Insurance company not 'wholesaler' under sales tax law

The sales tax tribunal has said that an insurance company is not a wholesaler under sales tax law.
Ali Sain Dino Metlo, Member, Customs, Excise & Sales Tax Appellate Tribunal, Karachi Bench II, in a recent judgement while disposing of the insured goods acquired under insurance business, has ruled that an insurance company is not acting as a wholesaler and is not liable to registration under the Sales Tax Act 1990.
This was observed on an appeal filed by Alpha Insurance Company Ltd against the compulsory registration order passed by the Assistant Collector (Sales Tax) Registration & Enforcement, Karachi (East Zone).
The order was challenged on the grounds that (a) the acquisition and disposal of insured goods by the insurance company is not taxable activity and (b) the insurance company is not a wholesaler. Therefore, the compulsory registration order should be cancelled.
While the Tribunal did not subscribe to the idea that the activity of the insurance company concerning the acquisition and disposal of insured goods is not taxable activity, it ruled that an insurance company is not a wholesaler for the purposes of the Sales Tax Act 1990 as defined by section 2(47) of the Sales Tax Act 1990, and cancelled the compulsory registration order of the sales tax department.
It was observed that for the purpose of qualifying as a wholesaler, a person must be engaged in the wholesale business, though not necessarily exclusively, and may in addition make retail supplies as well, but this does not mean that a person making only retail supplies will be treated as a wholesaler, except in the case of supplies made to persons deducting advance tax under sub-section (4) of section 50 of the Income Tax Ordinance 1979.
The term 'wholesale' has not been defined in the Act. Its meaning according to Webster's New World College Dictionary, Third Edition, is 'the selling of goods in relatively large quantities and usually at lower prices than at retail specially such selling to retailers for re-sale to consumers'. According to Black Laws Dictionary, Seventh Edition 'the sale of goods or commodities usually for re-sale by retailer, as opposed to a sale to ultimate consumer'.
In the present case there is nothing to show that the vehicles were sold to any merchant for re-sale or to pay any person deducting advance income tax.
Therefore, the department, without collecting sufficient evidence, was unjustified in treating the appellant as a 'wholesaler' and compulsory registering it as such. Resultantly, the appeal is allowed and the impugned order is set aside.
However, it will be up to the department to register the appellant as a 'wholesaler' on collecting sufficient evidence in that regard or as a 'retailer' on satisfaction of the condition of the value of supplies as required by section 14 (ii) ibid, if advised.
Haider Shamsi & Co, Chartered Accountants, represented Alpha Insurance Company Ltd before the Tribunal, while Barkat Ali Bukhari, Additional Collector, argued the case for the department.