and fixtures like crockery and cutlery.

Q10: Is extra tax applicable to all specified items, and what is an example of it?
A10:
- No, the Federal Government may collect extra tax on any specified item up to a maximum of 18% in addition to the normal sales tax. It is not applicable to all items.
- An example of extra tax is the 5% extra tax levied on supplies of electric power and natural gas to unregistered or non-ATL (Active Taxpayers List) persons having industrial or commercial connections, whose bill in any month exceeds Rs. 15,000. However, this extra tax is not charged in the case of natural gas supply to CNG stations.

Answer 114

A5:
- Yes, if a registered person did not deduct input tax within the relevant tax period, they can still claim it in the return for any of the next 6 tax periods.

Question 114

Q8: What are the conditions for a registered person to claim input tax on transactions related to electricity or gas bills not in their name?

Answer 114

A8:
- A registered consumer can claim input tax paid on electricity or gas bills not in their name.
- To claim input tax, the gas or electric bill must contain the consumer’s NTN and the address of the business premises declared to the Commissioner for sales tax purposes.
- If the electric or gas connection is not in the name of the registered person, the NTN of the registered person must be mentioned on the bill, along with the address given in the application for registration for sales tax.

Question 115

Q5: Can a registered person claim input tax if they did not deduct it during the relevant tax period?

Q7: What is CREST, and how does it relate to input tax adjustment?
A7:
- CREST stands for “Computerised Risk-Based Evaluation of Sales Tax.” It is a computerized program used by the sales tax department for analyzing and cross-matching sales tax returns.
- Input tax adjustment may be affected if a discrepancy is indicated by the CREST system. However, discrepancies are allowed on a provisional basis, and the registered person is advised by the FBR (Federal Board of Revenue) to contact the supplier and persuade them to disclose their relevant output tax.
- If the supplier does not declare their relevant output tax, the input tax allowed earlier provisionally would be adjusted or recovered.

Q8: Is provisional adjustment of input tax allowed if a registered person does not have a tax invoice?
A8:
- No, provisional adjustment of input tax is not allowed if a registered person does not have a tax invoice. The existence of a tax invoice bearing the name and NTN of the registered person is a basic condition for claiming input tax.
- However, if a registered person has a tax invoice for their purchases, and a discrepancy is indicated by the CREST system, provisional adjustment of input tax would be allowed.

Q9: What are the goods specified by the FBR for which input tax cannot be reclaimed?
A9:
- The FBR has specified the following goods acquired otherwise than stock in trade by a registered person, in respect of which input tax shall not be reclaimed:
1. Food, beverages, garments, and consumption on entertainment.
2. Gifts and giveaways, including dairies and calendars.
3. Supply of electricity and gas to residential colonies.
4. Office equipment (excluding electronic fiscal cash registers), furniture, and fixtures like crockery and cutlery.

Q10: Is extra tax applicable to all specified items, and what is an example of it?
A10:
- No, the Federal Government may collect extra tax on any specified item up to a maximum of 18% in addition to the normal sales tax. It is not applicable to all items.
- An example of extra tax is the 5% extra tax levied on supplies of electric power and natural gas to unregistered or non-ATL (Active Taxpayers List) persons having industrial or commercial connections, whose bill in any month exceeds Rs. 15,000. However, this extra tax is not charged in the case of natural gas supply to CNG stations.

Answer 115

A5:
- Yes, if a registered person did not deduct input tax within the relevant tax period, they can still claim it in the return for any of the next 6 tax periods.

Question 116

Q10: Are there any exceptions to the restriction on input tax adjustment for a particular tax period?

Answer 116

A10:
Yes, there are exceptions to the restriction on input tax adjustment:
1. Persons registered in the electrical energy sector and gas distribution companies.
2. Oil marketing companies, petroleum refineries, and Pakistan Steel Mills.
3. Fertilizer manufacturers.
4. Distributors (excluding wholesalers).
5. Commercial importers if the value of imports subjected to 3% value addition tax exceeds 50% of the value of all taxable purchases in a tax period.
6. Persons making zero-rated supplies if the value of such supplies exceeds 50% of the value of all taxable supplies during a tax period.
7. Telecommunications.
8. CNG dealers and petroleum dealers.
9. Registered persons other than manufacturers making supplies of 3rd schedule items on which sales tax has been paid on retail price, provided that the value of such supplies exceeds 80% of all taxable supplies.

Question 117

Q5: Can a registered person claim input tax if they did not deduct it during the relevant tax period?

Q7: What is CREST, and how does it relate to input tax adjustment?
A7:
- CREST stands for “Computerised Risk-Based Evaluation of Sales Tax.” It is a computerized program used by the sales tax department for analyzing and cross-matching sales tax returns.
- Input tax adjustment may be affected if a discrepancy is indicated by the CREST system. However, discrepancies are allowed on a provisional basis, and the registered person is advised by the FBR (Federal Board of Revenue) to contact the supplier and persuade them to disclose their relevant output tax.
- If the supplier does not declare their relevant output tax, the input tax allowed earlier provisionally would be adjusted or recovered.

Q8: Is provisional adjustment of input tax allowed if a registered person does not have a tax invoice?
A8:
- No, provisional adjustment of input tax is not allowed if a registered person does not have a tax invoice. The existence of a tax invoice bearing the name and NTN of the registered person is a basic condition for claiming input tax.
- However, if a registered person has a tax invoice for their purchases, and a discrepancy is indicated by the CREST system, provisional adjustment of input tax would be allowed.

Q9: What are the goods specified by the FBR for which input tax cannot be reclaimed?
A9:
- The FBR has specified the following goods acquired otherwise than stock in trade by a registered person, in respect of which input tax shall not be reclaimed:
1. Food, beverages, garments, and consumption on entertainment.
2. Gifts and giveaways, including dairies and calendars.
3. Supply of electricity and gas to residential colonies.
4. Office equipment (excluding electronic fiscal cash registers), furniture, and fixtures like crockery and cutlery.

Q10: Is extra tax applicable to all specified items, and what is an example of it?
A10:
- No, the Federal Government may collect extra tax on any specified item up to a maximum of 18% in addition to the normal sales tax. It is not applicable to all items.
- An example of extra tax is the 5% extra tax levied on supplies of electric power and natural gas to unregistered or non-ATL (Active Taxpayers List) persons having industrial or commercial connections, whose bill in any month exceeds Rs. 15,000. However, this extra tax is not charged in the case of natural gas supply to CNG stations.

Answer 117

A5:
- Yes, if a registered person did not deduct input tax within the relevant tax period, they can still claim it in the return for any of the next 6 tax periods.

Question 118

Q5: Can a registered person claim input tax if they did not deduct it during the relevant tax period?

Q7: What is CREST, and how does it relate to input tax adjustment?
A7:
- CREST stands for “Computerised Risk-Based Evaluation of Sales Tax.” It is a computerized program used by the sales tax department for analyzing and cross-matching sales tax returns.
- Input tax adjustment may be affected if a discrepancy is indicated by the CREST system. However, discrepancies are allowed on a provisional basis, and the registered person is advised by the FBR (Federal Board of Revenue) to contact the supplier and persuade them to disclose their relevant output tax.
- If the supplier does not declare their relevant output tax, the input tax allowed earlier provisionally would be adjusted or recovered.

Q8: Is provisional adjustment of input tax allowed if a registered person does not have a tax invoice?
A8:
- No, provisional adjustment of input tax is not allowed if a registered person does not have a tax invoice. The existence of a tax invoice bearing the name and NTN of the registered person is a basic condition for claiming input tax.
- However, if a registered person has a tax invoice for their purchases, and a discrepancy is indicated by the CREST system, provisional adjustment of input tax would be allowed.

Q9: What are the goods specified by the FBR for which input tax cannot be reclaimed?
A9:
- The FBR has specified the following goods acquired otherwise than stock in trade by a registered person, in respect of which input tax shall not be reclaimed:
1. Food, beverages, garments, and consumption on entertainment.
2. Gifts and giveaways, including dairies and calendars.
3. Supply of electricity and gas to residential colonies.
4. Office equipment (excluding electronic fiscal cash registers), furniture, and fixtures like crockery and cutlery.

Q10: Is extra tax applicable to all specified items, and what is an example of it?
A10:
- No, the Federal Government may collect extra tax on any specified item up to a maximum of 18% in addition to the normal sales tax. It is not applicable to all items.
- An example of extra tax is the 5% extra tax levied on supplies of electric power and natural gas to unregistered or non-ATL (Active Taxpayers List) persons having industrial or commercial connections, whose bill in any month exceeds Rs. 15,000. However, this extra tax is not charged in the case of natural gas supply to CNG stations.

Answer 118

A5:
- Yes, if a registered person did not deduct input tax within the relevant tax period, they can still claim it in the return for any of the next 6 tax periods.

Question 119

Q11: How is the apportionment of input tax done for registered persons supplying taxable and exempt goods simultaneously?
A11:
The apportionment of input tax for registered persons supplying taxable and exempt goods simultaneously is done as follows:
- Input tax relating wholly to taxable supplies is fully adjustable and reclaimable.
- Input tax relating wholly to exempt supplies is not admissible for adjustment or reclamation.
- Sales tax on goods and services used for both taxable and exempt supplies shall be apportioned using the formula:
Residual input tax credit = (Value of taxable supplies x Residual input tax) / (Value of taxable + exempt supplies)
- Residual input tax includes sales tax on raw materials and capital goods used for both taxable and exempt supplies, excluding sales tax paid wholly on taxable or exempt supplies.

Q12: How is the monthly apportionment of input tax treated, and what happens at the end of the financial year for registered persons?
A12:
The monthly apportionment of input tax is treated as a provisional adjustment. At the end of each financial year, registered persons make a final adjustment based on taxable and exempt supplies of that year.
- Monthly apportionment helps in distributing input tax between taxable and exempt supplies on a provisional basis.
- At the end of the financial year, the registered person reviews the actual taxable and exempt supplies made during the year and makes a final adjustment accordingly.

Q13: What is the restriction on input tax adjustment for a particular tax period, and how does it affect registered persons?
A13:
The restriction on input tax adjustment for a particular tax period is that a registered person cannot adjust input tax in excess of 90% of the output tax for that period. This means that if the input tax exceeds the output tax due to loss or overbuying (closing stock), the registered person is not entitled to a refund. Instead, they are required to pay 10% of their output tax to the Federal Board of Revenue (FBR).
- The disallowed input tax due to this restriction is carried forward to the next period and treated as input tax of that period.
- However, input tax on the acquisition of fixed assets or capital goods is claimable in the same tax period, and the restriction does not apply in this case.
- The FBR has the power to increase the limit from 90% to 95% in specific cases, including Tier-1 retailers who have integrated all their POS (Point of Sale) with the FBR.

Q14: Are there any exemptions to the restriction on input tax adjustment for a particular tax period?
A14:
Yes, there are exemptions to the restriction on input tax adjustment for a particular tax period. The following categories can adjust input tax from output tax without any restriction:
1. Persons registered in the electrical energy sector and gas distribution companies.
2. Oil marketing companies, petroleum refineries, and Pakistan Steel Mills.
3. Fertilizer manufacturers.
4. Distributors (excluding wholesalers).
5. Commercial importers if the value of imports subjected to 3% value addition tax exceeds 50% of the value of all taxable purchases in a tax period.
6. Persons making zero-rated supplies if the value of such supplies exceeds 50% of the value of all taxable supplies during a tax period.
7. Telecommunications.
8. CNG dealers and petroleum dealers.
9. Registered persons other than manufacturers making supplies of 3rd schedule items on which sales tax has been paid on the retail price, provided that the value of such supplies exceeds 80% of all taxable supplies.

Question 120

Q5: Can a registered person claim input tax if they did not deduct it during the relevant tax period?

Q7: What is CREST, and how does it relate to input tax adjustment?
A7:
- CREST stands for “Computerised Risk-Based Evaluation of Sales Tax.” It is a computerized program used by the sales tax department for analyzing and cross-matching sales tax returns.
- Input tax adjustment may be affected if a discrepancy is indicated by the CREST system. However, discrepancies are allowed on a provisional basis, and the registered person is advised by the FBR (Federal Board of Revenue) to contact the supplier and persuade them to disclose their relevant output tax.
- If the supplier does not declare their relevant output tax, the input tax allowed earlier provisionally would be adjusted or recovered.

Q8: Is provisional adjustment of input tax allowed if a registered person does not have a tax invoice?
A8:
- No, provisional adjustment of input tax is not allowed if a registered person does not have a tax invoice. The existence of a tax invoice bearing the name and NTN of the registered person is a basic condition for claiming input tax.
- However, if a registered person has a tax invoice for their purchases, and a discrepancy is indicated by the CREST system, provisional adjustment of input tax would be allowed.

Q9: What are the goods specified by the FBR for which input tax cannot be reclaimed?
A9:
- The FBR has specified the following goods acquired otherwise than stock in trade by a registered person, in respect of which input tax shall not be reclaimed:
1. Food, beverages, garments, and consumption on entertainment.
2. Gifts and giveaways, including dairies and calendars.
3. Supply of electricity and gas to residential colonies.
4. Office equipment (excluding electronic fiscal cash registers), furniture, and fixtures like crockery and cutlery.

Q10: Is extra tax applicable to all specified items, and what is an example of it?
A10:
- No, the Federal Government may collect extra tax on any specified item up to a maximum of 18% in addition to the normal sales tax. It is not applicable to all items.
- An example of extra tax is the 5% extra tax levied on supplies of electric power and natural gas to unregistered or non-ATL (Active Taxpayers List) persons having industrial or commercial connections, whose bill in any month exceeds Rs. 15,000. However, this extra tax is not charged in the case of natural gas supply to CNG stations.

Answer 120

A5:
- Yes, if a registered person did not deduct input tax within the relevant tax period, they can still claim it in the return for any of the next 6 tax periods.

Question 121

Q13: What is the restriction on input tax adjustment for a particular tax period, and how does it affect registered persons?

Answer 121

A13:
The restriction on input tax adjustment for a particular tax period is that a registered person cannot adjust input tax in excess of 90% of the output tax for that period. This means that if the input tax exceeds the output tax due to loss or overbuying (closing stock), the registered person is not entitled to a refund. Instead, they are required to pay 10% of their output tax to the Federal Board of Revenue (FBR).
- The disallowed input tax due to this restriction is carried forward to the next period and treated as input tax of that period.
- However, input tax on the acquisition of fixed assets or capital goods is claimable in the same tax period, and the restriction does not apply in this case.
- The FBR has the power to increase the limit from 90% to 95% in specific cases, including Tier-1 retailers who have integrated all their POS (Point of Sale) with the FBR.

Question 121

Q5: Can a registered person claim input tax if they did not deduct it during the relevant tax period?

Q7: What is CREST, and how does it relate to input tax adjustment?
A7:
- CREST stands for “Computerised Risk-Based Evaluation of Sales Tax.” It is a computerized program used by the sales tax department for analyzing and cross-matching sales tax returns.
- Input tax adjustment may be affected if a discrepancy is indicated by the CREST system. However, discrepancies are allowed on a provisional basis, and the registered person is advised by the FBR (Federal Board of Revenue) to contact the supplier and persuade them to disclose their relevant output tax.
- If the supplier does not declare their relevant output tax, the input tax allowed earlier provisionally would be adjusted or recovered.

Q8: Is provisional adjustment of input tax allowed if a registered person does not have a tax invoice?
A8:
- No, provisional adjustment of input tax is not allowed if a registered person does not have a tax invoice. The existence of a tax invoice bearing the name and NTN of the registered person is a basic condition for claiming input tax.
- However, if a registered person has a tax invoice for their purchases, and a discrepancy is indicated by the CREST system, provisional adjustment of input tax would be allowed.

Q9: What are the goods specified by the FBR for which input tax cannot be reclaimed?
A9:
- The FBR has specified the following goods acquired otherwise than stock in trade by a registered person, in respect of which input tax shall not be reclaimed:
1. Food, beverages, garments, and consumption on entertainment.
2. Gifts and giveaways, including dairies and calendars.
3. Supply of electricity and gas to residential colonies.
4. Office equipment (excluding electronic fiscal cash registers), furniture, and fixtures like crockery and cutlery.

Q10: Is extra tax applicable to all specified items, and what is an example of it?
A10:
- No, the Federal Government may collect extra tax on any specified item up to a maximum of 18% in addition to the normal sales tax. It is not applicable to all items.
- An example of extra tax is the 5% extra tax levied on supplies of electric power and natural gas to unregistered or non-ATL (Active Taxpayers List) persons having industrial or commercial connections, whose bill in any month exceeds Rs. 15,000. However, this extra tax is not charged in the case of natural gas supply to CNG stations.

Answer 121

A5:
- Yes, if a registered person did not deduct input tax within the relevant tax period, they can still claim it in the return for any of the next 6 tax periods.