ISLAMABAD: The Appellate Tribunal Inland Revenue (ATIR) has categorically declared that the supply of disposable syringes is exempted from sales tax and is covered under the Sixth Schedule (Exemption Schedule) of the Sales Tax Act, 1990. According to a latest order of the ATIR issued against the Large Tax Office (LTO) Islamabad, the tribunal has accepted the stance of a pharmaceutical company.
Directorate General Inland Revenue (Audit) reported that the company failed to declare taxable supplies relating to supply of "disposable syringes" valuing Rs710,400,558 during the period July 2015 to June 2019, and also failed to charge and pay due sales tax on such supplies amounting Rs120,768,094.
Show cause notice was issued confronting the said discrepancy detected from the relevant record.
The contravention proceedings were initiated and culminated in passing of order in original.
The company filed the appeal against the said order before the Commissioner Inland Revenue Appeals, which met the fate of dismissal and therefore the appellant being dissatisfied with the order of CIR (A) has approached the ATIR.
Tribunal has held that the supply of disposable syringes is duly covered under entry No 104 of the Sixth Schedule and is exempt from levy of sales tax. Resultantly, the tribunal has declared the orders of both the authorities as legally flawed and defective which cannot be allowed to sustain. Hence, the orders are annulled and demand created is deleted.
The ATIR when asked, if any other manufacturer of disposable syringes had paid the sales tax on supplies of disposable syringes, the tax department could not bring on record any precedent to establish that sales tax on supply of disposable syringes are being charged in Pakistan.
All the manufacturer of the disposable syringes are enjoying the exemption in terms of entry No 104 of the sixth schedule.
The tribunal referred that the federal government may declare any other substance as drug and by exercising the said power the article disposable syringes has been declared as drug.
The syringes are, therefore, being treated as drugs for the purpose of the Drugs Act, 1976 on the basis of SRO324 issued under the clause g(vi) of section 3 of the Act 1976.
Any other authority, except the authority under the Drugs Act 1976, has no powers and jurisdiction to declare a thing as non drug, which has been declared as drug by the competent authority.
It is therefore, the tax department does not have any authority to refuse to accept the disposable syringes as drug against the declaration of the federal government being competent to declare the syringes as drug, the tribunal added.
Copyright Business Recorder, 2021
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