Sales Tax-Input

Question 1

Rate

1. Local
   
   1. From Registered Person
   2. From Unregistered Person
2. Import
   
   1. Commercial
   2. Manufacturer

Answer 1

1. 1. 17%
   2. Nill
2. 1. 20% (17+3% value addition)
   2. 17%

Question 2

Special procedure rules for importers (Chp x)

Answer 2

Value addition tax not payable by: (a) Import of raw material and finished goods for own use(manufacturing purpose)

(b) POL Products by oil marketing companies
(c) Registered service providers importing goods for own use

Note: Tax not to be refunded. Only carried forward.

Input output is clearly identified in case of commercial imports, hence there is no concept of apportionment of residual input tax.

Question 3

Documents

Import

Local

Maximum Time Limit

Utilities

Electronic Transmission of Invoice

Answer 3

Import: bill of entry in his name showing registration number

(a) Taxable supply: Holds tax invoice in his name bearing his registration number.
(b) Auction purchase: Holds treasury challan in his name bearing registration num
(c) Advance payment: Holds advance payment receipt invoice

Note: Input tax can be claimed for any of six succeeding tax periods if not claimed in relevant tax return. Input on electricity/gas bill is claimable on paid basis and allowable only if NTN and business premises address is mentioned on bill.

Electronic transmission of sales tax invoices: Every registered person who wishes to use electronic invoicing system shall seek prior authorization in writing, from the concerned collector ,before issuing electronic invoices. The registered person shall issue an electronic sale tax invoice for every taxable supply made by him, containing such information as required under section 23 of the Act.The registered person shall retain the record and documents for a period of five years on electronic media (Chp XIV special procedure for issuance of electronic invoices, Sales Tax Rules, 2002).

Question 4

Electronic transmission of sales tax invoices (Rule 150Q-150Z)

Answer 4

Electronic transmission of sales tax invoices: Every registered person who wishes to use electronic invoicing system shall seek prior authorization in writing, from the concerned collector ,before issuing electronic invoices. The registered person shall issue an electronic sale tax invoice for every taxable supply made by him, containing such information as required under section 23 of the Act.The registered person shall retain the record and documents for a period of five years on electronic media (Chp XIV special procedure for issuance of electronic invoices, Sales Tax Rules, 2002).

Question 5

Input on Opening Stock

Importer (Commercial & Manufacturer)

Local

(Days-stock-Documents)

Answer 5

1. Registered Person: Can be claimed in case application for registration is made within 90 days and registered person holds valid bill of entry and stock is unsold and verifiable.
2. Unregistered Person: Can be claimed in case registration application is made within 30 days, purchases are from registered person and you hold valid tax invoice and stock is unsold and verifiable.

Question 6

Inadmissible transactions (S-73)

Answer 6

(1) Payment > 50,000 (other than utilities) through banking channel
(2) Payment must be made from business bank account of buyer to business bank account of the supplier.
(3) Payment must be within 180 days of issuance of tax invoice in case of credit transactions. (Board may extend time through condonation u/s 74)

If any of the above conditions are not fulfilled then:

(a) Buyer will not be entitle to claim input tax.
(b) Supplier will not be entitle to claim input tax if amount not received in bank account.
(c) Bank account of both buyer and supplier should be declared to Borad at the time of registration/through change of particulars
(d) Higher of 3% of tax or Rs.5,000 will be charged as penalty in case of non compliance of section 73 or section 23 (tax invoice not issued). (Sec 33) N-1: Input tax should be reversed in the month after lapse of 180 days. N-2:

Sec 73 not applicable on wholesale-cum-retailer and persons suppling goods to unregistered person. However supplier should deposit cash in his business bank account to claim input tax.

Also not applicable on in kind payment.

Question 7

Tax credit not allowed (S-8)

Answer 7

(a) Goods/services used other than for taxable supplies (including exempt supplies) N-1: Input allowed on wastage of RM during manufacturing. (Cir 1, 1989). Similarly input allowed on loss of goods in transit. However, its not allowed on expired goods. N-2: Input tax on goods subsequently destroyed (e.g fire etc) is not allowed in light of judgment of Lahore High Court in case of Mayfair Spinning. (b) Goods subject to extra tax under section 3(5)
(c) fake invoices, discrepancy by CREST, Agriculture machinery @ 7% under 8th Sch, ST not deposited by supplier
(d) Services on which input tax adjustment is barred under provincial law (normally reduced rate services in provincial ordinances are barred.)
(e) Goods used/permanently attached to immoveable property such as construct materials, paints, sanitary fittings, pipes, wires, cables but excludign pre-fabricated buildings and goods acquired for sale or resale or direct use in the production.
(f) Vehicles (excluding fork lifter), furniture, electric and gas appliances, office equipment (excluding electronic cash registers) but excluding such goods acquired for sale/resale)
(g) if suspended/blacklisted, input agst invoices issued even prior to blacklisting/suspension.
(h) Foods, Beverages, garments and consumption on enterainment, gifts, crockery, cutlery (i) Give aways incl diaries/calendars, supply of electricity to residential colonies
(j) From date to be notified by Board Goods/services which at time of filing return have not been declared by supplier in his return
k) Input on Purchase from buyer whose regsitration is suspended; input disallowed during the period of suspension whether invoice was issued prior/after the suspension.
l) Input of purchases from blaclisted supplier. In case of black listed buer input on all previous purchases shall be disallowed
m) When sales made to unregistered customer and invoice does not mention CNIC/NTN of customer
(i) any value for other than ordinary customer
(ii) 100k incl ST for ordinary customer in retail sales

Question 8

Approtionment for Commercial Importer Manufacturer

Answer 8

No apportionment required as goods are in finished form. Input tax on goods used for both taxable (including zero rated) and exempt supplies is called residual input tax which is apportioned as: Residual input tax x value of taxable supplies/ value of taxable + exempt supplies N-1: Brought forward input tax should not be used for apportionment as its already apportioned. Further there would be no apportionment in case of commercial imports and trading of 3rd Schedule/specified goods. N-2: Monthly adjustment-provisional, Final adjustment at end of each financial year

Question 9

Purchase return (Debit/Credit note Chp III)

Answer 9

(a) Allowed if goods returned within 180 days along with relevant debit/credit note. (b) In case of advance received 180 days rule is not applicable. N-1: Goods returned if unfit for sale (expired goods) should be destroyed in presence of sales tax officer and input tax is not admissible on such goods. N-2: If you are supplier: Sales return: credit note,Increase in sale value: Debit note If you are customer: Purchase return: Debit note, Increase in purchase value: credit note. Input can be claimed only if related debit/credit note is issued by both parties. N-3: 2% further tax shall not be reversed in case of sales return by non register. N-4: No adjustment of bad debts is allowed beyond 180 days.

Question 10

Exceptions to 90% restriction

OR

Dedcution of Input from Out without any restriction

Answer 10

Indurty Specific - Person Type

Persons

• 3rd schedule supply chain (Wholesaler/dist/retailer) except manuf/importer where ST paid by manuf/importer and value of 3rd schedule supplies > 80% of total supplies
• Distributor
• Wholesale-cum retailer upto 95%(Not wholesaler)
• Zero rate supplier - whole entity (zero rate:local ration 50.01:49.9) i.e. no 90% restriction for local supply even
• Zero rate supplier - Zero rate only (zero rate:local ration 49.9:50.01) i.e. 90% restriction for local supply
• Comm. Imp. - whole entity (zero rate:local ration 50.01:49.9) i.e. no 90% restriction for local supply even
• Comm. Imp. - Zero rate only (zero rate:local ration 49.9:50.01) i.e. 90% restriction for local supply
• subject to reduced rates u/SRO 1125 of 2011
• Fixed Assets, Capital goods

In the exam Q - calculate ratio of local and comm. and/or zero rate

Industry (Elect, gas oil marketing, refineries, fertilizer, edible oil, telecom)