Section 73 of ST Act 1990: payments made through banking channels specified

The Federal Board of Revenue has issued an important ruling regarding the time limit prescribed under the Sales Tax Act 1990 for over Rs 50,000 payments made from the business bank accounts of the buyers to the sellers. In this regard, the FBR has issued a clarification to the Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) on Friday to specify the legal status of payments made through banking channels under section 73 of the Sales Tax Act.
Under section 73 of the Sales Tax Act, 1990, the buyer has to make the payment to the registered person within 180 days from his business bank account for the purpose of claiming input tax. The issue has been raised that the cheques issued within the limitation are not presented for clearance within the said limitation under the Sales Tax Act. Whether the registered units have to obtain condonation for such delay? This issue has been taken up with the board by the registered persons seeking condonation for such period. The time taken during clearance of cheques would not be considered as an irregularity for the purpose of section 73, sources added.
Under section 73, payment of the amount for a transaction exceeding Rs 50,000 shall be made by a crossed cheque drawn on a bank or by crossed bank draft or crossed pay order or any other crossed banking instrument showing transfer of the amount of the sales tax invoice in favour of the supplier from the business bank account of the buyer. The payment in case of a transaction on credit is so transferred within 180 days of issuance of the tax invoice.
According to the FBR clarification issued to the field formations on Friday, "the time lag between issuance and encashment of cheques is not an irregularity under the Sales Tax Act, 1990, if the supplier has paid his output tax (claimed as input tax by the buyer) for the relevant tax period. As such no condonation thereof is required in such cases," the FBR added.
The FBR further ruled that," the second matter of mutual adjustment of transactions/supplies between the buyer and seller is, in fact, a matter of payment against a supply partly in cash and partly in kind. Board vide an earlier clarification had clarified that such transactions are admissible subject to certain conditions enumerated therein," the board clarification added.
As per past clarification of the FBR, a question has been raised whether payment against any supply can be made partly in cash and partly in kind. The matter has been examined in the Board. The value of supplies can either be in cash or partly in cash and partly in kind as per the provisions of proviso (i) to clause (a) to sub-section (46) of section 2 of Sales Tax Act, 1990. Similarly, as per the provision of Section 73 of the Act, if a transaction exceeds Rs 50,000, the payment is to be made through crossed cheques drawn on bank or by a crossed bank draft or pay order or any other banking instrument showing transfer of the payment from the business account of the buyer to the business account of the seller.
In view of the above mentioned provisions of Sales Tax Act, 1990, it is ruled that the payment can be received partly in kind provided: Goods received in kind represent taxable goods under the Act. Secondly, goods received in kind as consideration are adequately reflected in the books of accounts with reference to sales tax invoice number and date and the balance/remaining amount even if less than Rs 50,000 is transferred from the business account of the buyer to the business account of seller through banking instrument, as mentioned in section 73 of the Act, the FBR added.