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VIDE SROs 484(I)/2015, 485(I)/2015, 486(I)/2015, 489(I)/2015, 491(I)/2015, 492(I)/2015 and 494(I)/2015.
Naveed Zafar Ashfaq Jaffery & Co.
Chartered Accountants Prologue:
FBR has made significant amendments in Sales Tax Regime and has incorporated changes in following Statutes and/or Rules:
1. Sales Tax Act 1990 ("STA"),
2. Sales Tax Rules, 2006 ("STR")
3. Sales Tax Special Procedure Rules 2007 ("STSPR"),
4. Sales Tax Special Procedure (withholding) Rules ("STSPWR"), and;
5. SRO 1125(I)/2011 (SRO-1125)


=======================================================================
1. TITLE: SALES TAX SPECIAL PROCEDURE RULES, 2007
=======================================================================
NATURE: AMENDMENT, ADDITIONS
REFERENCE: RULES 54-58, 58F, 58H, 58Ha, 58I, 58K, 58RA, 58T, 58X
AMENDING SRO 484(I)/2015 DATED: 30-06-2015
=======================================================================

Historic Perspective:
STSPR were initially introduced vide SRO 484(I)/2004 dated: 12-06-2004. The Rules were later on amended through following SROs:
-SROs 522(I)/2005 dated: 06-06-2005;
-560(I)/2006 dated: 05-06-2006; and
-480(I)/2007 dated: 09-06-2007.
Amendment:
Through the above referred SRO, the Federal Government has made amendment as follows:
a. Zero rated supply of ginned cotton
Supply of ginned cotton was exempted through an amendment in SRO 551(I)/2008 vide SRO 220(I)/2013 dated: 19-03-2013. Later, the same was transferred and made part of sixth schedule, thereby, keeping the same exempt.
SRO 484 has now removed the rules with respect to zero rated supply of ginned cotton, as the same were not required due to exemption of ginned cotton.
b. Steel Melters, re-rollers and ship breakers
The application of the chapter has also been further refined to importers of iron and steel scrap falling under the PCT Headings 7204.3000, 7204.4100, 7204.4990 and 7204.4940. local suppliers of re-meltable iron and steel scrap have also been included in the chapter.
The rate of tax has also been increased from Rs 7 / unit of electricity consumed to Rs 9 / unit. Sales tax @ Rs 5,600/ metric ton, which was earlier adjustable, has now been made non-adjustable in case of import of waste and scrap of compressors falling under PCT Heading 7204.4940,however, further local supply of such import has been excluded from levy of sales tax.
Further, sales tax collected @ Rs 5,600 on import of scrap falling under PCT headings 7204.3000, 7204.4100 and 7204.4990 has been kept adjustable. Local supply of such import shall also be charged @ Rs 5,600 / metric ton.
Sales tax on ship breakers has also been increased from Rs 6,000 / metric ton to Rs 8,000 per metric ton. For steel melters and re-rollers operating on self generation basis, the rates of sales tax has been increased as follows: a. Mills producing electricity with the help of gas generators, from Rs 1,663 to Rs 2,138. b. Mills operating on self generated electricity, from Rs 45,458 to Rs 58,446 The amount of sales tax to be mentioned on invoices issued by various suppliers has also been revised as follows:


==============================================================================
Amount of sales Amount of sales
S. NO. Invoice issued by and for or to tax (New)/MT tax (old)/MT
(Rs) (Rs)
==============================================================================
By steel melters or composite units of
1 melting, re-rolling and MS cold drawing 8,047 6,447
to registered re-rollers
2 By steel re-rollers, using ingots or billets 9,217 7,357
of steel melters or compositeunits of
melting, re-rolling and MS cold drawing,
to registered persons
3 By re-rollers, using billets of Pakistan 8,092 8,092
Steel Mills or Peoples Steel Mills or
heavy Mechanical Complex or imprted
billets, to registered persons
4 By re-rollers, using shipplates and re- 9,170 7,610
rollable scrap as raw material, to
registered persons
5 By re-rollers, to unregistered persons 1,170 910
6 By persons supplying imported MS 8,256 8,256
products, to registered persons
7 By persons supplying imported MS 1,170 910
products, to unregistered persons.
==============================================================================

c. Payment for extra sales tax on specified goods
The wholesaler-cum-retailer operating under this chapter has been allowed to issue a sales tax invoice for the goods subject to extra tax under this chapter, if supplied to a registered person.
Earlier, specified goods subject to extra tax were exempt after import or manufacturing stage as per rule 58T of the Rules, consequently making retailers unable to issue sales tax invoices and claim input tax. The allow ability to issue sales tax has made retailers able to claim input against sale specified goods subject to extra tax too.
Moreover, where the wholesaler-cum-retailer receives consideration in cash against the supplies made by him, the provisions of section 73 of the Sales Tax Act, 1990 shall not affect the admissibility of input tax adjustment.
Further, it has been specified that the extra amount of sales tax shall be declared against relevant supplies instead of other supplies and shall be deposited without any adjustment against the same ie 'extra tax' shall be treated similarly as 'further tax' in the hands of supplier as the supplier will pay the extra tax to the exchequer without making it part of output tax.
The same will also not be adjustable in the hands of buyer as provided in section 8(1)(c) of the ACT.
d. Cottonseed oil expelled by oil mills
The sales tax has now been made payable and has been made liable to be collected at the time of supply. This shall have effect form 5th March, 2015.


==============================================
2. TITLE: SALES TAX SPECIAL PROCEDURE
(WITHHOLDING) RULES, 2007
==============================================
NATURE: AMENDMENT
REFERENCE: RULES 2, 5
AMENDING SRO 485(I)/2015 DATED: 30-06-2015
==============================================

Historic Perspective:
STSPWR were initially introduced vide SRO 660(I)/2007 dated: 30-06-2007. The Rules were later on amended through SROs:


=================================
SRO 956(I)/2007 dated: 14-09-2007
SRO 77(I)/2008 dated: 23-01-2008
SRO 719(I)/2009 dated: 11-08-2007
SRO 704(I)/2009 dated: 30-07-2009
SRO 846(I)/2009 dated: 01-10-2009
SRO 98(I)/2013 dated: 14-02-2013
SRO 505(I)/2013 dated: 12-06-2013
SRO 897(I)/2013 dated: 04-10-2013
=================================

Amendment:
Withholding agents as specified in the Rules are required to deduct sales tax equal to 1/5th of the amount of sales tax shown on invoices subject to certain exceptions.
Through the above referred SRO, the Federal Government has made amendment as follows:
-- Petroleum dealers, on invoices issued by them, have been excluded from the ambit of sales tax deduction by withholding agents.
> The dealers of motor spirit and high speed diesel have also been included in the list of registered suppliers to whom these Rules shall not apply.
-- The sales tax return cum payment challan; by the withholding agents other than Government Department; has been made liable to be filed by 15th day of the month following the month during which purchases have been made instead of the month in which payments have been made.
This means that the sale tax withholding regime has been changed from cash basis to accrual basis.
-- Earlier, suppliers of mild steel products were excluded from applicability of these Rules. Suppliers of mild steel products have now been replaced by the persons falling under chapter XI of Sales Tax Special Procedure Rules, 2007 ie Steel Melters, Re-rollers and Ship Breakers.
-- Suppliers of following products have been removed from the list of persons to whom these rules do not apply, making the rules applicable to them:
-- Products made from sheets of iron or non-steel alloy, stainless steel or other alloy steel, such as pipes, almirahs, trunks etc.
-- Paper, in rolls or sheets, and
-- Plastic products including pipes.


==============================================
3. TITLE: SALES TAX CHARGED AT ZERO
PERCENT ON SUPPLY/
IMPORT OF GOODS
==============================================
NATURE: AMENDMENT
REFERENCE: SRO 1125(I)/2011
AMENDING SRO 486(I)/2015 DATED: 30-06-2015
==============================================

Historic Perspective:
Certain goods were notified initially vide SRO 1125(I)/2011 dated: 31-12-2011 on which sales tax was charged at 0% or 5% wherever applicable. Multiple amendments have been made in the said SRO since then.
Amendment:
Through the above referred SRO, the Federal Government has made amendment as follows:
Table I
Maize (corn) starch has been removed from Table I of the said SRO. This has the effect that maize (corn) starch will no more be charged at reduced rate of 2% and the normal rate of 17% shall apply.
Table II Table II of said SRO have been replaced with a new table wherein the goods have been comprehensively specified along with conditions and rates applicable to them. Due to the replacement, Conditions no. (iii) to (ixa), which have become redundant, have been deleted.
Following is the comparison of rates of sales tax charged before and after the amendment:


=================================================================================
Rate of Rate of
S. Sales Tax- Sales Tax
No Description of Goods and Points of Taxation New -Old
=================================================================================
1. Goods usable as industrial inputs, specified
in Table I
i Import for in-house consumption by 3% 2%
registered manufacturers of the five sectors
ii Commercial imports 3% + 1% 2% + 2%
VA VA
iii Supplies to registered or unregistered 2% 3%
persons of the said five sectors
iv Supplies to persons outside the said five sectors 17% 17%
v Import by, or supply to, registered 3% 2%
manufacturers, whether or not of the said
five sectors, for the manufacture of goods
specified in Table-I or Table-II
2. Fabric, including grey fabric
i Import for in-house consumption by 3% 3%
registered manufacturers of the five sectors
ii Commercial imports 3% + 1% 3% + 2%
VA VA
iii Supplies 3% 3%
3. Processed goods, including fabrics
Processing of goods owned by other persons, by 3% 2%
I registered manufacturers of the five sectors
Locally manufactured finished articles of
4. (a) textiles and textile made-ups.
(b) leather and artificial leather
i Supplies to any person, including retail sales 5% 5%
6. Imported finished goods ready for use by the
general public
i Import 17% + 2% 5% + 2%
VA VA
ii Supply thereof 17% 17%
=================================================================================


===============================================
4. TITLE: SERVICES ON WHICH EXCISE DUTY AS
TAX PAYABLE UNDER SALES TAX MODE
===============================================
NATURE: OMISSION
REFERENCE: 550(I0/2006 DATED: 05-06-2006
AMENDING SRO 489(I)/2015 DATED: 30-06-2015
===============================================

Historic Perspective:
Through SRO 489(I)/2006 dated: 05-06-2006, Excise Duty in Sales Tax mode (ie input adjustment is allowed) on following services was levied:
-Advertisement
-Facilities for travel
-Carriage of goods by air
-Shipping agents
-Telecommunication services
Amendment: Through the above referred SRO, the Federal Government has excluded services of 'Facilities for travel' and 'Carriage of goods by air' from FED in Sales Tax mode ie input tax adjustment shall not be allowed to recipient of such services.


=============================================
5. TITLE: FIXATION OF MINIMUM VALUE OF
TAXABLE SUPPLY OF COAL
=============================================
NATURE: AMENDMENT
REFERENCE: 532(I)/2008 DATED: 11-06-2008
AMENDING SRO: 491(I)/2015 DATED: 30-06-2015
=============================================

Historic Perspective:
The minimum value of taxable supply of locally produced coal was fixed at Rs 1,000 per ton.
Amendment:
Through the above referred SRO, the Federal Government has fixed the minimum value to be Rs 2,500 per ton.


=================================================
6. TITLE: PERSONS SPECIFIED TO BE EXCLUDED
FROM SECTION 8B OF STA
=================================================
NATURE: AMENDMENT
REFERENCE: SECTION 8B OF STA,
SRO 647(I)/2007, SRO 1125(I)/2011
AMENDING SRO: 492(I)/2015 DATED: 30-06-2015
=================================================

Historic Perspective:
Section 8b of the STA specifies that a registered person shall not be allowed to adjust input tax in excess of 90% of output tax for that tax period. Certain registered persons were excluded from this condition through SRO 647(I)/2007.
Amendment:
Through the above referred SRO, the Federal Government has also included persons making supplies at reduced rates under SRO 1125(I)/2011 in the list of SRO 647(I)/2007 as discussed above provided value of such supplies exceeds 50% of value of all taxable supplies in a tax period.


======================================================
6. TITLE: SALES TAX RULES, 2006
NATURE: AMENDMENT
======================================================
REFERENCE: RULES 2, 4, 5, 5A, 6-11, 12, 12A, 12B,
14, 26A, 33, 34, 36, 45-50, 57A, 57B,
150ZA-150ZQ
AMENDING SRO: 494(I)/2015 DATED: 30-06-2015
======================================================

AMENDMENT: Through the above referred SRO, the Federal Government has made following amendment, additions and omissions:
A. Rule 2 - Definitions:
The following definitions have been added:
-Licensee;
-Package; and
-System.
B. Rule 4 - Requirement of registration:
Rule 4 has been omitted and new rules for the registration requirements have been added as described below:
C. Rule 5 - Application for registration:
By omitting rule 4 and adding Rule 5, registration requirements have been amended and following additional formalities have been specified:
-- The applicant is now required to submit following additional information:
-- Distribution certificate from the principal showing distributorship or dealership, in case of distributor or dealer;
-- Balance sheet / statement of affairs / equity of the business;
-- Particulars of all branches in case of multiple branches at various locations; and
-- Particulars of all franchise holders in case of national or international franchise
-- The applicant is required to submit biometric verification along with all required documents in case of manual applications.
-- All applicants are required to submit GPS-tagged photographs of their business premises, office equipment, and electricity and gas meter. Earlier, only manufacturers were required to furnish such photographs.
-- The applicant may file a revised registration application during the registration process if any error, omission or misstatement is discovered by the applicant in the application. Previously, such option was not available and the applicant had to file a fresh application causing the registration process to be restarted.
-- In case a premise is being shared, the applicant is also required to furnish evidence of demarcation and installation of sub-meter.
D. Rule 5A - Temporary Registration
A new rule for the temporary registration has been added to facilitate manufacturers who intend to get registered In order to be able to import machinery and raw materials etc. The main characteristics are:
-- Temporary sale tax registration shall be allowed within 72 hours of filing complete application to the manufacturer who has not yet imported/ installed any machinery.
-- Such registration shall be allowed for a period of 60 days only.
-- The applicant will be allowed to import machinery and raw material after fulfilling the following requirements:
-- Submission of Post Dated Cheque to Customs Authorities
-- Submission of List of machinery and their Good Declarations
-- Filling of sales tax returns without taking any input tax adjustment
-- Fulfilling registration requirements within 60 days of temporary registration
-- Temporary registration holder will not be allowed to issue sales tax invoice nor he will be allowed sales tax refund, however, the amount of input tax may be carried forward.
E. Rule 12 - Suspension and Blacklisting
FBR has now notified the procedures for suspending or blacklisting the registration in Sales Tax Rules, 2006 too. These procedures are also currently specified in Sales Tax General Order no. 3 dated 12 June 2004.
F. Rule 12A - Non-Active Taxpayer
Consequences of being a non-active taxpayer have been prescribed as follows:
-- A non-active taxpayer shall not be entitled to-
-- file Goods Declarations for import or export
-- issue sales tax invoices;
-- claim input tax or refund; or
-- avail any concession under the Act or rules made thereunder.
-- Registered persons including government authorities are not allowed to procure any taxable supplies from Non Active Taxpayer
-- Registered persons are also not allowed to claim input tax against invoice issued by Non Active Taxpayer even prior to become Non Active
Steps for restoration as an active taxpayer are:
-- Filing of return or statement along with any tax due
-- Recommendation to the Board from RTO or LTU for restoration
-- Issuance of an order to such effect by the Board
G. Rule 14 - Filing of return
A new annexure - J to the monthly sales tax return has been introduced titled 'Details of Production and Supplies' to be filed along with monthly sales tax return in respect of products specified in sub rule (1) of Rule 14 in the units of measurement prescribed therein.
Approval of the Commissioner has been made mandatory to file monthly return after lapse of 6 months from due date of filing of return.
H. Addition of new chapters Following chapters have been added in rules specifying their respective special procedures:
-- Import or Supply of exempt goods to Organization or Agencies under Grants-in- Aid Rules 57A to 57B under Chapter VIII-A:
These rules have been added to prescribe procedure for availing exemption with respect to exempt imports or purchase of exempt supply from a registered person.
These provisions shall apply to goods imported or supplied in terms of serial no. 48 of the Sixth Schedule to the Act.
-- Monitoring or Tracking of Certain Registered Persons by Electronic or other Means Rules 150ZA to 150ZE under Chapter XIV-A:
These rules have been added to prescribe procedures for monitoring or tracking of business activities of registered restaurants, cafes, coffee shops, eateries, snack bars and hotels ("Registered persons").
The Registered persons will be required to provide continuous access to the Board of their computerized system for installation, configuration and dove-tailing of their system with Board's system.
Certain other IT related control and monitoring requirements have also been specified to be followed by the persons.
-- Electronic Monitoring and Tracking of Specified Goods Rules 150ZF to 150ZQ under Chapter XIV-B
The chapter has been added under powers to Board provided via section 40C of STA the provision of this chapter shall apply to manufacturers or importers following goods:
-- Aerated waters
-- Cigarettes
-- Fertilizers
-- Cement
-- Sugar
The manufacturers of specified goods would be required to affix or print tax stamp, banderole, sticker, label, barcode, etc ("signs") on every package of goods whether manufactured or imported, except goods which are exempt or meant for export, under electronic monitoring and tracking of specified goods.
Goods which are exempt or meant for export shall be affixed as "Exempt Goods" or "For Export", as the case may be.
Every affixation shall bear such security features as are approved by the Board in order to prevent counterfeiting; enable accounting of production of the specified goods and enable any person in the supply chain or an officer authorised by the Commissioner Inland Revenue to authenticate such affixation.
The Board may appoint and authorise one or more licensees to prepare and deliver tax signs as per specifications approved by the Board; develop a system for counting, recording and reporting of the specified goods and install and operate a system for the affixation or printing of signs, counting and monitoring of production, clearances and stocks, recording and reporting of data and other allied matters.
The manufacturer or importer shall pay to the licensee a fee fixed by the Board from time to time which shall cover the costs of installation, operation and maintenance of the system and printing or affixation of signs.
Such systems shall include all devices and equipments required for affixing, printing, authentication and validation of signs; roper identification of packages and affixation of corresponding signs; counting of goods manufactured or produce and recording and reporting of data of the specified goods to the board and any other function as required by the Board.
The system shall be installed on all production lines and packaging machines at the manufacturing premises as may be necessary.
The system for imported goods shall be installed in a designated area at the port of importation or a customs bonded warehouse, as the case may be, declared by the importer for this purpose.
Provided that the Board may allow signs to be affixed on any specified goods to be imported in a production facility in the exporting country, subject to such conditions as the Board may specify.
After installation of the system in each case, the licensee shall provide details of the system to the manufacturer as well as to the Board.
Disclaimer:
This publication gives an overview of significant amendments made in procedural requirements, is prepared for the general use of our clients/other users, and shall not be a construed as an expert advice relating to a particular matter. No representation and/or warranty (written or inferred) is extended as to the completeness of contents. You should not act upon or take decision(s) on the basis of the information without soliciting professional advice. Newspaper's disclaimer:
(The comments expressed above are not necessarily those of the newspaper.)
Copyright Business Recorder, 2015

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