Central Board of Revenue

Azad Jammu and Kashmir

Sales Tax

Before Registration and Filing of your Sales Tax Return, it is recommended that one should establish basic understanding regarding these processes. Knowledge of basic concepts would not only ensure that the tasks are performed easily but also in the prescribed manner.

Sales Tax is a tax levied by the Federal Government under the Sales Tax Act, 1990, on sale and supply of goods and on the goods imported into Pakistan. Sales Tax on services is levied by the Federal Government under Azad Jammu and Kashmir Sales Tax (Tax on services) Act, 2001.

INPUT TAX

Input tax is the tax paid by registered person on the taxable goods and services purchased or acquired by him. This also includes the sales tax paid on imports.

OUTPUT TAX

It is the sales tax charged and levied on the sale or supply of goods or services on which sales tax is leviable.

SCOPE OF SALES TAX

Sales tax applies to the following:

GOODS

All goods are taxable except those that have been exempted under section 13 as mentioned under 6th Schedule of the Sales Tax Act, 1990. For sales tax purposes goods include every kind of movable property other than actionable claims, money, stocks, shares and securities.

IMPORTS INTO PAKISTAN

All goods imported into Pakistan are liable to sales tax at the time of import, except goods specifically exempted under section 13 as mentioned in Sixth Schedule to the Act.

EXEMPT GOODS

Under section 13 of The Sales Tax Act 1990, the Sixth Schedule of the Sales Tax Act, 1990 specifically and explicitly mentions those goods on which exemption of sales tax is available. Other exemptions are available through various notifications (SROs) issued by the Government under section 13.

  1. All importers
  2. All wholesalers (including dealers) and distributors
  3. Manufacturers not falling in cottage industry. {Cottage industry means a manufacturer whose annual turnover from taxable supplies made in any tax period during the last twelve months ending any tax period does not exceed [ten] million rupees or whose annual utility (electricity, gas and telephone) bills during the last twelve months ending any tax period do not exceed [eight] hundred thousand rupees;}
  4. Retailers (Tier-1 retailers means:
    1. A retailer operating as a unit of a national or international chain of stores;
    2. A retailer operating in an air-conditioned shopping mall, plaza or centre, excluding kiosks;
    3. A retailer whose cumulative electricity bill during the immediately preceding twelve consecutive months exceeds Rupees six hundred thousand; and
    4. A wholesaler-cum-retailer, engaged in bulk import and supply of consumer goods on wholesale basis to the retailers as well as on retail basis to the general body of the consumers;)
  5. A person required under any Provincial or Federal Law to be registered for purpose of any duty or tax collected or paid as if it were a levy of sales tax, e.g. service providers like hotels, clubs, caterers, customs agents, ship chandlers, stevedores, courier services etc.
  6. Persons making zero-rated supplies, including commercial exporter who intends to obtain sales tax refund against his zero rated supplies.
  7. A person who is required to be registered by virtue of aforesaid criteria, but still avoids registration, can be compulsorily registered by the department, after proper enquiry, under sub- rule 1 of Rule 6 of Sales Tax Rules, 2006.

SALES TAX REGISTRATION BASICS

The first step before filing your Sales Tax Return is to get yourself registered with Central  Board of Revenue (CBR).

The registration with CBR provides you with a Sales Tax Registration Number (STRN) or User ID and password. These credentials allow access to efile portal, the online portal for filing Sales Tax Return.

Online Sales Tax Return can only be filed while logging into efile portal.

The Automated System for Sales Tax Registration will be effective from July 1st, 2022, allowing for registration of the person for Sales Tax through the Iris Portal .

Only those persons having active Iris Portal credentials can Register for Sales Tax.

PROCEDURE OF REGISTRATION

The person shall use their Iris Portal credentials to login into Iris Portal. Once logged in, the person shall select Form 14(1) (Form of Registration filed voluntarily through Simplified) (Sales Tax) from the Registration drop down menu.

On selection of Form 14(1) (Form of Registration filed voluntarily through Simplified) (Sales Tax), the person will be asked to furnish the following information:

  • Tax Period
  • Sales Tax information, in case of:
    • Individual, the type of registration, whether it is a Manufacturer or Non-Manufacturer
    • AOP or Company, CNIC of the Member/Director/Principal Officer along with the type of registration, whether it is a Manufacturer or Non-Manufacturer
  • Bank Account details that include the Bank Account Certificate issued by the bank in the name of the business
  • Business details including Business Name, Acquisition Date, Capacity and Business Activity along with particulars of all branches in case of multiple branches at various locations
  • GPS-tagged photographs of the business premises
  • Registration / consumer number with the gas and electricity supplier along with pictures of utilities meter
  • In case of Manufacturer, also the GPS-tagged photographs of machinery and industrial electricity or gas meter installed

On submitting the above information and documents, the system shall register the person for Sales Tax.

BIOMETRIC VERIFICATION

After registration, the person registered through Iris Portal is required to visit e-Sahulat Centre of NADRA within 30 days for biometric verification. In case of failure to visit or failure of verification, the registered person’s name shall be taken off the Sales Tax Active Taxpayer List.

There are number of NADRA e-Sahulat Centers to facilitate the applicant for biometric verification.

POST VERIFICATION – MANUFACTURER

In case of manufacturer, the Board may require post verification through field offices, or a third party authorized by the Board. In case, the field office, during scrutiny after the registration, finds that any document provided is non-genuine / fake / wrong, it may request through the system, to provide the missing document, in fifteen days, failing which the registered person shall be taken off from the Sales Tax Active Taxpayer List.

CHANGE IN PARTICULARS OF REGISTRATION

In case there is a change in the name address, or other particulars as stated in the registration certificate, the registered person shall notify the change in the prescribed form to the Tax Office within fourteen days of such change.

The change in the business category shall be allowed after Tax Office has verified the manufacturing facility and confirmed the status as industrial consumer of the electricity and gas distribution companies.

TRANSFER OF REGISTRATION

In case a registered person intends to shift his business activity from the jurisdiction of one Tax Office to another Tax Office or as the case may be to a Tax Office , or he has any other valid reason for such transfer, he shall apply to the Tax Office for transfer of his registration.

The Tax Office may subject to such conditions, limitations or restrictions as it may deem fit to impose, by an order , transfer the registration of a registered person from the jurisdiction of one ?TO/RTO/LTU, to another TO/RTO/LTU, or as the case may be to the LTU or RTO.

The return for the tax period in which the registration is transferred shall be filed in the RTO/LTU from where the registration is transferred.

REVISED REGISTRATION CERTIFICATE

In case of multiple registrations, the registered person shall apply to RTO/LTU for single registration to the RTO/LTU which after ascertaining tax liabilities from concerned RTO/LTU shall issue revised registration certificate in which previous registration number shall be merged.

DEREGISTRATION

To deregister a person shall submit an application to Commissioner Inland Revenue having appropriate jurisdiction. Within ninety days from the date of such application or the date all the dues outstanding against such person are deposited by the person, whichever is later shall cause the person to be de-registered through the computerized system.

Following persons can be deregistered:

  • Who ceases to carry on the business, or
  • Whose supplies become exempt from Sales Tax, or whose turnover becomes less than the threshold level can apply for cancellation of the registration

Every person registered under the Sales Tax Act,1990, or the Federal Excise Act, 2005, is required to file a Sales Tax Return.

A Sales Tax return is the taxpayer’s document of declaration through which taxpayer not only furnishes the details of transactions during a tax period but also deposits his Sales Tax liability.

On the return form, the taxpayer declares for a particular tax period and respective input tax and output tax, at prescribed rate of Sale Tax. In case input tax exceeds output tax, the amount of refund claimed or excess input tax is also declared in the return.

A registered person shall file a single return for all the possible sectors that the registered person is operating in. Due date for the single return for the sectors would be the due date applicable to his major activity in terms of sales tax or federal excise duty payable.

Where a Sales Tax Return is not filed within a period of six months after the due date, the same shall be filed only after approval of the Commissioner Inland Revenue having the appropriate jurisdiction.

The Active Taxpayer List (ST) is a central record of online active Sales Tax Return filers.

Taxpayers belonging to their respective categories have to file Sales Tax returns in monthly, quarterly or annual return format.

MONTHLY RETURN

Under the standard procedure a registered person is required to file monthly return Annexure C on 10th and Payment on 15th and e-file return by the 18th day of the month following the period in which the supplies were made, in the designated Branches of National Bank of Pakistan. In case of certain categories as mentioned below Procedure has been devised to file return on monthly and quarterly basis.

QUARTERLY RETURN

The taxpayers falling exclusively in the category of CNG required to file the return on quarterly basis.

ANNUAL RETURN

A manufacturer is to file annual Sales Tax return, for a financial year by the 30th September of the following financial year.

If the input tax paid by a registered person on taxable purchases made during a tax period exceeds the output tax on account of zero rated local supplies or export made during that tax period, the excess amount of input tax shall be refunded to the registered person not later than forty five days of filing of refund claim in such manner and subject to such conditions as the board may, by a notification in the official Gazette specify.

To pay your sales tax dues, the person can pay through E-payment.

SALES TAX RECORDS

A registered person must keep a record in English or Urdu of all the goods and services supplied, purchased or imported in the course of business.

RECORD OF SALES

The record of sales should indicate the following details of goods supplied or services rendered:

  • Description.
  • Quantity.
  • Value.
  • Name and address of the customer, and
  • Amount of tax charged.

At the end of each month, a registered person must add up the sales tax shown in these records, and transfer the total to sales tax account as output tax.

RECORD OF PURCHASES AND IMPORTS

The record of purchases and imports should indicate the following details of goods purchased or received or services hired:

  • Description;
  • Quantity;
  • Value;
  • Name, address and registration number of the supplier,
  • Amount of tax paid on purchases.

RECORD OF PAYMENTS RECEIPTS

All payment so receipts of amount of sales tax on purchases or supplies above Rs. 50,000 (except utility bills) should be made through bank instruments indicating specified bank accounts of both the persons i.e., sellers and purchasers. It is recommended that records/ photocopies of all bank instruments through which payments of sales tax are made or received must be kept along with bank statements for the purpose of compliance of section 73 of the Act and to avoid audit complications.

OTHER RECORDS

A registered person should also keep record of:

  • Zero-rated and exempt supplies,
  • Record of invoices, credit notes, debit notes, bank statements, inventory
  • Utility bills, salary and labor bills, rental agreements, sale purchase agreements and lease agreements.

RETENTION OF RECORDS AND DOCUMENTS

A registered person is required to maintain a record and documents for a period of six (6) years after the end of the tax period to which such record and documents relate.

The electronic sales tax return and its relevant attachments, if any, shall be kept in electronic record of the registered person and shall be produced to the officer-in-charge on demand along with the supportive documents. If the delay is beyond 15 days, a penalty of Rs.5000/month is payable.

 

Through Finance Act, 2018 Sales Tax Audit under section 25 of the Sales Tax Act, 1990 to be conducted only once in every three (3) years.

APPEAL TO COLLECTOR APPEALS

An appeal can be filed with the Collector (appeals) against the order-in-original passed by the Additional Collector, Deputy Collector, Assistant Collector and Superintendent.

LIMITATION OF APPEAL

An appeal before the Collector (appeals), has to be filed within thirty days of the receipt of decision or order passed by the Additional Collector, Deputy Collector, Assistant Collector or Superintendent.

CONDONATION OF DELAY

An appeal preferred after the expiry of thirty days may be admitted by the Collector (appeals). If he is satisfied that the appellant has sufficient cause for not preferring the appeal within the specified period.

SETTLEMENT OF APPEAL

The Collector of Sales Tax (appeals) may, after giving both parties to the appeal an opportunity of being heard, pass such order as deemed fit, confirming, varying, altering, setting aside or annulling the decision or order appealed against.

APPEAL TO THE APPELLATE TRIBUNAL

An appeal can be filed against the order of the Collector (appeals) before the Appellate Tribunal.

LIMITATION AND COMPUTATION OF TIME

The limitation for preferring an appeal against any order or decision of an officer of Sales Tax under the Act is 60 days from the date of receipt of such order or decision. The day on which the order is passed and the period up to issue and receipt of the order is to be excluded in computing the period of limitation of 60 days.

CONDONATION OF DELAY

The Appellate Tribunal has been empowered to condone the delay in filing the appeal, if it is satisfied that the appellant had sufficient cause for not filing the appeal within time.

REFERENCE TO HIGH COURT

PERSONS LEGIBLE TO FILE REFERENCE TO THE HIGH COURT

The person aggrieved by the order of Appellate Tribunal may prefer an application to the High Court.

LIMITATION OF TIME

The reference has to be filed within ninety days of the communication of the order of the Appellate Tribunal.

ISSUES ON WHICH REFERENCE CAN BE FILED

Reference to the High Court can be filed if a question of law arises out of the Appellate Tribunal’s order, against which application is being preferred.

LEAVE TO APPEAL TO THE SUPREME COURT

Against the order of the High Court a leave to appeal can be sought from the Supreme Court of AJ&K.

APPOINTING AN AUTHORIZED REPRESENTATIVE

In order to appoint this authorized representative, a taxpayer shall issue a letter of authorization, duly signed by the proprietor, partner or director of the company or, business  concern, which shall be submitted by the authorized representative before the adjudicating authority or Appellate Tribunal.

ELIGIBLE PERSONS

A taxpayer can authorize the following persons to represent the taxpayer before the adjudicating authority and the Appellate Tribunal.

  • A full time employer of the taxpayer, holding at least a bachelor degree.
  • A practicing lawyer
  • A person holding a bachelor or
    Masters degree in Commerce.
  • A retired officer of Sales Tax, Customs or Federal Excise department who has put in at least 10 years of satisfactory service not lower than post of an Assistant collector.
  • An accountant.

INELIGIBLE PERSONS

  1. A person who has been convicted of criminal proceedings.
  2. A person compulsorily dismissed or retired from service.
  3. A person who is un discharged insolvent.

On receipt of complaint for misconduct against an authorized representative, the adjudicating authority, Appellate Tribunal or the Board may disqualify him from representing the taxpayer

A basic understanding of Federal Excise Duty (FED) concepts would not only ensure that the tasks are performed easily but also in the prescribed manner.

ADJUSTMENT

deduction of amount of duty paid on goods used in the manufacture or production of other goods from the amount of duty payable on such other goods in the prescribed manner

DISTRIBUTOR

a person appointed by a manufacturer in or for a specified area to purchase goods from him for sale to a wholesale dealer in that area;

DUE DATE

in relation to furnishing a return under section 4, means the 15th day of the month following the end of the month, or such other date as the Board may, by notification in the official Gazette, specify and different dates may be specified for furnishing of different parts or annexures of the return.

DUTIABLE GOODS

all excisable goods specified in the First Schedule except those which are exempt under section 16 of the Act;

DUTIABLE SUPPLY

a supply of dutiable goods made by a manufacturer other than a supply of goods which is exempt under section 16 of the Act;

FRANCHISE

an authority given by a franchiser under which the franchisee is contractually or otherwise granted any right to produce, manufacture, sell or trade in or do any other business activity in respect of goods or to provide service or to undertake any process identified with franchiser against a fee or consideration including royalty or technical fee, whether or not a trade mark, service mark ,trade name, logo, brand name or any such representation or symbol, as the case may be, is involved;

GOODS

goods leviable to excise duty under this Act or as specified in the First Schedule and includes goods manufactured or produced in non-tariff area and brought for use or consumption to tariff area;

GOODS INSURANCE

includes fire, marine, theft, accident and other such miscellaneous insurance;

IMPORT AND EXPORT

respectively bringing into, and taking out of Pakistan by sea, land or air and shall be deemed to have always been so defined;

KIBOR

Karachi Inter Bank Offered Rate prevalent on first day of each quarter of the financial year

NON-TARIFF AREA

Azad Jammu and Kashmir, Northern Areas and such other territories or areas to which this Act does not apply;

FRANCHISE

an authority given by a franchiser under which the franchisee is contractually or otherwise granted any right to produce, manufacture, sell or trade in or do any other business activity in respect of goods or to provide service or to undertake any process identified with franchiser against a fee or consideration including royalty or technical fee, whether or not a trade mark, service mark,trade name, logo, brand name or any such representation or symbol, as the case may be, is involved;

REGISTERED PERSON

a person who isregistered or is required to be registered under this Act provided that a person who is not registered but is required to be registered shall not be entitled to any benefit or privilege under this Act or rules made there under, unless he is registered and such benefit and privilege, unless allowed by Board, shall be confined to period of registration;

SALE AND PURCHASE

with their grammatical variations and cognate expressions, mean any transfer of the possess on of goods or rendering and providing of services by one person to another in the ordinary course of trade or busi ness for cash or deferred payment or other consideration;

SERVICES

services, facilities and utilities leviable to excise duty under this Act or as specified in the First Schedule read with Chapter

SUPPLY

includes sale, lease or other disposition of goods and shall include such transaction as the Federal Government may notify in the official Gazette from time to time;

TARIFF AREA

area other than the non-tariff area;

WHOLESALE DEALER

a person who buys or sells goods wholesale for the purpose of trade or manufacture, and includes a broker or commission agent who, in addition to making centrals for the sale or purchase of goods for others, stocks such goods belonging to others as an agent for the purpose of sale;

ZERO-RATED

duty of Federal excise levied and charged at the rate of zero per cent under section 5 of this act.

For further information and clarification on various Federal Excise Duty (FED) concepts, kindly refer to the: