PRA explains circumstances: service providers barred from adjusting input tax

Punjab Revenue Authority (PRA) will not allow input tax adjustment to service providers in a number of cases, including utility bills not in the name of registered persons, and capital goods not exclusively used in providing taxable services.
The disallowance of the input tax adjustment in different circumstances was explained in the draft Punjab Sales Tax on Services (Adjustment of Tax) Rules, 2012.
Under the rules (input tax adjustment not allowed), a registered person shall not be entitled to claim input tax adjustment in respect of:
(i) Capital goods (plant and machinery and equipments etc) not exclusively useable or used in providing of taxable services;
(ii) Goods and services already in use on which sales tax is not paid, or, where paid, the input adjustment has been taken before the commencement of the Act or where the input related goods and services were purchased or acquired before such commencement;
(iii) Utility bills not in the name of registered person with reference to his registered premises unless evidence of consumption is produced in the matter of such claims;
(iv) Sales tax claimed as input tax on services where such sales tax amount has not been deposited by the supplier or the service provider or where the evidence of such payment is not produced;
(v) carry forward of the input tax adjustment relating to the period prior to the commencement of the Punjab Sales Tax on Services Act, 2012;
(vi) Goods and services received against false, fake, forged, flying untrue, unreal or unrelated invoices or against purchases from the persons black listed or suspended by the Authority or by the Federal Board of Revenue or by any other Provincial authority;
(vii) Goods and services used or consumed in a service liable to a rate of tax lesser than the 16% of the charges or to a specific rate of tax not based on value;
(viii) Vehicles including three- and two-wheelers;
(ix) Food, beverages, garments, fabrics etc and consumption on entertainment, amusements, recreation or enjoyments;
(x) Gifts and give-aways and (xi) such goods or services as are notified or specified by the Authority to be inadmissible for input tax adjustment;
No input tax adjustment shall be admissible in respect of permanent or fixed assets of general nature or character, furniture and fixtures, construction materials and multiple-use goods or items, the rules said.
The rules also explained complete adjustment bar in certain situations.
No input tax adjustment on any account whatsoever shall be admissible in respect of tax required to be charged, deducted and paid on the basis of principles of origin and reverse charge under Section 4 of the Act and the person liable to pay tax on that account shall deposit the whole amount of due tax to the government of the Punjab without any deduction, adjustment or credit.
The adjustment shall be confined only to such extent to which it has been consumed in the providing of taxable service or services during a tax period. The input tax not consumed during a tax period may be carried forward to the next tax period for consumption and adjustment during the next tax period or periods not exceeding four moths whereafter adjustment shall be admissible only on confirmation through audit by the competent officer of the Authority.
Subject to the provisions of the Act and the rules or notifications issued thereunder, a registered person who holds a tax invoice for the purchase of goods or services used or consumed in providing of taxable services in his name, bearing his sales tax registration/NTN, shall be entitled to deduct or adjust input tax paid or payable during the relevant tax period.
The input tax in relation to the taxable services shall be worked out first and the amount so worked out, shall be bifurcated for the services provided in Punjab and also taxed in Punjab and for those provided outside Punjab and also not taxed in Punjab.
Where the registered person did not deduct or adjust the input tax in the relevant period, he may claim such input tax deduction or adjustment in the tax returns for any of the four succeeding tax periods under intimation to the Commissioner having jurisdiction.
The input tax paid on goods and services used in providing non-taxable or exempt services shall not be admissible. In case an input is used in providing taxable services and also non-taxable or exempt services, the input tax shall be apportioned according to the specified formula for availing of input tax adjustment/ deduction, rules added.