PAYMENT AGAINST A SUPPLY MADE IN KIND

PAYMENT AGAINST A SUPPLY MADE IN KIND <!--[if gte mso 10]> PAYMENT AGAINST A SUPPLY MADE IN KIND By Mr. Akhtar Javed, Advocate, Lahore Section 73 of the Act, provides that any transaction (excluding utility bills) in respect of which payment is made for a sum exceeding Rs.50,000 otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft or pay order or any other banking instrument showing transfer of the payment in favour of seller from business account of buyer shall not be admissible for the purposes of input tax credit, adjustment or deduction, or refund, repayment or draw back or zero rating of tax. 2. A question had arisen whether or not a registered person is entitled for input adjustment/refund if the payment is made by transferring landed property and whether the said transfer of land could fulfill the requirement of transfer of payment from the business account of the buyer to the business account of the seller in terms of section 73 of the Sales Tax Act, 1990. 3. The matter has been examined in the Board. CBR vide its letter C. No. 3(36)STP/99 (Pt.I, dated 15th April, 2003 has ruled that the payment in kind by transferring landed property can be made provided: (i) Attested copy of Mutation deed showing transfer of landed property between the two registered persons is furnished; (ii) Transfer of property is duly reelected in the books of accounts with reference to sales tax invoice number and date; (iii) Payment of sales tax due on such supply is made either by the buyer from his bank account to the bank account of the supplier or tax is deposited by supplier himself; and (iv) The balance/remaining amount, if any, even less than Rs.50,000 is transferred from the bank account of the buyer to the bank account of the seller through banking instrument, as mentioned in section 73 of the Act. 4. The same ratio will apply when payment against any supply is made through kind where the buyer, instead of making monetary payment, compensates the supplier by making supply in kind. In view of Board's above referred letter dated 15.04.2003, the requirement of transfer of payment in terms of section 73 would be fulfilled provided that (i) There is sufficient documentary evidence showing transfer of goods between the two registered persons; (ii) The transfer of goods is duly reflected in the books of account with reference to sales tax invoice number and date; (iii) Payment of sales tax due on such supply; (iv) The balance amount of sales tax, if any, even less than Rs.50,000 is transferred from the bank account of the buyer to that of seller in any of the modes prescribed in section 73 of the Act;