'Restaurants liable to pay sales tax to FBR not PRA after Finance Act 2019'

The restaurants are liable to pay sales tax on food supply to the Federal Board of Revenue (FBR) under the Sales Tax Act, 1990 after the Finance Act, 2019, and the Punjab Revenue Authority (PRA) has no authority to collect such sales tax, said tax expert and advocate of Supreme Court Muhammad Shahid Baig.

He said legal notices have been served to the PRA for removal of Restaurant Invoice Monitoring System (RIMS) from restaurants in the city, which were installed under the Punjab Restaurant Invoice Monitoring System Rules, 2015 to report the services taxable under the Punjab Sales Tax on Services Act, 2012.

He said the Parliament has charged sales tax on the prepared food, foodstuff and sweetmeats supplied by restaurants, bakeries, caterers and sweetmeat shops at the rate of 7.5% through the Finance Act, 2019 without input tax adjustment vide Entry No.64 in the Eighth Schedule to the Sales Tax Act, 1990.

Moreover, he added, through the Finance Act, 2019, the relevant entries in chapter 98 of the 1st Schedule of the Customs Act, 1969 have been omitted or amended to exclude reference to restaurants, caterers, contracts of furnishing supplies and ship chandlers, meaning thereby that the Parliament has clarified its intention that the activity of provision of food by restaurants is not a service.

According to him, not needless to state that as per Article 143 of the Constitution, if any provision of Act of a Provincial Assembly is repugnant to any provision of Act of the Parliament which it is competent to enact, then the Act of the Parliament shall prevail and the Act of the Provincial Assembly shall to the extent of repugnancy be void.