Under the new SRO, the restriction of 90 percent of output tax will not apply to different categories of taxpayers. According to a tax expert, the FBR had issued SRO 1190(I)/2019 with respect to applicability of section 8B of Sales Tax Act, 1990 (STA). The section 8B provides that input tax amount, exceeding 90 percent of the output tax for a period, shall not be allowed to be adjusted in that period and will be carried forward to next tax periods. Now, the FBR has amended SRO 1190(I)/2019 through an SRO.1290(I)/2019.
Earlier, SRO 1190 provides that the restriction of 90 percent output tax will not apply to following: persons registered in electrical energy sector; oil marketing companies and petroleum refineries; fertilizer manufacturers; persons making zero-rated supplies, including exports, provided that value of such supplies exceeds 50 percent of value of all taxable supplies in a tax period; distributors; gas distribution companies; telecommunication services and Pakistan Steel, Bin Qasim, Karachi; registered persons other than manufacturers, making supplies of items covered under the Third Schedule to the Sales Tax Act, 1990 on which sales tax has been paid by the manufacturers or importer on retail price, provided that value of such supplies exceeds 80% of value of all taxable supplies in a tax period, and commercial importers where value of imports subject to 3 percent value addition as prescribed in twelfth schedule to STA exceeds 50 percent of value of all taxable purchases, including imports, in a tax period. The new notification SRO.1290(I)/2019 further provides that the wholesalers of yam may adjust input tax to the extent of 95 percent of the output tax for that tax period and excess amount shall be carried forward to next tax period.