S.Tax (Definitions) Flashcards
Scope of Sales Tax & Definitions
Chargeability/Applicability of sales Tax
17% of VALUE of
- LOCAL - 3 main conditions
- Taxable supplies (other than 6th sch; by 4 persons (i) importer (ii) manuf (iii) wholesaler incl. dealer (iv) dist. or retailer; Goods - movable with exception like future claims/vouchers, etc; Supply-sale, other transfer (gift, free sample, etc), hire purchase, internal usage (pvt/biz/non-biz) by manuf.)
- Registered Person
- Taxable Activity
- IMPORT- in Pakistan whether final destination tarif or non-tarif i.e. import for FATA/PATA also sub. to ST)
TAXABLE SUPPLY & related definitions
What are TAXABLE (supplies)?
What are GOODS?
What is supply?
Taxable (supplies)
- other than 6th sch (not exmpt)
- by 4 persons (i) importer (ii) manuf (iii) wholesaler incl. dealer (iv) dist. or retailer
Goods - exclude
- Immovable (land/building other than pre-fabricated buildings)
- Actionble claims (gift/disc vouchers coupons, future claims for rent, unsecured debt, option offered to purchase any property when sold, etc etc)
- Money- notes/coints
- Security- bonds, T Bills, PIB etc
- Shares/Stocks
Supply
- Sale
- Other transfer of rights to dispose (gifts, free samples, exchange etc)
- Hire Purchase
- Internal usage (Pvt/Biz/Non-biz) of own manufacture by manufact. (Procured goods, internal usage No ST on O/P, no claim of I/P)
- Auction/disposal to satisfy debt (Mkt value for ST)
- Stock immidiately before person ceases to be registered (e.g stock with person no more required to be registered (not manuf./imp/ws/ret), goods declared exempt by FBR through SRO, etc ) i.e. ST to be charged on closing stock OR Business closes down, etc etc
- Transfer/delivery of goods belonging to another person after process/manuf. - Toll manufacture [No ownership & Not goods (services) hence specifically included in definition]
- Fed Govt - not supply
- Forward transac. of comod. at PMEX
- delivery under Morabaha arrangment to or by bank
Definition - Taxable Activity
- Biz/Trade/Man
- Supply of goods
- Supply of services
- Supply of goods & services both
- One off
- anything done during commencement and termination of economic activity
EXCLUSIONS:
- Employment
- Private recreational pursuit or hobby
Restaurant vs Silani Center (Charity Org) - both making food
If both provide free food to needy…….Restaurant’s provision of free supply is taxable activity as the business is commercial activity while silani is not comm. activity
Definitions -Registered Person
Registered
+
Liable to be registered
(such person ‘ll not be entitled to benifits available to registered)
(Impact: A Manuf. where comissioner considers TO above 5M and this limit crossed since last 5-6 months, they ‘ll consider this manuf. as back-dated registered and require o/p related to last 5-6 months’ sales however ‘ll not allow input claim against this o/p as not entitled to any benifit as not registered)
[Power misusage risk]
Definitions - Goods (What is subject to ST)
3 itesm
- Immovable (Land/build)……..No ST
- Movable - Actionable claims (A/R, Prom. Note, etc——No ST
- Movable -Others (Movable)—–Subject to ST
{Diff b/w Share & Stock…..Singular Plural)
Definitions - Input Tax
Local Supply (Accrual)
+
Import (Paid)
+
FED (in VAT mode, manuf/services)
+
Provincial ST on services (courier,clearing,forwarding)
+
AJK ST paid
Definitions - Manufacture or Produce
PRACTICALLY WHEN MACHINES ARE INVOLVED
- Conversion
- Changed / Reshaped / capable of being used differently (DVD, wood—-duster)
- incidental process (Toll manuf.)
- printing/pub/lith/engrav
- assembling/mix/cut/dilut/bottl/packag/repackag
Definition- Manfacturere / Producer
Engaged in Man/Prod
+
Toll Man. which is like service provider (i.e. Man. whether or not RM owned)…..Toll Man (u/ITO services; u/ST manuf)
+
Holder/user of patent, other prop rights
+
Assignee/trustee/liquidator (Manf. during) in bankruptcy/liquidacy who disposes off assets in bankruptcy
Definitions - Supply
Check examples from book also
- Sale
- Transfer of right to ownership (exchange, gifts)
- Manufacturer USES own goods
- Pvt use
- Non-biz use (to employees)
- In-house consumption (components in manuf) [exempt supply if final goods are taxable.
- Disposal to satisfy debt (goods as consideration)
- Auction to satisfy debt (goods as consideration)…….s.tax, in this case, belongs to owner of goods as bank, etc are acting on behalf
- Stock in trade (not yet sold, charge o/p tax) De-registration (stock immidiately held before)
- Stock in trade (not yet sold, charge o/p tax) Change in Reg. (stock immidiately held before) category e.g. retailer changes shop from mall to outside, etc
- Goods owned/belonging to others, transfer of same to owner - Toll Manuf.- Manufacture of goods belonging to others
Definitions - Supply (Diff. between Hire Purchase - Lease - Installment Sales)
What is supply in these cases & are they subject to ST
- Installment sales - Goods (ownership) transferred …..payment in installments—Normal sales
- Hire Purchase (lease but not by an entity established under leasing related laws) - mentioned separately as title is not transferred at the time of sales…..transfer happens at the end of contract/arrangement
- Leasing and Hire Purchase arrangements are same, Title is not transferred hence not supply; however leasing biz is under separte laws/rules related to leasing business - not included in the definition of supply specifially as for Hire Purchase
so supply not supply not subject to ST (i.e. not in the definition of supply)
Installment sales - Supply & Subject to ST
Hire Purchase - Supply and specifically included in the definition of supply.
Leasing - Not Supply and not subject to ST
Definitions - Taxable Supply
Taxable Supply (other thn exempt u/s 13)
+
Taxable Activity
What are taxable goods and services
What is Taxable supply
Goods — ALL except exempt
Services —– Specified only
Conclusion: any x goods taxable - yes (if they are not exempt)
teaching services taxable - NO as not sepcified in law
Taxable supply: Supply of taxable goods including zero rated excluding exempt
Definitions - Tax Fraction
How much is ST if Value including ST is “X”
%of ST divided by (% of ST+100%) x value including ST
Figs in fraction
Definitions - Time of Supply
- Delivered
- Notified (set aside and informed)
- Paid (means if advance paid, whether notified, delivered or not: separate document advance payment receipt like ST Invoice)
- Associate - made available (Advance is not supply)
- Hire Purchase - Date of Agreement (Advance & Delivery irrelevant)
important as EFFECTS AMOUNT OF O/P in return……….O/P in Jan-Jan’s return
Delivered - Notified - Paid whichever is earlier
Definitions (Value of Supply related)
What are discounts shown on Invoice
A. Invoice - @net of discount value
- Normal trade discount
-
Quantity discount
- Different levels of disc wrt quantum
- free items for certain quantity purchased e.g 4+1=5 (20%)
- Cash Purchase discount
B. Invoice - not net of discount value/disc not shown on Invoice
- Early Payment
C. 3rd schedule items - No concept of discount
