COMMENTS ON AMENDMENTS IN SALES TAX LAWS MADE THROUGH BUDGETARY MEASURES, 2004

COMMENTS ON AMENDMENTS IN SALES TAX <!--[if gte mso 10]> COMMENTS ON AMENDMENTS IN SALES TAX LAWS MADE THROUGH BUDGETARY MEASURES, 2004 By Akhtar Javed, Advocate, Lahore This Memorandum has been prepared as a general guide for the benefit of our clients. This is not an exhaustive treatise as it sets out interpretation of the amendments proposed through the Finance Bill, 2004 in the Sales Tax Act, 1990 in a concise form sufficient to amplify the important aspects of the changes proposed. It is suggested that the text of the Hill and the relevant notifications, where applicable, be referred to, in considering the interpretation of any provision. Since these are only general comments, no final conclusion on any issue should be drawn without further consideration and consultation. For additional information or guidance on the issues dealt with in these comments, specific professional advice should be sought before any action is taken. In terms of section 3 of Provisional Collection of Taxes Act, 1931, following measures have been given immediate effect: (i) Subsection (1A) of section 3 has been omitted. Further tax 3 % chargeable to supplies made to non‑registered persons has been abolished with immediate effect. (ii) Sr. No. 5 of the Sixth Schedule and entries relating thereto have been omitted. Exemption on supply of cotton seeds used in the manufacture of cotton seed oil has been withdrawn. Through SRO 501(I)/2004 dated 12‑6‑2004. CBR has fixed value of supply of cotton seed at Rs.330 per 40 Kg. These measures have also been given immediate effect. (iii) By virtue of an amendment in Sr. No. 6 of the Sixth Schedule, exemption of sales tax was available on supply of all locally produced crude vegetable oils obtained from locally produced seeds, except cooking oil, without having undergone any process except of washing. Exemption on supply of locally produced crude vegetable oil obtained from cotton seed has been withdrawn with immediate effect. (iv) After Sr. No. 6, a new Sr. No. 6A has been added in Sixth Schedule to the Act through which exemption of sales tax has been granted on edible oils and vegetable ghee, including cooking oil, on which central excise duty is charged, levied and collected as if it were a sales tax. Corresponding amendments have also been made in section 3 of Central Excises Act, 1944. Through SRO 502(I)/2004 dated 12‑6‑2004, central excise duty @ 15 % ad. val. has been levied on edible oil, vegetable ghee and cooking oil. Through SRO 503(I)/2004 dated 12‑6‑2004, the Federal Government has specified that central excise duty on the aforesaid items shall be levied and collected as if it were a sales tax payable under section 3 of the Sales Tax Act, 1990 and all the provisions of the said Act and Rules made and notifications, orders and instructions issued thereunder shall apply. All these measures have been given immediate effect. (v) In terms of Sr. No. 49 of the Sixth Schedule, exemption of sales tax was available to "supply of tractors, bulldozers and combined harvesters for agricultural purposes". The entry has been substituted and the words "for agricultural purposes" have been omitted. Now the exemption is available to supply of "tractors, bulldozers and combined harvesters". Now the supply of tractors, bulldozers and combined harvesters is exempt from sales tax irrespective‑ of the fact whether or not these are used for the agricultural purposes. The rest of the provisions of the Finance Bill, 2004 will be given effect once the bill is passed by the Parliament and is given assent by the President of Pakistan. Comments on major changes brought in Sales Tax Act, 1990 and notifications through Budgetary Measures, 2004 are offered in the following paragraphs: 1. LEGAL AMENDMENTS IN SALES TAX ACT, 1990 1.1 AMENDMENTS IN SECTION 2 1.1.1 Omission of words "further tax" from Clause (2A).‑‑ Clause (2A) of section 2 defines the term "arrear" which includes the un‑paid amount of tax, additional tax, further tax, extra amount of tax. fines, penalties, fees or any other sums, however described, as have been assessed, adjudged or demanded under this Act. Since the levy of further tax has been abolished, the words "further tax" has been omitted from clause (2A). 1.1.2 Insertion of new Clause (3A).‑‑‑A new clause (3A) has been inserted after clause (3) which defines the term "banking company" which means a banking company as defined in the Banking Companies Ordinance, 1962 (LVII of 1962) and includes any body corporate which transacts the business of banking in Pakistan. 1.1.3 Omission of Clause (5A).‑‑‑Clause (5A) was inserted through Tax Law (Amendments) Ordinance, 1999 which defines the term "common taxpayer identifier" as the identification number allocated under section 20 of the Finance Act, 1999. Since the scheme of common taxpayer identifier did not come into operation, the clause (5A) has been omitted as the said term had no utility. 1.1.4 Omission of words "sub‑section (6) of section 26A" from Clause (9).‑‑‑Clause (9) defined the term "due date" in relation to furnishing of a return by the persons registered under the normal regime of 15 % sales tax, persons enrolled under the regime of turnover tax and the retailers. They were required to furnish sales tax return under section 26, sub‑section (6) of section 26A and section 26AA respectively. Since the scheme of turnover tax has been abolished, so the words "sub‑section (6) of section 26A". have been omitted from clause (9) which had become superfluous. 1.1.5 Omission of Clauses (9a) and (9aa).‑‑‑Clause (9a) defined the term "enrolled person" and clause (9aa) defined the term "enrolment number". Since the scheme of enrolment tax applicable to manufacturers and retailers having turnover less than Rs.2,500,000 and Rs.20,000,000 respectively, has been abolished, the clauses (9a) and (9aa) have been omitted. 1.1.6 Clauses (14) and (20).‑‑‑Through Central Excises (Amendment) Ordinance, 2000, third proviso was added in section 3(1) of Central Excises Act, 1944 w.e.f. 1‑7‑2000 which empowered the Federal Government to specify the excisable services on which central excise duty shall be levied and collected as if it were a sales tax payable under section 3 of the Sales Tax Act, 1990. In exercise of those powers, Federal Government had issued SRO 617(I)/2000 dated 02‑9‑2000 through which Federal Government had specified excisable services of domestic travel, carriage of goods by air and services provided by persons engaged in telecommunication work on which central excise duty was collected as if it were a sales tax. However, since the levy was central excise duty, the registered person receiving these services was not entitled for adjustment of input tax paid to the persons supplying the services. However, through Finance Ordinance, 2001, an amendment was made in clause (14) of section 2 of the Sales Tax Act, 1990 which defines the term "input tax" and the services on which excise duty was collected in sales tax mode were also included in the term "input tax". A new amendment has been made in clause (d) of clause (14) and the central excise duty levied on goods in the mode of sales tax has also been included in the term "input tax". A corresponding amendment has also been made in clause (20) and the excise duty chargeable on excisable goods collected in sales tax mode has also been included in the term "output tax" of the person rendering or providing such services. 1.1.7 Clause (25).‑‑‑Clause (25) defines the term "registered person" as a person who is registered or is liable to be registered under the Act. The proviso to clause (25) farther provides that a person liable to be registered but not registered under this Act shall remain liable to further tax under sub‑section (1A) of section 3 and shall not be entitled to any benefit available to a registered person under Any of the provisions of this Act or the rules made thereunder. Since, further tax has been abolished, the words "shall remain liable to further tax under sub‑section (1A) of section 3" have been omitted. 1.1.8 Clause (33).‑‑‑Clause (33) defines the term "supply" which inter alia includes any transaction as the Federal Government may by notification specify. Clause (d) has been omitted and a new proviso has been added through which the Federal Government has been empowered to specify, through a notification, such other transaction which shall or shall not constitute supply. In exercise of those powers, Federal Government has issued SRO 445(I)/2004 dated 12‑E‑2004 through which it has been specified that the following types of transactions shall not constitute supply, namely (a) forward transactions of commodities at the National Commodity Exchange Limited; and (b) goods delivered under a Murabaha financing arrangement to or by a bank or a financial institution approved by the State Bank of Pakistan or the Securities and Exchange Commission of Pakistan, as the case may be. 1.1.9 Clause (34).------Clause (34) defines the term "tax" which inter alia included "turnover tax". Since the scheme of turnover has been abolished, the words "turnover tax" have been omitted from clause (34). 1.1.10 Clause (37).‑‑‑Clause (37) defines the term "tax fraud". Sub‑clause (ii) has been amended and the scope of tax fraud has been expanded. The act of making taxable supplies without getting registration under the Act has also been included in the term "tax fraud". 1.1.11 Omission of Clause (38).‑‑‑Clause (38) defined the term "tax identification number (TIN)" as the registration number or any other number allocated to a taxable person. Since the scheme of single tax identification number did not come into operation, the clause (38) has been omitted as the said term had no utility. 1.1.12 Omission of Clause (45).‑‑‑Clause (45) defined the term "turnover tax" as the tax levied under section 3A of the Act. Since the scheme of turnover tax has been abolished, the clause (45) has been omitted. 1.1.13 Clause (47).‑‑‑Clause (47) defines ,the term "wholesaler including a dealer" and inter alia includes a person supplying taxable goods to person deducting advance tax under subsection (4) of section 50 of the Income Tax Ordinance, 1979. Since the Income Tax Ordinance, 1979 has been repealed and a new Income Tax Ordinance, 2001 has been promulgated, therefore, there was need of suitable amendment in clause (47) by inserting the provisions under which a person deducts income tax at source under the Income Tax Ordinance, 2001. Through the amendment, for the words "persons deducting advance tax under subsection (4) of section 50 of the Income Tax Ordinance, 1979 (XXXI of 1979) ", the words "a person whose income is not liable to tax under the Income Tax Ordinance, 2001 (XLIX of 2001) but has deducted income tax at source under section 153 of the said Ordinance" have been inserted. It appears that draftsman has erred while making amendment in clause (47) as now the amended clause reads as follows‑ Wholesaler means any person.‑‑‑"and includes a person, supplying taxable goods to a person whose income is not liable to tax under the Income Tax Ordinance, 2001 (XLIX of 2001) but has deducted income tax at source under section 153 of the said Ordinance" A bare reading of the above reveals that now only those persons are covered under the definition of wholesaler who supply taxable goods to such person whose income is not liable to tax under the Income Tax Ordinance, 2001 e.g. Government Departments. The persons who are supplying goods to such person whose income is liable to tax under the Income Tax Ordinance, 2001 and also deducts advance tax is not covered under the definition of wholesaler e.g. Supplier of taxable goods to banks and other financial institutions. We are of the opinion that this was not the intention of the legislature to exclude those goods from the purview of sales tax net but because of the drafting mistake, this omission has occurred. 1.2 OMISSION OF SUB‑SECTION (1A) OF SECTION 3 FURTHER TAX 1.2.1 Through Finance Act, 1998, subsection (1A) was inserted in section 3 of the Sales Tax Act, 1990 which provided that Where taxable supplies are made in Pakistan to a person other than a registered person, there shall be charged, levied and paid a further tax @ 1 % of the value in addition to rate specified in sub‑section (1). 1.2.2 Through Finance Act, 1999, the scope of further tax was also extended to goods liable to sales tax on the basis of retail price. The rate of further tax was also enhanced from 1 % to 3 %. Through Finance Ordinance, 2000, the rate of further tax was reduced from 3 % to 1.5 %. However, through Finance Ordinance, 2001, the rate of further tax was again enhanced from 1.5 % to 3 %. 1.2.3 In its various letters, CBR had clarified that sub‑section 1A is punitive in nature and such persons have been put to a disadvantage who are otherwise liable to be registered but did not get themselves registered. Such persons are required to pay further tax over and above the standard rate of sales tax. However it has now been realized that the objectives of levy of further tax have not been achieved rather the phenomenon of flying invoices flourished. 1.2.4 Subsection (1A) has been omitted and this omission has been given immediate effect. Levy of further tax has been abolished. ‑‑‑Now the registered persons will charge sales tax at the standard rate of 15% irrespective of the fact whether or not the buyer is registered. 1.2.5 Subsection (5) of section 3 empowers the Federal Government to levy extra amount of tax in addition to the tax levy under sub section (1) and (1 A). Since subsection (1 A) has been omitted and levy of further tax has been abolished, the words "and (1A)" have been omitted from subsection (5) of section 3. 1.3 OMISSION OF SECTION 3A ‑ TURNOVER TAX 1.3.1 Under section 3A, turnover tax @ 2% of taxable turnover was levied on manufacturer or producer and retailer who is making taxable supplies in the course or furtherance of any taxable activity carried on by him provided that total turnover of that manufacturer or producer and that retailer did not exceed two and a half million rupees and twenty million rupees, respectively, in any period during the last twelve months: 1.3.2 The scheme of turnover tax has been abolished and section 3A has been omitted. 1.4 AMENDMENTS IN SECTION 3AA ‑ RETAIL TAX 1.4.1 Subsection (1) of section 3AA provides that there shall be charged, levied and paid retail tax at the standard rate by a retailer who is making taxable supplies in the course or furtherance of any taxable activity carried by him. 1.4.2 Subsection (4) of section 3AA provides that notwithstanding provisions of subsection (1), a retailer not liable to pay tax, shall, after voluntary registration under section 18 opt for paying sales tax at the standard rate. Section 18 has been omitted, for the words "under section 18",, the words " prescribed under section 14" have been substituted. 1.5 AMENDMENTS IN SECTION 4 ‑ ZERO RATING 1.5.1 Section 4 overrides the provisions of section 3 and provides that a supply of. following goods shall be charged to tax at the rate of zero percent ' (a) goods exported, or the goods specified in the Fifth Schedule; (b) supply of stores and provisions for consumption aboard a conveyance proceeding to a destination outside Pakistan as specified in section 24 of the Customs Act, 1969 (IV of 1969); (c) such other goods as the Federal Government may, by a Notification in the Official Gazette specify. 1.5.2 Since the words "supply of goods" did not match the wording available in section 4, these words have been omitted. 1.6 AMENDMENTS IN SECTION 7 ‑ DETERMINATION OF TAX LIABILITY 1.6.1 Section 7 of the Act provides the method for the determination of tax liability of a registered person in respect of taxable supply made by him during a tax period. He is entitled to conduct input tax paid during the tax period for the purpose of taxable supplies made, or to be made, by him from the output tax i.e. due from him in respect of that tax period. 1.6.2 During the recent years, the provisions of section 7 have been interpreted in a way that the registered person is entitled to deduct only that amount of input tax which he pays during the tax period. On the other hand, the taxpayers were of the opinion that they were entitled to adjust input tax on the strength of sales tax invoices irrespective of the fact whether or not they had paid sales tax to their suppliers. They were also of the view that the output tax of a supplier constitutes the input tax of the buyer and the words "input tax paid" reflected the input tax which is paid by the suppliers as their output tax alongwith the return of the tax period in which the invoices are issued. 1.6.3 The words "or payable" have been added after the words "input tax paid". Now the registered person is entitled to deduct input tax paid or payable during the tax period from his output tax. 1.6.4 Through Finance Act, 2003, the words "excluding the amount of further tax" were added after the word "output tax" and the registered person was disentitled froth making deduction of further tax from input tax in cases where input tax exceeded the output tax. So in cases where the input tax exceeded the output tax, the registered person was forced to make payment of further tax in cash and the balance amount was carried forward. In such cases, where the input tax on purchases was 20% and output tax on sales was 15%, the registered persons were forced to pay further tax in cash although they had been carrying forward huge amounts of excess input tax. 1.6.5 Since the further tax has been abolished, the words "excluding the amount of further tax" have been omitted from section 7. 1.6.6 Subsection (2) of section 7 inter alia provides that registered person shall be entitled to deduct input tax from output tax in case of goods purchased in auction, if he holds a treasury Challan showing payment of sales tax. After the words "Challan" the words "in his name and bearing his registration number" have been inserted. So the registered person is now entitled to deduct input tax from output tax in case of goods purchased in auction only when the treasury Challan bears his name and his registration number. 1.7 AMENDMENTS IN ‑ SECTION 7A LEVY AND COLLECTION OF TAX ON SPECIFIED GODS ON VALUE ADDITION 1.7.1 Section 7A was inserted through Finance Act, 2003 which empowers the Federal Government to specify, through a notification in the official Gazette, that sales tax chargeable to supply of goods be levied and collected on difference between the value of supply for which the goods are required, and the value of supply for which the goods either in the same state or on further manufacture, are supplied. 1.7.2 The existing provisions of section 7A or renumbered as subsection (1) and a new subsection (2) has been added which provides that the Federal Government may, by notification in the official Gazette, specify the minimum value addition required to be declared by certain persons or categories of persons, for supply of goods of such description, or clause as may be prescribed, and to waive the requirement of audit or scrutiny of record if such minimum value of addition is declared. 1.8 AMENDMENTS IN SECTION 8 ‑ TAX CREDIT NOT ALLOWED 1.8.1 Subsection (1) of section 8 overrides the other provisions of the Act and provides that registered person shall not be entitled to reclaim or deduct input tax paid on: (a) the goods used or to be used for any purpose other than for the manufacture or production of taxable goods or for taxable supplies made or to be made by him; (b) any other goods which the Federal Government may, by a notification in the, official Gazette, specify; and (c) on the goods under sub‑section (IA) and (5) of section 3. 1.8.2 Since further tax has been abolished and subsection (1A) of section 3 has been omitted, the words "subsection (IA) and" have been omitted from clause (c). 1.8.3 After clause (c), two new clauses have also been added namely: (d) fake invoices; and (e) purchases made by such registered person, in case he fails to furnish the information required by the Board through a' notification issued under subsection (5) of section 26. 1.8.4 Now the registered person will also not be entitled to claim adjustment of input tax paid on goods specified in clauses (d) and (e) referred to in above paragraph. The registered person has been disentitled to claim adjustment of input tax paid against fake invoices. The term "fake invoice" has not been defined in the Act. The said amendment in section 8(1) implies that prior to the insertion of clause (d), there were not provisions in the Act through which a registered person could be denied adjustment / refund on the basis of invoice said to be a fake invoice. 1.8.5 Subsection (4) of section 8 provides that a person paying turnover tax shall not be entitled to make any deduction or reclaim input tax. It further provides that the turnover, tax paid by an enrolled person shall not be creditable as a input tax for taxable activity of any other registered person. Since the scheme of turnover tax has been abolished and section 3A has been omitted from the Act, subsection (4) of section 8 had become superfluous and has been omitted. 1.8.6 Since the scheme of turnover tax has been omitted, the words "or enrolled" occurring twice in subsection (6) of section 8 have been omitted. 1.8.7 Subsection (7) of section 8 empowers the Federal Government to specify any goods in respect of which the provision of section 3A shall not apply. Since section 3A has been omitted, subsection (7) had become superfluous and has been omitted. 1.9 AMENDMENTS IN SECTION 10 ‑ EXCESS AMOUNT TO BE CARRIED FORWARD OR REFUNDED 1.9.1 Section 10(1) provides that in cases where the total deduction of input tax exceeds the output tax, the excess amount shall be carried forward by the registered person to the next tax period and shall be treated as input tax for that tax period. The first proviso to section 10(1) further provides that in case the excess amount is not fully covered by the tax payable during a period of one year following the tax period in which the credit first arose, the balance outstanding at the end of that period shall, unless otherwise directed by the Board under exceptional circumstances, be refunded to the registered person as may be prescribed. . 1.9.2 The first proviso has been substituted and the new proviso says that any excess amount of tax carried forward, from the previous tax period may be refunded to the‑ registered person subject to such conditions, restrictions and limitations as the Board, may by notification in the official Gazette, specify. 1.9.3‑In exercise of power conferred under subsection (1) of section 10 of the Act, CBR has issued SRO 510(1)/2004 dated 12‑6‑2004 through which it has been specified that the excess amount of tax carried forward by a registered person other than an exporter may be refunded if the amount carried forward is not adjusted within a period of six months from the period in which it first arose. 1.10 AMENDMENTS IN SECTION 13 ‑ EXEMPTION 1.10.1 Section 13(2)(b) empowers the Board to exempt any supply from the payment of‑whole or any part of tax through a special order in each case stating the reasons. A bare reading of the aforesaid provisions indicate that Board was not empowered to grant exemption of sales tax on goods imported into Pakistan. Through legislative measure, the word "supply" has been substituted with the words "import or supply of goods of such description or class, as may be specified". So now Board has also been given the powers to grant exemptions of sales tax on import of goods of such description or classes as may be specified. 1.11 SUBSTITUTION OF SECTION 14 ‑ REQUIREMENT OF REGISTRATION 1.11.1 The existing section 14 provides that the following persons engaged in making of taxable supplies in Pakistan (including zero‑rated supplies) in the course or furtherance of any taxable activity carried on by them, if not already registered, are required to be registered under this Act, namely: (i) a manufacturer whose annual turnover from taxable supplies made in any period during the last twelve months ending any tax period exceeds two and half million rupees; (ii) a retailer whose value of supplies in any period during the last twelve ‑months ending any tax period exceeds twenty million rupees; (iii) an importer; and (iv) a wholesaler (including dealer) and distributor 1.11.2 Section 14 has been substituted and new provision says that registration will be required for such persons and be regulated in such manner and subject to rules as the Board may, by notification in the official Gazette, prescribe. 1.12 OMISSION OF SECTION 15 ‑ ‑ APPLICATION FOR REGISTRATION 1.12.1 Section 15 provided that a person required to be registered under this Act shall make an application in the prescribed form to the Collector before making taxable supplies. The said section 15 has been omitted. 13 OMISSION OF SECTION 17 ‑ CERTIFICATE OF REGISTRATION 1.13.1 Section 17 provided that if the Collector or such other officer as may be authorised by him in this behalf is satisfied 1hat the application for registration is complete in all respect, he would register the applicant and issue a certificate of registration in such form as the Board may, by notification in the official Gazette, specify. The said section 17 has been omitted. 1.14 OMISSION OF SECTION 18 VOLUNTARY REGISTRATION 1.14.1 Section 18 provided that a person who makes or intends to make taxable supplies but is not required to be registered under this Act, may make an application for registration in such form and manner as the Board may, by notification in the official Gazette, specify. The said section 18 has been omitted. 1.15 OMISSION OF SECTION 19 COMPULSORY REGISTRATION 1.15.1 Section 19 provided that if a person who was required to be registered or enrolled under this Act did not apply for registration or enrolment and the Collector or such other officer as may be authorized by him in this behalf, after such inquiry as he thinks fit, was satisfied that such person was required to be registered or enrolled, the Collector or such other officer would register that person and that he would be deemed to have registered or enrolled from the date he had become liable for registration or enrolment. The said section 19 has been omitted. 1.16 OMISSION OF SECTION 20 ‑ CHANGE IN THE PARTICULARS OF THE REGISTRATION 1.16.1 Section 20 provided that in case there was a change in the name, address or other particulars as stated in the registration application, the registered person would notify the change to the Collector or the local Sales Tax Office within fourteen days of such change. The said section 20 has been omitted. 1.17 SUBSTITUTION OF SECTION 21 ‑ DE‑REGISTRATION 1.17.1 Section 21 pertains to De‑registration. It has been substituted and the newly substituted section 21 provides De-registration, blacklisting and suspension of registration. 1.17.2 Subsection (1) of newly inserted section 21 provides that the Board or any officer, authorized in this behalf, may subject to the rules, de‑register a registered person or such class of registered persons not required to be registered under this Act. 1.17.3 Subsection (2) further provides that notwithstanding anything contained in this Act, in cases where the Collector is satisfied that a registered person is found to have issued fake invoices, evaded tax or has committed tax fraud, he may blacklist such person or suspend his registration in accordance with such procedure as the Board may, by notification in the official Gazette, prescribe. 1.18 AMENDMENTS IN SECTION 22 RECORDS 1.18.1 Section 22 pertains to the record required to be maintained by the registered person. An amendment has been made in clause (d) of subsection (1) of section 22 and the words "banking instruments in terms of section 73" have been added after the words "bank statement". Now the registered person will be required to keep the banking instruments through which he makes or receives the consideration in respect of supplies received or made by him and will be required to furnish the same as and when required by the sales tax auditors. 1.19 AMENDMENTS IN SECTION 23 TAX INVOICES 1.19.1 Section 23(1) requires a registered person to issue a serially numbered tax invoices at the time of supply of goods inter alia including' the amount of further tax as specified in section 3(1A) as has been specified in clause (ff). Since 'subsection (1A) of section 3 has been omitted and further tax has been abolished, clause (ff) of subsection (1) of section 23 has been omitted. 1.19.2 Subsection (2) of section 23 provides that only a registered person or a person paying turnover or retail tax shall issue a tax invoice Since the scheme of turnover tax has been abolished and section 3A has been omitted, the words "turnover tax have been omitted from subsection (2) of section 23. 1.20 AMENDMENTS IN SECTION 26 ‑ MONTHLY RETURN 1.20.1 Section 26 requires a registered person to furnish a monthly return by the due date. Subsection (4) was added through Finance Act, 2003 which provided that if a registered person wishes to file revised return voluntarily alongwith amount of tax short paid and additional tax, whenever it comes to his notice, before receipt, of notice of ‑audit, no penalty, shall be recovered from him. 1.20.2 The second proviso to subsection (4) says that in case where the registered person wishes to deposit the amount after issuance of show cause notice, he shall deposit the evaded amount of sales tax alongwith the amount of further tax as per provisions of subsection (IA) of section 3, if applicable, additional tax and full amount of penalty alongwith revised return and thereafter, the show cause notice, shall stand abated. Since subsection (1A) of section 3 has been omitted, so the words "alongwith the amount of further tax ' as per provisions of subsection (1A) of section 3, if applicable" were no more required on the statute book and have been omitted. 1.20.3 A new subsection (5) has been added after subsection (4) which provides that the Board may, by notification in the official Gazette, require any person or class of persons, for any goods of such description or class, to furnish such summary or details or particulars pertaining to the imports,, purchases and supplies during any tax period or periods, in such format as may be specified. 1.20.4 In exercise of power conferred under newly inserted subsection (5) of section 26, C.B.R. has issued two notifications S.R.O. 508(1)/2004 and 509(1)/2004 both dated 12‑6‑2004. Through S.R.O. 509(1)/2004, C.B.R. has required the commercial importers of polypropylene granules tape yarn grade to furnish a monthly statement to the Collector of Sales Tax. Through SRO 508(1)/2004, the registered persons engaged in the manufacture or supply of following goods have also been required to furnish monthly statement to the Collector of Sales Tax: (a) cotton yarn, blended yarn or man‑made yarn; (b) textile fabrics of all kinds and descriptions; and (c) textile made‑ups, including bed linen, kitchen linen, terry fabric goods and ready‑made garments 1.21 OMISSION OF ‑SECTION 26A ‑ TURN VER TAX RETURN 1.21.1 Section 26A provided that every person required to pay turnover tax would furnish a true and correct return in the prescribed form to the Office of the Collector having jurisdiction indicating the value of supplies made in a tax period, the tax paid and such other information as may be prescribed. Since the scheme of turn over tax has been abolished and section 3A has been omitted, section 26A was no more required on the statute book and has been omitted. 1.22 AMENDMENTS IN SECTION 26AA- RETAIL TAX RETURN 1.22.1 Section 26AA provides that every registered retailer making taxable supplies shall furnish not later than due date a true‑and. correct return in the prescribed form to the designated branch of the bank specified by the Board. 1.22.2 Subsection (4) was added through Finance Act, 2003 which provided that if a registered retailer wishes to file revised return voluntarily alongwith deposit of the amount of tax short paid and additional tax, whenever it comes to his notice, before receipt of notice of audit, no penalty shall be recovered from him. 1.22.3 The second proviso to subsection (4) says that in case where the registered retailer wishes to deposit the amount after issuance of show cause notice, he shall deposit the evaded amount of sales tax alongwith the amount of further tax as per provisions of subsection (1A) of section 3, if applicable, additional tax and full amount of penalty alongwith revised return and thereafter, the show cause notice, shall stand abated. Since subsection (IA) of section 3 has been omitted, so the words "alongwith the amount of further tax as per provisions of subsection (1A) of section 3, if applicable" were no more required on the statute book and have been omitted. 1.23 AMENDMENTS IN SECTION 27 ‑ SPECIAL RETURNS 1.23.1 Section 27 pertains to special returns to be filed by a person registered or enrolled under the Act. Since the scheme of turnover tax has been abolished, the words "or enrolled under the Act," had become superfluous so have been omitted. 1.24 AMENDMENTS IN SECTION 32AA ‑ AUDIT OF RETAILER 1.24.1 Section 32AA pertains to audit of retailers. Subsection (2) provides that a retailer who pays turnover tax under section 3A or retail tax under section 3AA may in lieu of audit of his business by an officer of Sales Tax, opt for audit by a Chartered Accountant or a Cost and Management Accountant Authorized by Central Board of Revenue in terms of section 32A provided he pays half of the fee payable to such Chartered Accountant or, as the case may be, Cost and Management Accountant. 1.24.2 Since the scheme of turnover tax has been abolished and section 3A has been omitted, the words "turnover tax under section 3A" available in subsection (2) have become superfluous and are omitted. 1.25 AMENDMENT IN SECTION 33 ‑ GENERAL PENALTIES 1.25.1 Subsection (2) of section 33 lays down penalties for contravention of various provisions of the Act. The proviso to sub section (2) says that no penalty shall be imposed when any miscalculation is made for the first time during a year. 1.25.2 A new proviso has been added before the existing proviso which says that in case the amount of sales tax payable in the return does not exceed five thousand rupees, he shall pay a penalty of one thousand rupees. 1.25.3 Clause (a) of subsection (3) of section 33 provides that if any person who is required to apply for registration or enrollment under this Act fails to make an application within the specified period, he shall pay a penalty of Rs.10,000 or five percent of ‑the amount of tax involved, whichever is higher. 1.25.4 Since the scheme of turnover tax has been abolished, the words "or enrolment" have been omitted. The words "for registration before making taxable supplies" have been inserted for the words "within the specified period". 1.25.5 A new clause (c) has also been inserted. After amendments, now subsection (3) of section 33 reads as follows: (3) Any person who, (a) is required to apply for registration under this Act fails to make an application for registration before making taxable supplies; (b) fails to maintain records required under this Act or the rules made thereunder; or (c) fails to furnish the information required by the Board through a notification issued under subsection (5) of section 26. shall pay a penalty of ten thousand rupees or five percent of the amount of tax involved, whichever is higher. 1.25.6 Subsection (4) of section 33 prescribed penalties for registered person for contravening various provisions of the Act. In case, a person who commits any offence specified in clauses (a) to (f) of sub section (4), he shall pay a penalty of Rs.25,000 or 30% of the amount of tax involved, whichever is higher. The extent of penalty has been enhanced from 30 % to 100 % . 1.25.7 Subsection (6A) was inserted through Finance Act, 2003 which prescribes penalties for registered or enrolled persons or retailers Since Since the scheme of turnover tax has been abolished, the words "or enrolled" have been omitted from subsection (6A). 1.26 AMENDMENTS IN SECTION 36 ‑RECOVERY OF TAX NOT LEVIED OR SHORT LEVIED OR ERRONEOUSLY REFUNDED 1.26.1 Since the‑‑ scheme of turnover tax has been abolished and section 3A has been omitted, the words "or enrolled" available in second proviso to subsection (3) of section 36 have been omitted. 1.27 AMENDMENTS IN SECTION 37C ‑ PROSECUTI N AND PUNISHMENT FOR EVASION OF TAX ETC. 1.27.1 Section 37C pertains to prosecution and punishment for evasion of tax. Clause (b) of subsection (1) prescribes that where a person who is required to get himself registered under this Act fails to get registered within sixty days of the expiry of the period given in section 15 read with clause (a) of sub‑section (3) of section 33, he shall be liable to punishment for a term which may extend to three years, or with fine which may extend to amount equal to the amount of tax involved, or with both. 1.27.2 Since section 15 has been omitted, corresponding amendment has been made in clause (b) of section 37(l) and for the words "of the expiry of the period given in section 15 read with clause (a) of sub section (3) of section 33 ", the words "of the commencement of taxable activity". 1.27.3 Now section 37(1)(b) reads as follows: where a person who is required to get himself registered under this Act fails to get registered within sixty days of the commencement of taxable activity, he shall be liable to punishment for a term which may extend to three years, or with fine which may extend to amount equal to the amount of tax involved, or with both. 1.28 INSERTION OF SECTION 38A ‑ POWER TO CALL FOR INFORMATION 1.28.1 After section 38; a new section 38A has been inserted which empowers the Collector to require any person including a banking company to furnish such information or such statement in connection with any investigation or inquiry in case of tax fraud. Newly inserted section 38A reads as follows: The Collector may, by notice in writing, require any person, including a banking company, to furnish such information or such statement in connection with any investigation or inquiry in cases of .tax fraud, as may be specified in such notice. 1.28.2 Through the insertion of new section 38A, it is implied that before the said insertion the Collector of Sales Tax was not competent to require any person including banking company to furnish information or statement in connection with any investigation or inquiry in cases of tax fraud. 1.29 SUBSTITUTION ‑OF SECTION 40 ‑ SEARCHES HOW TO BE MADE 1.29.1 Section 40 provides that all searches made under this Act or the rules made thereunder shall be carried out in accordance with the relevant provisions of the Code of Criminal Procedure, 1898 (Act V of 1898). 1.29.2 Section 40 has been substituted and newly inserted section 40 reads as follows: 40. Searches under warrant.‑‑‑(1) Where any officer of sales tax has reason to believe that any documents or things which in his opinion, may be useful for, or relevant to, any proceedings under this Act are kept in any place, he may after obtaining a warrant from the Magistrate, enter that place and cause a search to be made at any time. (2) The search made under sub‑section (1) shall be carried out in accordance with the relevant provisions of the Code of Criminal Procedure, 1898 (V of 1898). 1.30 AMENDMENTSIN SECTION 45 POWER OF ADJUDICATION 1.30.1 Section 45 prescribes the powers of adjudication of the sales tax officers in cases involving assessment of tax charging of additional tax, imposition of penalty and recovery, of amount erroneously refunded under this Act or the rules made thereunder 1.30.2 To make the provisions more elaborate and to remove any ambiguity, the words "or any other contravention" have been added after the word "refunded". 1.30.3 Since further tax has been abolished, so the explanation available after the second proviso to section 45 has been suitable amended. Before amendment, the explanation read as follows: Explanation. ‑‑‑For the purpose of this section; tax means the principal amount of sales tax other than further tax or additional tax and in a case where only further tax, whether or not with additional tax, is involved, the amount of further tax and in all other cases additional tax. 1.30.4 After amendment, the explanation now reads as follows: Explanation:‑"For the purpose of this section, tax means the principal amount of sales tax other than additional tax, and in case where only additional tax is involved, the amount of additional tax. 1.31 AMENDMENTS IN SECTION 45B---APPEALS 1.31.1 Section 45B was inserted through Finance Ordinance, 2002. Subsection (1) provides that any person including the Sales Tax Department, aggrieved by any decision or order passed under sections 11, 36 or 45, by an officer of Sales Tax below in rank to Additional Collector may, within thirty days of the date of receipt of such decision or order, prefer appeal to the Collector of Sales Tax (Appeals). 1.31.2 Since the Act did not provide any forum where appeals are to be filed against orders passed by an officer below in rank to Additional Collector under section 10 or 66 of the Act, clarificatory amendment has been made in section 45B and for the words "11, 36 or 45", the words " 10, 11, 36, 45 or 66" have been inserted. 1.32 AMENDMENTS IN SECTION 46-APPEAL TO THE APPELLATE TRIBUNAL 1.32.1 Subsection (9) was added by Finance Act, 2003 and read as follows; (9) The Chairman or any other member of the Appellate Tribunal authorized in this behalf by the Chairman may, sitting singly, dispose of any case which has been allotted to the bench of which he is member where (a) in any disputed case other than a case where the determination of any question having a relation to the rate of sales tax or to the value of taxable goods for purposes of assessment is in issue or is one of the points in issue, the difference in tax involved or the tax involved; or (b) the amount of fine or penalty involved; does not exceed five hundred thousand rupees. 1.32.2 Corrective amendments have been made in subsection (9) and words "does not exceed five hundred thousand rupees" have been added after the word "involved" in clause (a). The semicolon occurring after the word "involved" in clause (b) was unnecessary and, has been omitted. Now subsection (9) reads as follows: (9) The Chairman or any other member of the Appellate Tribunal authorized in this behalf by the Chairman may, sitting singly; dispose of any case which has been allotted to the bench of which he is member where (a) in any disputed case, other than a case where the determination of any question having a relation to the rate of sales tax or to the value of taxable goods for purposes of assessment is in issue or is one of .the points in issue, the difference in tax involved or the tax involved does not exceed five hundred thousand rupees; or (b) the amount of fine or penalty involved does not exceed five hundred thousand rupees. 1.33 SUBSTITUTION OF SECTION 47A ‑ ALTERNATE DISPUTE RESOLUTION 1.33.1 Section 47A was inserted through Finance Ordinance, 2002 and it provides an alternate forum for resolution of any hardship relating to levy and payment of sales tax. It provides that Board may, of its own motion or application by a registered person, may‑ constitute a Dispute Resolution Committee which shall examine the question of facts and law and may make recommendation to Board for the resolution of dispute. An amendment was made in section 47A through Finance Act, 2003 which provided that a unanimous recommendation of the Committee shall be binding on the Board and the applicant. 1.33.2 Section 47A has been substituted. Subsection (1) of the newly substituted section 47A provides that any registered person aggrieved in connection with any matter of sales tax in respect of the following cases, may apply to the Central Board of Revenue for the appointment of a committee for the resolution of any hardship or dispute mentioned in detail in the application: (a) the liability of tax against the registered person, or admissibility of refunds, as the case may be; (b) the extent of waiver of additional tax and penalty; (c) the quantum of input tax admissible in terms of sub‑section (3) of section 7; (d) relaxation of any procedural or technical irregularities and condonation of any prescribed time limitation; and (e) any other specific relief required to resolve the dispute, 1.33.3 Subsection (2) provides that the Central Board of Revenue may, after examination of the application of‑a registered person, appoint a committee consisting of an officer of sales tax and one or two persons from among the notified panel of Chartered or Cost Accountants, advocates, representatives of trade bodies or associations, or any other reputable taxpayers for the resolution of the dispute. 1.33.4 Subsection (3) provides that the committee constituted under subsection (2) shall examine the issue and may, if it deems necessary, conduct inquiry, seek expert opinion, direct any officer of sales tax or any other person to conduct an audit and make recommendations in respect of the resolution of the dispute as it may deem fit. 1.33.5 Subsection (4) provides that the Board may, on the recommendation of the committee, pass such order, as it may deem appropriate. 1.33.6 Subsection (5) provides that the registered person may make the payment of sales tax and other duty and taxes as determined by the Board in its order under sub‑section (4) and all decisions, orders and judgments made or passed shall stand modified to that extent and all proceedings under this Act or the rules made thereunder by any authority or forum shall abate: Provided that, in case the matter is already sub judice before any forum or Tribunal or the Court, an agreement made between the registered person and the Board in the light of recommendations of the committee shall be submitted before that forum, Tribunal or the Court for consideration and orders as deemed appropriate. 1.33.7 Subsection (6) provides that in case the registered person is not satisfied with the orders of the Board, he may file an appeal with the appropriate forum, Tribunal or Court under the relevant provisions of this Act within a period of sixty days of the order passed by the Board under this section has been communicated to the registered person. No appellate forum had been prescribed in the omitted section 47A, however, the Rules framed under section 47A provided that any person aggrieved on account of any obvious error or incorrect application of law or misunderstanding of any fact by an order of the Board, may, within 60 days of the order, make a representation to Secretary (Revenue Division). 1.33.8 Subsection (7) provides that the Board may, by notification in the official Gazette, make rules for carrying out the purposes of this section 1.34 INSERTION OF SECTION 49A ‑ LIQUIDATORS 1.34.1 A new section 49A has been inserted after section 49. The newly inserted section 49A provides a detail procedure relating to appointment of liquidators and functions/ powers thereof. 1.34.2 Subsection (1) provides that every person (hereinafter referred to as a "liquidator") who is: (a) a liquidator of a company; (b) a receiver appointed by a Court or appointed out of Court; (c) a trustee for a bankrupt; or (d) a mortgagee in possession, shall, within fourteen days of being appointed or taking possession of an asset‑ in Pakistan, whichever occurs first, give written notice thereof to the Collector. 1.34.3 Subsection (2) provides that the Collector shall, within three months of being notified under sub‑section (1), notify the liquidator, in writing, of the amount which appears to the Collector to be sufficient to provide for any sales tax which is or will become payable by the person whose assets are in the possession of the liquidator. 1.34.4 Subsection (3) provides that a liquidator shall not, without leave of the Collector, part with any asset held as liquidator until the liquidator has been notified under sub‑section (2). 1.34.5 Subsection (4) provides that a liquidator: (a) shall set aside, out of the proceeds of sale of any asset by the liquidator, the amount notified by the Collector under sub section (2), or such amount as is subsequently agreed to by the Collector; and (b) shall be liable to the extent of the amount set aside for the sales tax liability of the person who owned the asset. 1.34.6 Subsection (5) provides that a liquidator shall be personally liable to the extent of any amount required to be set‑aside under subsection (4) for the tax referred to in sub‑section (2) if, and to the extent that, the liquidator fails to comply with the requirements of this section. 1.34.7 Subsection (6) provides that where the proceeds of sale of any asset are less than the amount notified by the Collector under sub section (2), the application of sub‑section (4) and (5) shall be limited to the proceeds of sale. 1.34.8 Subsection (7) provides that this section shall have effect notwithstanding anything contained in any other law for the time being in force. 1.35 INSERTION OF SUBSECTION 3 IN SECTION 51 ‑ BAR OF SUITS PROSECUTION AND OTHER LEGAL PROCEEDINGS 1.35.1 Subsection (1) provides that no suit, prosecution or other legal proceedings shall be brought in any civil Court to set aside or modify any order passed, any assessment made, any tax levied, any penalty imposed or collection of any tax made under this Act. 1.35.2 Subsection (2) provides that no suit, prosecution or other legal proceeding shall lie against the Federal Government or against any public servant in respect of any order passed in good faith under this Act. 1.35.3 A new subsection (3) has been added which provides that notwithstanding anything in any other law for the time being in force, no investigation or inquiry shall be undertaken or initiated by any governmental agency against any officer or official for anything done in his official capacity under this Act; rules, instructions or direction made or issued thereunder without the prior approval of the Board. 1.36 INSERTION OF SECTION 51A ‑ ASSISTANCE TO THE OFFICERS OF SALES TAX 1.36.1 A new section 51A has been added after section 51 which provides that all officers of Customs, Central Excise, Police and Civil Armed Forces and all officers engaged in the collection of land revenue are hereby empowered and required to assist officers of sales tax in the discharge of their functions under this Act. ' 1.37.1 AMENDMENTS IN SECTION 59 ‑ TAX PAID ON STOCKS ACQUIRED BEFORE REGISTRATION 1.37.1 Since the scheme of turnover tax has been abolished and section 3A has been omitted and section 18 has also been omitted, necessary amendments in section 59 has been made and the words "other than turnover tax" have been omitted and for the words "section 18" , the words "this Act or the rules made thereunder" have been substituted. 1.38 AMENDMENTS IN SECTION 67 ‑ DELAYED REFUND 1.38.1 Section 67 provides that where a refund due under section 10 is not made within the time specified in section 10 from the date of filing of return, there shall be paid to the claimant in addition to the amount of refund due to him, a further sum equal to fourteen per cent per annum of the amount of refund due, from the date following the expiry of the time specified in section 10 from the date to the day preceding the date of payment of refund. The word "fourteen" has been substituted with the word "six". 1.39 SUBSTITUTION OF SECTION 73 1.39.1 Section 73 was added in the Sales Tax Act, 1990 through Tax Law (Amendments) Ordinance, 1999 promulgated on 17‑12‑1999. At the time of its insertion, section 73 read as follows: "Notwithstanding anything contained in this Act or any other law for the time being in force, any transaction in respect of which payment is made on or after the first day of January, 2000, for a sum exceeding fifty thousand rupees otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft or pay order shall not be admissible for the purpose of input tax credit, adjustment or deduction, or refund, repayment or drawback or zero‑rating etc. of tax under this Act." 1.39.2 Vide its Letter C. No. 3(36)STP/99 dated 22‑1‑2000, Central Board of Revenue suspended the operation of section 73 till 30‑6‑2000. 1.39.3 The provisions of section 73 as have been reproduced in paragraph 1.39.1 above remained operating from 1‑7‑2000 to 4‑9‑2000. Through Sales Tax (Amendment) Ordinance, 2000 promulgated on 5‑9‑2000, certain amendments were made in section 73 of the Act. After these amendments, section 73 read as follows: "Notwithstanding anything contained in this Act or any other law for the time being in force, any transaction excluding utility bills in respect of which payment is made on or after the first day of July, 2000, for a sum exceeding fifty thousand rupees otherwise than by a crossed cheque drawn on a flank or by 4 crossed bank draft or pay order or anther banking instrument showing transfer of the payment to favour of seller from the business account of the beer shall not be admissible for the purpose of input tax credit, adjustment or deduction, or refund, repayment or drawback or zero‑rating etc. of tax under this Act. " 1.39.4 Till 18‑6‑2001, the provisions of section 73 were applicable only to the buyers and they were not entitled for adjustment of input tax if payment was made in any mode other than the prescribed one. Through Finance Ordinance, 2001 promulgated on 18‑6‑2001, further insertions were made in section 73 inter alia including a proviso which made the application of section 73 to the suppliers also. After Finance Ordinance, 2001, section 73 read as follows: "Notwithstanding anything contained in this Act or any other law for the tune being in force, any transaction excluding utility bills in respect of which payment is made on or after the first day of July, 2000, for a sum exceeding fifty thousand rupees 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 the business account of the buyer shall not. be admissible for the purpose of input tax credit, adjustment or deduction, or refund, repayment or drawback or zero‑rating etc. of tax under this Act provided that payment in case of such transactions on credit is to transferred within one hundred and twenty days of the issuance of the tax invoice. Provided that when a registered person supplies taxable goods for a sum exceeding fifty thousand rupees in respect of which payment is received otherwise than in the manner prescribed in this section read with section 7, he shall not be entitled to claim adjustment or refund of input tax in respect of such goods." 1.39.5 Section 73 was substituted through Finance Act, 2003 which read as follows: Notwithstanding anything contained in this Act or any other law for the time being in force, payment of the amount of sales tax excluding utility bills for a transaction exceeding value of twenty‑five thousand rupees shall be made by a banking instrument showing transfer of the amount of sales tax in favour of supplier or the Collector of Sales Tax, as the case may be, from the specified bank account of the buyer to the specified bank account of the supplier or to the specified sales tax head of account, as the case may be. The buyer and seller shall not be entitled to claim input tax credit, adjustment or deduction, or refund, repayment or draw‑back or zero‑rating of tax under this Act if the payment of the amount of sales tax is made or received otherwise than in the manner herein prescribed. 1.39.6 A number of representations were made to CBR wherein it was apprised that the newly substituted section 73 was not practicable. Keeping in view the representation made by various State bodies and associations, C.B.R. suspended the operation of the section 73 till 31‑8‑2003 vide its Letter C. No. 3(36)STP/99‑PT‑I dated 9‑8‑2003. It was provided that during the period up to 31‑8‑2003, the provisions of the section 73, as existed prior to the substitution shall remain operative. 1.39.7 The provisions of newly inserted section 73 were suspended up to till 30‑6‑2004. 1.39.8 In consultation with various associations including APTMA and FPCCI, section 73 has been redrafted and has been inserted in the Act. The newly inserted section 73 reads as follows; Certain transactions not admissible. ‑‑‑(1) Notwithstanding anything contained in this Act or any other law for the time being in force, payment of the amount for a transaction exceeding value of fifty thousand rupees, excluding payment against a utility bill, 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. (2) The buyer shall not be entitled to claim input tax credit adjustment or deduction, or refund, repayment or draw‑back or zero‑rating of tax under this Act if payment for the amount is made otherwise than in the manner prescribed in sub‑section‑ (1), provided that payment in case of a transaction on credit is so transferred within one hundred and eighty days of issuance of the tax invoice. (3) The amount transferred in terms of this section shall be deposited in the business bank account of the supplier, otherwise the supplier shall not be entitled to claim input tax credit, adjustment or deduction, or refund, repayment or draw‑back or zero‑rating of tax under this Act. Explanation.‑‑‑For the purpose of this section, the term "business bank account" shall mean a bank account utilized by the registered person for business transactions, declared to the Collector in whose jurisdiction he is registered."; 1.39.9 That taxpayer has been given relief and now the registered buyers are required to make payment through any of the prescribed modes within 180 days of the issuance of tax invoice. However, the payment has to be made through banking instrument showing transfer of the amount of sales tax invoice in favour of supplier from the business bank of the buyer. The business bank account as has been defined in the Explanation shall mean the bank account utilized by registered person for business transactions, declared to the Collector in whose jurisdiction he is registered. Now the registered person will have to declare his business bank account to the Collector. 1.40 INSERTION OF PROVISO IN SECTION 74 1.40.1 Section 74 was added by Finance Ordinance, 2002 and Board was empowered to condone the time limit or period specified in any of the provisions of the Act or the Rules made thereunder. A proviso has been inserted in section 74 through which Board has been authorized to empower by a notification in the official Gazette any Collector to exercise the powers under section 74 in any case or classes of cases. 2. AMENDMENT IN FIFTH SCHEDULE ‑ ZERO RATING 2.1 Section 4 of the Act overrides the provisions of section 3 and inter alia provides that the goods specified in the Fifth Schedule will be charged to tax at the rate of zero percent. Presently, seven types of goods have been specified in Fifth Schedule which are liable to tax at the rate of zero percent and in term of section 10(2) of the Act, the registered person making zero rated supplies is entitled to claim refund of input tax incurred on such zero rated supplies. 2.2 A new serial number 8 has been added in the Fifth Schedule. By virtue of newly inserted serial number 8, the following category of goods will be charged to tax at the rate of zero percent: Imports or supplies made to Gawadar Special Economic Zone, excluding vehicles falling under heading 87.02 of the Pakistan Customs Tariff, subject to such conditions, limitations and restrictions as the Central Board of Revenue may impose. 3. AMENDMENTS IN SIXTH SCHEDULE ‑ EXEMPTIONS 3.1 Section 13 overrides the provisions of section 3 of the Act and provides that the goods specified in the Sixth Schedule shall, subject to such conditions as may be specified by the Federal Government, be exempt from sales tax. 3.2 Withdrawal of exemption on supply of cotton seed used in the manufacture of cotton seed oil.‑‑‑Sr. No. S of the Sixth Schedule granted exemption of sales tax to supply of cotton seed which is: (a) used in the manufacture of cotton seed oil by the registered persons subject to such conditions as the Board may specify; and (b) exclusively meant for sowing purposes, subject to such conditions as the Board may specify. 3.3 Clause (a) of Sr. No. 5 and the entry relating thereto has been omitted. So the exemption of sales tax has been withdrawn on supply of cotton seed used in the manufacture of cotton seed oil which has now become taxable. Through S.R.O. 501(1)/2004 dated 12‑6‑2004, CBR has fixed the value of supply for cotton seed at Rs.330 per 40 Kg. 3.4 Withdrawal of exemption from supply of locally produced crude vegetable ‑oil obtained from locally produced cotton seed.‑‑‑Sr. No. 6 of the Sixth Schedule granted exemption of sales tax inter alia to supply of locally produced crude vegetable oil obtained from all kinds of locally produced seeds. The exemption of sales tax on vegetable oil obtained from locally produced cotton seed has been withdrawn whereas supply of locally produced crude vegetable oil obtained from other kinds of locally produced seeds is still exempt from sales tax. 3.5 Exemption of sales tax on edible oil and vegetable ghee including cooking oil which are liable to excise duty.‑‑‑A new serial number 6A has been added in the Sixth Schedule and exemption of sales tax hat been extended to edible oils and vegetable ghee, including cooking oil, on which Central Excise Duty is charged, levied and collected as if it were a tax payable under section 3 of this Act. An amendment has been made in SRO 333(1)/2002 dated 15‑6‑2002 and central excise duty @ 15% ad. val. has been imposed on edible oil, vegetable ghee and cooking oil which is levied and collected as if it were a sales tax and all the provisions of Sales Tax Act, 1990, rules and notifications issued thereunder will apply. Through SRO 504(1)/2004 an amendment has also been made in rule 174 of the Central Excise Rules, 1944 through which it has been provided that the manufacturer or producers of vegetable ghee and cooking oil paying excise duty in the mode of sales tax will not be required to obtain central excise license. 3.6. Threshold of turnover for the manufacturers.‑‑‑Clause (a) of Sr. No. 42 of the Sixth Schedule granted exemption to supplies made by such manufacturers whose annual turnover from taxable supplies made in any tax period during the last twelve months ending any tax period did not exceed rupees five hundred thousand. The words "five hundred thousand" have been substituted by words "five million". So supplies made by a manufacturer whose annual turnover from taxable supplies made in any tax period during last 12 months does not exceed Rs.5.0 Million are exempt from sales tax and he will not be liable to be registered. 3.7 Threshold of turnover for the retailer. ‑‑‑Clause (b) of Sr. No. 42 of the Sixth Schedule granted exemption to supplies made by such retailers whose annual turnover from supplies whether taxable or otherwise, made in any tax period during the last twelve months ending any tax period did not exceed rupees one million. The words "one million" have been substituted by words "five million". So supplies made by a retailer whose annual turnover from supplies made in any tax period during last 12 months does not exceed Rs.5.0 Million are exempt from sales tax and he will not be liable to be registered. 3.8 Prior to Finance Bill, 2004, the supplies of retailers having turnover less than Rs. l million during last 12 months were exempt whereas such retailers whose annual turnover was between Rs.1 million to Rs. 20 million were liable to be enrolled under section 3A of the Act and were required to pay turnover tax @2 % of the taxable turnover. 3.9 Since the scheme of turnover tax has been abolished and section 3A has been omitted so all such retailers whose annual turnover from supplies whether taxable or otherwise made in any taxes during last 12 months ending any tax period exceeds Rs.5 million are liable to be registered and are required to "ay sales tax @ 15 % . 3.10 Sr. No, ‑43 of the Schedule read as follows; "Raw materials and intermediary goods or services if used by the sale tax registered manufacturer, himself in the manufacture of goods subject to sales tax." 3.11 In terms of aforesaid entry at Sr. No. 43 of the Schedule, exemption was available inter alia on the supply as well as on import of raw materials if used by the sales tax registered manufacturer, himself in. the manufacture of goods subject to sales tax. It appeared from the language of Sr. No. 43 that through this exemption, the legislature had facilitated all manufacturers of taxable goods and had authorized them to procure their taxable raw materials without payment of sales tax from local ‑sources as well as imported ones. However, prima facie, this was not the intention‑of the legislature. It appears that the language available at Sr. No: 43 required` necessary correction which has been made through Finance Bill, 2003. The, said entry now reads as follows: Raw material and intermediary goods manufactured or produced, and services provided or rendered by a registered person, consumed by himself in the manufacture of goods subject to sales tax. 3.12 Exemption of sales tax on tractors, bulldozers and combined harvesters whether or not used for agricultural purposes.‑‑‑In Budgetary Measures for the year 1998‑99, the Government announced reduction in the prices of agricultural tractors and various measures were taken. The import of CKD kits of tractors was granted exemption of whole of customs duty and sales tax: The input sales tax on components procured by the local manufacturer of agriculture tractors from the vendors was also granted exemption by way of refund and an exemption Notification SRO 839(1)/98 dated 23.07.1998 was issued which allowed refund of input tax paid by the manufacturer of the agricultural tractors to the vendors. A new Sr. No. 49 was inserted through Finance Act, 1998 which granted exemption inter alia on supply of tractors, bulldozers and combined harvesters for agricultural purposes. 3.13 However, a number of cases were framed against Messrs Millat Tractors Ltd, the recognized manufacturer of MASSEY FERGUSON Tractors and M/s Al‑Ghazi Tractors, the recognized manufacturer of FIAT Tractors wherein it was alleged that they had supplied tractors to certain institutions like Cantonment Board, PIA, Shaheen Cargo, Pakistan Ordnance Factory, Wah, Development Authorities, etc. and these tractors were not meant for agricultural purposes hence did not qualify for exemption of sales tax under Sr. No. 49 of the Sixth Schedule. Unnecessary litigations cropped up and the cases were adjudicated against the taxpayers at the original adjudicating forums. However, relief was given by the Appellate Tribunal and the appeals filed by the manufacturers of the tractors were accepted. Being aggrieved, the Department has gone into appeal and the appeals are still lying in the High Court. 3.14 To remove the ambiguity in the language, the words "for agricultural purposes" have been omitted. Now the supply of tractors, bulldozers and combined harvesters is exempt irrespective of the purpose for which it is supplied. 3.15 Withdrawal of exemption on cattle feed.‑‑‑All types of cattle feed falling under any of the heading of tariff had been granted exemption through Sr. No. 53 of the Sixth Schedule. The aforesaid Sr. No. 53 has been omitted and exemption on supply and import of cattle feed has been withdrawn. However, supply of oil cake and other solid residues, whether ground or in the form of pellets of PCT Heading 2306.1000 has been zero rated through S. R. O. 500(1)/2004 ‑dated 12‑6‑2004. 4. RELIEF MEASURES 4.1 Abolishing of higher rate of sales tax @ 20.%.‑‑‑Section 3(2)(b) of the Act empowers the Federal Government to declare that in respect of any goods or class of goods imported into or produced or any taxable supplies made by a registered person or a class of registered person, the tax shall be charged, collected and paid in such manner and at such higher or lower rate or rates as may be specified in the notification. In exercise of those powers, Federal Government had issued S.R.O. 389(1)/2001 through which more than 200 goods had been specified on which sales tax was to be charged, levied and paid @ 20 %o ad. val. of the goods imported or supplied. The aforesaid notification has been rescinded vide S.R.O. 489(1)/2004 dated 12‑6‑2004. Now all such goods which were liable to sales tax 20% through erstwhile S.R.O. 389 I /2001 are char gable to sales tax at the standard rate of 15 % with immediate effect. 4.2 Adjustment of input tax on building material telecommunication equipments, generators, electrical and as appliances, wires and cable diesel becomes admissible: Section 8(1) of the Act provides that a registered person cannot make adjustment of input tax (a) the goods used or to be used, for any purpose other than for the manufacture or production of taxable goods or for taxable supplies made or to be made by him. (b) any other goods which the Federal Government may, by a notification in the official Gazette, specify. 4.3 In exercise of powers conferred under section 8('1)(b).of the Act, the Federal Government had issued SRO 578(1)/98 dated 12‑6‑1998 through which the fol owing 11 items had been specified on which a registered person was not entitled to claim adjustment of input tax in spite of the fact that these were used for the purpose of taxable supplies: (1) Vehicles falling in chapter 87 of the First Schedule to the Customs Act, 1969 (IV of 1969) (2) Building materials. (3) Office equipment (excluding electronic fiscal cash registers), furniture, fixture and furnishings. (4) Electrical and gas appliances excluding those purchased for use in taxable activity. (5) Telecommunication equipments. (6) Generators and generating sets, excluding generators and generating sets of 250 KVA or above, acquired by a registered manufacturer for use in manufacture of taxable supplies. (7) Wires and cables excluding those used for industrial purposes and ordinary electrical fittings. (8) Crockery, cutlery and utensils, etcetera excluding those purchased for providing taxable services. (9) Supply of food, beverages, garments, fabrics, etcetera and consumption on entertainments. (10) Gifts and give‑sways. (11) P.O.L. products other than JP‑1 purchased by PTA and other, domestic airlines, furnace oil, lubricants and greases. 4.4 Various trade bodies have been making repeated requests to CBR that the registered person may be allowed adjustment / refund of input tax paid on diesel used in the generating sets. The persons using generating sets running on diesel oil were at disadvantage as compared to those persons whose generating sets were running on furnace oil. Similarly, newly established units had been making requests to allow them to make adjustment of input tax on building material like cement, iron and steel bars, etc. Keeping in view the genuine hardship of the taxpayer, S.R.O. 578 has been superceded vide SRO 490(1)/2004 through which the following goods have been specified on which a registered person shall not be entitled to claim adjustment/ refund, if these are acquired otherwise than as stock and trade: (a) vehicles falling in chapter 87 of the First Schedule to the Customs Act, 1969 (TV of 1969); (b) food, beverages, garments, fabrics, etcetera and consumption on entertainment; and (c) gifts and give‑sways. 4.5 An explanation has been given in the notification which defines the term "stock‑in‑trade" for the purpose of the said notification S.R.O. 490(1)/2004 which shall mean goods purchased by a registered person in the course of business for sale as such or after further processing or manufacture. 4.5 Exemption on supply of locally manufactured and import of agricultural machinery equipment and implements: Through SRO 753(1)/98 dated 1‑7‑1998, the Federal Government had granted exemption of sales tax on locally manufactured agricultural implements which had been specified therein. SRO 753(1)/98 has been rescinded vide SRO 446(1)/2004 dated 12‑6‑2004 and through SRO 495(1)/2004 dated 12‑6‑2004, exemption of sales tax has been granted to (a) supply of locally manufactured agricultural machinery, equipment and implements, as specified in the Table below; and (b) import of agricultural machinery, equipment and implements as specified under the respective custom concessionary notifications subject to the same conditions, restrictions, limitations and procedures as are prescribed for the purpose of applying deco rate of customs duty thereon; 4.7 The following categories of machinery has also been included in the list in addition to the machinery on which exemption was already available under the erstwhile Notification SRO 753(1)/98 dated 1‑7‑1998: (i) Vegetables and fruits cleaning and sorting or grading equipment. (ii) Fodder and feed cube maker equipment. (iii) Machinery and eqi4pment for grain handling and storage facilities. (iv) Milking machines. . (v) Compression‑ignition internal combustion piston engines (diesel engines of 12HP to 26 HP of PCT 8408.9000) (vi) Combined harvesters 4.8 Reduction in activation charges of cellular telephone sets: Through SRO 390(1)/2001 dated 18‑6‑2001, the Federal Government has granted exemption of customs duty and sales tax on the import, as the case may be, on the supply of cellular telephone sets (handheld sets) to the extent that the combined effect of both the levies shall be Rs.2000 per set subject to certain conditions which inter alia included that no customs duty and sales tax shall be collected on such telephone sets at the time of import or at the time of supply but the said amount will be charged, collected and paid by the cellular company operator at the time the sets are presented to the cellular company operator for activation or energization. Through SRO 499(1)/2004, dated 12‑6‑2004 an amendment has been made in SRO 390(1)/2001 dated 18‑6‑2001 and the activation charges have been reduced from Rs.2000 to Rs.1000. 4.9 Reduction in value of supply of Dia‑Ammonium Phosphate (DAP) fixed by CBR under section 2(46) of the Act: In exercise of powers conferred under first proviso to clause (46) of section 2 of the Act, CBR has issued SRO 1071(1)/2003 dated 25‑11‑2003 through which has fixed the values of phosphate fertilizers for the purpose of assessment of sales tax chargeable at import stage as well as against local supply of these fertilizers. The value of supply for Dia‑Ammonium Phosphate (DAP) of grade N(18) P(46) K(0) has been fixed at Rs.9280. Through SRO 492(1)/2004 dated 12‑6‑2004, the aforesaid SRO 1071(1)/2003 has been amended and value of supply of the aforesaid fertilizer has been reduced from Rs.9280 to Rs.4610. 4.10 Fixation of value of Phosphoric Acid for the purpose of assessment of sales tax chargeable at import stage: In exercise of powers conferred under first proviso to clause (46) of section 2 of the Act, Federal Government has issued S.R.O. 494(1)/2004 through which value of Phosphoric Acid (PCT 2809.2010) has been fixed at Rs.7000 per MT for the purpose of assessment of sales tax, if imported by Phosphatic Fertilizer Industry for the manufacture of Phosphatic Fertilizer. 4.11 Zero rating of plant, machinery and equipment; Supply of cotton, oil cake, hides and skins and raw wool.‑‑‑Through S.R.O. 987(1)/99 dated 30‑8‑1999, Federal Government had granted exemption of sales tax on plant and machinery, operated by power of any description, as was imported or purchased locally by a registered person to be used for the manufacture of taxable goods by that person. The exemption under the aforesaid notification was contingent upon certain conditions which inter alia included that the importer or purchaser of locally manufactured machinery shall submit an indemnity bond to the Collector of Customs or the Collector of Sales Tax, as the case may be, which shall be discharged on production of installation cum production certificate within a period of two years. It was further provided that the machinery imported or purchased locally shall not be removed from the declared premises before expiry of seven years of the date of bill of entry or the date of sales tax invoice. The Government has decided to done away with the condition of submission of indemnity bond and submission of installation cum production certificate SRO 987(1)/99 has been rescinded vide SRO 487(1)/2004 dated 12‑6‑2004. 4.12 A new notification has been issued by the Federal Government in exercise of powers conferred under clause (c) of section 4 of the Act through which it has been prescribed that sales tax on the following goods shall be charged at the rate of zero percent (i) Imported plant, machinery and equipment ‑‑‑ if imported under a customs concessionary notification subject to same conditions, restrictions and procedures as are prescribed thereunder, excluding the condition that such goods are not manufactured locally OR if imported against statutory rate of customs duty of 5%. (ii) supply of plant, machinery and equipment, either imported or purchased locally shall be charged at the rate of zero percent. No condition has been prescribed for such machinery. (iii) Supply of cotton, not carded or combed (ginned cotton) of heading 5201.0090 subject to the procedure prescribed in Chapter VII of the Sales Tax Special Procedure Rules, 2004. The provisions of Chapter VII of the said Rules has been given immediate effect whereas all the other provisions of the Rules will be applicable with effect from 1‑7‑2004. (iv) Supply of oil cake and other solid residues, whether or not ground or in the form of pellets of heading 2306.1000. (v) Hides and skis of heading 41.01, 41.02, 41.03 (excluding 4103.3000). (vi) Raw wool of heading 5101.1900 An explanation has been given at the end of SRO 500(1)/2004 which says that the expressions `plant', `machinery' and `equipment' shall have the same meanings as are assigned to them in a notification issued under section 19 of the Customs Act, 1969. 4.13 Exemption on machinery to certain industries without any condition. ‑‑‑Under SRO 987(1)/99 dated 30‑8‑1999, the exemption of sales tax was available to such plant and machinery as was used for the manufacture of taxable goods. In the previous years it was the considered policy of the Government not to allow exemption of sales tax on machinery meant for the manufacture of exempt goods. 4.14 However, in pursuance of a considered policy, the Federal Government issued SRO 505(1)/2003 dated 7‑6‑2003 through which exemption of sales tax on plant and machinery falling under Chapter 84 or 85 of the first Schedule to the Act purchased or imported for the following use was granted exemption: 1. Seafood industry (farming, catching, processing and preservation of fish, shrimp and other marine products). 2. Fruits, vegetables and flower grading, processing, packing and preservation. 3. Treatment and disposal of toxic and hazardous industrial wastes, sewerage, effluent or solid waste management, water purification or desalination plant. 4. Dairy and dairy products. 5. Rice, grain and dried leguminous vegetables. 6. Sulphurous acid generators SAG‑10 meant for de- alkanization of soil. 7. Livestock, poultry farming, meat processing, preservation and packing. 4.15 Under SRO 505(1)/2003 dated 7‑6‑2003 exemption of sales tax was available subject to certain conditions inter alia including that the importer or purchaser of locally manufactured machinery shall submit an indemnity bond to the Collector of Customs or Collector of Sales Tax as the case may be, which shall be released on production of installation cum production certificate. SRO 505(1)/2003 has been rescinded vide SRO 487(1)/20(14 dated 12‑6‑2004. Through SRO 497(1)/2004, exemption of sales tax has been granted on plant and machinery exclusively for the use mentioned in the Table given in paragraph 4.14 above without any condition of furnishing of indemnity bond or submission of installation certificate. 5. ADMINISTRATIVE MEASURES 5.1 Rescinding of SRO 793(1)/94 dated 15.08.1994: In mid 1990s, there was a scheme to create separate Collectorates of Sales Tax and to appoint Chief Collectors of Sales Tax. In pursuance of that scheme, in exercise of powers conferred under sections 30 and 3: of the Act, C.B.R. issued SRO 793(1)/94 dated 15‑8‑1994 through which it had appointed a Chief Collector of Sales Tax at Karachi to exercise and discharge duties as to‑ be conferred on him under the Act on the following Collectorates: (i) Collectorate of Sales Tax, Hyderabad. (ii) Collectorate of Sales Tax, Quetta. (iii) Collectorate of Sales Tax, Karachi 5.2 Since the aforesaid scheme could not materialize and there exists neither any Chief Collector nor separate Collectorates of Sales Tax at Karachi, Hyderabad and Quetta. SRO 793(1)/94 has been rescinded vide . SRO 481(1)/2004 dated 12‑6‑2004. 5.3 Change in administrative machinery at Faisalabad: Two Collectorates have been appointed by, CBR at Faisalabad. One Collector is Incharge of Sales Tax and the other Collector is Incharge of Customs and Central Excise. 5.4 In exercise of powers conferred under section 3 of the Customs Act,1969 and sections 30 and 31 of the Sales Tax Act, 1990, C.B.R. has issued S.R.O. 41(1)/2000 dated 1‑2‑2000 through which it has appointed various Collectors to be the officer of Customs and . Sales Tax for the areas specified in the column (3) of the Schedule given below the said notification. In terms of Sr. No. 12 of the Schedule, the Collector of Customs and Central Excise, Faisalabad is the officer to exercise his powers in the areas falling in the Commissioners' Divisions of Sargodha and Faisalabad. Through S.R.O. 477(1)/2004 dated 12‑6‑2004, S.R.O. 41(1)/2000 has been amended and words central excise have been omitted. Now the Collector of Customs at Faisalabad is looking after the Customs matter in the civil divisions of the Sargodha and Faisalabad including customs dryport, airport, GPO Faisalabad and Duty Free Shop Faisalabad. It is however pointed out that Collcctors at Hyderabad, Quetta and Multan are incharge of composite Collectorates and have been appointed officers of customs, central excise and sales tax through Notification S.R.O. 41(1)/2000 which has been issued by CBR in exercise of powers conferred under Customs Act, 1969 and Sales Tax Act, 1990. The aforesaid notification has not been issued under the Central Excises Act, 1944 so legally the Collectors at Multan. Hyderabad and Quetta have not been appointed as Collectors under the Central Excises Act, 1944. 5.5 In exercise of powers conferred under sections 30 and 31 of the Act, CBR has issued SRO 1160(1)/96 dated 6‑10‑1996 through which Collectors of Sales Tax have been appointed to exercise their, jurisdiction ` in various areas. By virtue of Sr. No. 3, Collector of Sales Tax, Faisalabad is an officer of Sales Tax to exercise his powers in the area included in Civil Divisions of Faisalabad and Sargodha. An amendment has been trade in SRO 1160(1)/96 dated 6‑10‑1996 through SRO 478(1)/2004 dated 12‑6‑2004 and the powers conferred on the Collector under the Central Excises Act, 1944 have also been entrusted to Collector of Sales Tax. Now the Collector of Customs of Faisalabad is incharge of Customs Affairs whereas the other Collector will look after sales tax and central excise matters. 5.6 Since the jurisdiction of the two Collectors of Faisalabad has been changed. The Administrator and Legal work pertaining to central excise has been transferred from the jurisdiction of Collector of Customs to Collector of Sales Tax through amendments in Notification SRO1160(1)/96 and SRO 41(1)/2000. A corrective amendment has also been made in SRO 380(1)/2002 dated 15‑6‑2002 through SRO 479(1)/2004 dated 12‑6‑2004 and the Collector Adjudication at Faisalabad has been empowered to adjudicate the cases inter alia falling under the jurisdiction of Collectorate of Customs; Faisalabad and Collectorate of Sales Tax and Central Excise, Faisalabad. 5.7 Rescinding of SRO 471(1)/2001: Through SRO 471(1)/2001 dated 25‑6‑2001, the Federal Government had. granted exemption of further tax chargeable on supply of such vehicles as are acquired by Financial Institutions such as leasing companies, modarbas and banks from local automotive manufacturers or assemblers for onward supply to and consumers under financial lease agreement or car financing. Since subsection (1A) of section 3 has been omitted and further tax has been abolished, the SRO 471(1)/2001 has become superfluous. The said S.R.O. 471(1)/2001 has been rescinded vide S.R.O. 491(1)/2004 dated 12‑6‑2004. 5.8 Rescinding of SRO 336(I)/2002: Through S.R.O. 336(1)/2002 dated 15‑6‑2002, CBR had designated PNSC Branch Karachi of National Bank of Pakistan for payment of sales tax by a registered persons registered. in Large Taxpayer Unit Karachi notified under S.R.O. 350(1)/2002. The aforesaid notification has been rescinded vide S.R.O. 496(1)/2004 dated 12‑6‑2004. 5.9 Requirement for commercial exporters of polypropylene granules, tape yarn grade to furnish a monthly statement: In exercise of power conferred under newly inserted subsection (5) of section 26, CBR has issued SRO 509(1)/2004 dated 12‑6‑2004 which will be effective on purchases and supplies made on or after 1‑7‑2004. Through the aforesaid notification, CBR has required all commercial importers of polypropylene granules (tape yarn grade) falling under PCT Heading No.3902.1000 of the First Schedule to the Customs Act, 1969 (IV of 1969) to furnish a summary of their purchases and sales made during a tax period by the, 151h of the month following the said tax period, to the Collector of Sales Tax having jurisdiction, in the form as specified in the annexure below, namely:‑ SUMMARY STATEMENT UNDER SECTION 26(5) OF THE SALES TAX ACT, 1990 Name------------------------------------------------------------------------ Sales Tax Registration Number----------------------------------------------- Tax period------------------------------------------------------------------- SNo. Sales Tax Registration No. of Buyer (if any) National tax No. of buyer Name (and, in case of unregistered buyers, complete Address) of buyer No. of Invoices Issued Sales Tax Involved (1) (2) (3) (4) (5) (6) 5.10 Requirement for registered persons engaged in the manufacture or supply or export of cotton yarn, blended yarn or man‑made yarn textile fabrics of all kinds and descriptions, and textile made ups including bed linen, kitchen linen, tarry fabric goods and ready made garments to furnish a monthly statement: In exercise of power conferred under newly inserted subsection (5) of section 26, CBR has issued SRO 508(1)/2004 dated 12‑6‑2004 which will be effective on purchases and supplies made on or after 1‑7‑2004. Through the aforesaid notification, C.B.R. has required all registered persons engaged in the manufacture or supply or export of cotton yarn, blended yarn or man made yarn; textile fabrics of all kinds and descriptions; and textile made ups, including bed linen, kitchen linen, tarry fabric goods and ready made garments to, furnish a monthly statement to furnish a summary of their purchases and sales made during a tax period by the 15th of the month following the said tax period, to the Collector of Sales Tax having jurisdiction, in the form as specified in the annexure below, namely:‑ SUMMARY STATEMENT UNDER, SECTION 2'6(5) OF THE SALES TAX ACT, 1990 Name------------------------------------------------------------ Sales Tax Registration Number----------------------------------- Tax period------------------------------------------------------- SUMMARY OF PURCHASE INVOICES SNo. Sales Tax Registration No. of Supplier (if any) Name (and, in case of un registered supplier, complete Address) of supplier No. of Purchases/ Invoices received Sales Tax Involved (1) (2) (3) (4) (5) SUMMARY OF SALE INVOICES SNo. Sales Tax Registration No. of Buyer (if any) Name (and, in case of un registered buyer, complete Address) of supplier No. of Invoices Issued Sales Tax Involved (1) (2) (3) (4) (5) Person------------------------------------------------------------ Name and NIC No.---------------------------------------------- Date-------------------------------------------------------------- Stamp------------------------------------------------------------ 5.11 Re‑determination of jurisdiction of Collectors of Adjudication: With the creation of separate Adjudication Collectorates in the year 2000, CBR has issued SRO 448(1)/2004 through which the jurisdiction of Collectors of Adjudication has been specified. The said SRO 448(1)/2000 was superceded vide SRO 377(1)/2002. The said SRO 377(1)/2002 has been superceded vide SRO 480(1)/2004 and the jurisdiction of Collectors Adjudication have been re‑determined. There is no significant change in the new notification except that the Collector Adjudication Lahore has also been empowered to adjudicate the cases relating to the registered persons falling in the jurisdiction of Large Taxpayer Unit Lahore which will be functional in next few months. Since the jurisdiction of the Collectors at Faisalabad has been re‑determined, corresponding amendments have been incorporated in SRO 480(1)/2004. 5.12 Filter rods of cigarettes of heading‑5502.0090 polypropylene granule air conditioning plants cranes and propane storage tanks cannot be sold to unregistered persons: Through SRO 507(1)/2003 dated 7‑6‑2003, Federal Government had notified that inter alia the goods which are manufactured from any raw materials, sub‑components and components imported under any of the concessionary notifications cannot be sold to a person not registered under the Act. Various trade bodies agitated and protested against the said notification. Keeping in view the genuine hardship faced by the taxpayers, the Federal Government made amendments in the said notification and only the following goods were specified which could not be sold to a person not registered under the Act: (a) polypropylene granules (tape yarn grade falling under PCT heading 3902. 1000); (b) taxable goods mentioned in the table below (excluding those sold in retail to ultimate consumers. or persons whose income is not liable to income tax under the Income Tax Ordinance, 2001 (XL,IX of 2001) but deduct income tax at source under the said Ordinance or Government organizations not liable to registration tinder the Sales Tax Act, 1990), manufactured or produced by consuming raw materials, parts, sub‑components and components imported and cleared against bills of entry or goods declaration filed on the 5" September, 2003 or thereafter, under various concessionary notifications issued under section 19 of he Customs Act, 1969 (IV of 1969), or under section 13 of the Sales Tax Act, 1990. TABLE S. NO. NAME OF ITEMS 1 Air‑conditioning, chilling plants and humidification plant. 2 Cranes. 3 Propane storage tank, heat exchanger and gas separator. 5.13 S.R.O. 507(1)/2003 dated 7‑6‑2003 has been rescinded vide S.R.O. 488(1)/2004 dated12‑6‑2004 and in addition to the goods already specified in the erstwhile notification SRO 507, filter rods for cigarettes (PCT heading 5502.0090) have also been notified which cannot be supplied to unregistered persons. In case such supply is made, the registered person supplying goods will not be entitled to deduct input tax. 5.14 Through SRO 952(1)/98 dated 5‑9‑1998, CBR had designated 100s of branches of National Bank of Pakistan for payment of sales tax on return cum Challan from by a registered person within the jurisdiction of Collectorate of his registration. The aforesaid notification has been superceded vide SRO 498(1)/2004 dated 12‑6‑2004 and a new list of branches of National Bank of Pakistan has been specified in which a registered person can make payment of sales tax on return cum: Challan form. 6. REVENUE MEASURES 6.1 Withdrawal of exemption of sales tax on supplies of cotton seed and oil dirt: Through SRO 644(1)/2000 dated 16‑9‑2000, the Federal Government had granted exemption from whole of sales tax on the supplies of cotton seed and oil dirt. The aforesaid SRO 644(1)/2000 has been rescinded vide SRO 486(1)/2004 dated 12‑6‑2004 so the exemption on supplies of cotton seed and oil dirt has been withdrawn and these goods have become taxable with immediate effect. Through SRO 501(1)/2004 dated‑ 12‑6-2004, CBR has fixed the value of supply for cotton at Rs.330 per 40 Kg and for oil dirt at Rs.220 per 40 Kg. 6.2 Rescinding of SRO 205(1)/2001: Through SRO 205(1)/2001, CBR has fixed the value of supply of locally produced Urea Fertilizer of PCT Heading 3102.1000 of the First Schedule to the Customs Act, 1969 at Rs.6,660 per MT. The aforesaid notification has been rescinded vide SRO 493(1)/2004 dated12‑6‑2004 and from now onward, the, manufacturer of locally produced Urea Fertilizer will be required to pay sales tax on value of supply which shall mean the actual consideration received from the buyer. 7. MERGER OF SPECIAL PROCEDURES RULES NOTIFIED UNDER SECTION 71 OF THE ACT 7.1 Section 71 of the Sales Tax Act, 1990 empowers the Federal Government, by a notification in the official Gazette, to prescribe special procedure for Scope and Payment of Tax, Registration, Book keeping and invoicing requirement and Returns in 'respect of supply as may be specified therein. 7.2 In exercise of powers conferred under section 71, Federal Government had notified 13 SROs. Out of these 13, 10 notifications have been repealed and a new The Sales Tax Special Procedure Rules, 2004 have been notified through SRO 484(1)/2004 dated 12‑6‑2004 which comprises of 14 Chapters. These Rules shall come into force on 1‑7‑2004 except Chapter VII which has come into force with immediate effect. 7.2.1 Chapter I prescribes special procedure for filing of nil returns and comprises froth rule 2 to rule 7 of the Sales Tax Special Procedure Rules, 2004 and applies to every registered person who files a nil return for any tax period. 7.2.2 Chapter II prescribes special procedure for payment of sales tax by commercial importers on value addition and comprises from rule 8 to rule 14 of the Sales Tax Special Procedure Rule, 2004 and applies to persons registered exclusively as commercial importer under the Act. 7.2.3 Chapter III prescribes special procedure for payment of retail tax and comprises from rule 15 to rule 21 of the Sales Tax Special Procedure Rules, 2004 and applies to persons registered exclusively as retailer under the Act. 7.2.4 Chapter IV prescribes special procedure for payment of sales tax by jewellers and comprises from rule 22 to rule 31 of the Sales Tax Special Procedure Rules,` 2004 and applies 'to jewellers, goldsmiths and other persons engaged in the manufacture or supply of jeweller whether on ownership basis or on labour or service charges basis and to persons engaged in the supply of readymade jeweller. 7.2.5 Chapter V prescribes special procedure for collection and payment of sales tax on electric power and comprises from. rule 32 to rule 40 of the Sales Tax Special Procedure Rules, 2004 and applies for collection and payment of sales tax on electric power imported, generated, produced, transmitted and supplied by electricity generation, transmission and distribution companies licensed under the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 (XL of 1997), including their distributors, dealers and agents, or by any other person dealing in importation, generation, production, transmission, distribution and supply of electric power. 7.2.6 Chapter VI prescribes the special procedure for collection and payment of sales tax on natural gas rules and comprises from rule 41 to rule 44 of the Sales Tax Special Procedure Rules, 2004 and applies for collection and payment of Sales Tax on Natural Gas including Compressed Natural Gas (CNG) and Liquefied Petroleum Gas (LPG) imported, produced, transmitted and supplied by gas well‑head companies and gas transmission and distribution companies licensed under the Natural Gas Rules, 1960, including their distributors, dealers, sales agents, retailers or by any other person hereinafter called the "person" for the purposes of this Chapter, and dealing in importation, production or distribution , and supply of Natural Gas including Compressed Natural Gas and Liquefied Petroleum Gas. There is no difference between new and the repealed Rules. 7.2.7 Chapter VII prescribes for special procedure for supply of ginned cotton and comprises of from rule 45 to 54. It applies to cotton ginners, ginning units, and persons involved in the purchase, supply and export of ginned cotton. The Special Procedure for Ginning Industry Rules, 1996 previously notified through SRO 1271(1)/96 dated 10‑11‑1996 have been repealed. SRO 500(1)/2004 dated 12‑6‑2004 provides that supply of cotton, not carded or combed (ginned cotton) of heading 5201.0090 shall be charged to tax at the rate of zero percent subject to the procedure prescribed in Chapter VII of the Sales Tax Special Procedure Rules, 2004. The provisions of Chapter VII have been made applicable with immediate effect whereas the other provisions of the rules will come into force w.e.f. 1‑7‑2004. Rule 49 provides that supply of ginned cotton shall be zero‑rated subject to the procedure specified in rules 50 and 51. Rule 50 provides that a ginner or any other person making supply of ginned cotton shall issue a tax invoice under section 23 of the Act for each supply of taxable goods, indicating all the particulars specified in the said section, including the full name and complete address of the buyer, registration number of the buyer, if any, the quantity and value of supply, and the rate and amount of tax involved, if any, on such supply. Rule 51(1) further provides that the ginner shall deliver ginned cotton against a serially numbered delivery note or gate pass to the buyer, indicating the quantity of ginned cotton sold, the full name and complete address of the buyer and his registration number. Rule 51(2) provides that the buyer shall, after receipt of the ginned cotton, settle the terms about the quantity and value of ginned cotton with the ginner within six days of the date of dispatch of ginned cotton from the ginning unit, and indicate the changes in the quantity and value (if any) on the reverse side of copies of the delivery note or gate pass issued by the ginner. Rule 51(3) provides that the ginner shall then, within seven days, issue the prescribed zero‑rated sales tax invoice for the quantity and value of the ginned cotton agreed between the ginner and the buyer, which shall be issued bearing the date on which the ginned cotton was dispatched against the delivery note or gate pass and shall bear a cross reference to the said delivery note or gate pass. Rule 51(4) provides that the ginner shall maintain proper record of all such supplies made and shall furnish the details of all supplies of cotton made by him during a month to the Collector, in the format given below, by the 15th day of the month succeeding the month in which the supplies were made:‑‑ STATEMENT OF SUPPLY OF GINNED COTTON Name of Ginner------------------------------------------------------ Address-------------------------------------------------------------- Registration No.------------------------------------------------------ Month---------------------------------------------------------------- SNo. Invoice number and date Name of buyer and his registration No. (if any) Complete address of buyer Quantity of supply Value of supply (1) (2) (3) (4) (5) (6) Rule 53 provides A person making zero‑rated supplies of ginned cotton may claim adjustment of input tax on his taxable purchases in accordance with provisions of sections 7 and 8 of the Act, and in case the input tax exceeds the output tax, he may claim refund in terms of section 10 of the Act and Chapter V of the Sales Tax Rules, 2004. Rule 54 provides in case any supply of ginned cotton is made in a manner other than as specified in this Chapter, sales tax shall be chargeable thereon at the standard rate. 7.2.8 Chapter VIII prescribes the special procedure for the spinning industry and comprises from rule 55 to rule 62 of the Sales Tax Special Procedure Rules, 2004 and applies to the spinners and spinning units manufacturing and producing cotton yarns and blended yarns falling under Chapter 52 and 55 of the First Schedule to the Customs Act, 1969. 7.2.9 Chanter IX prescribes the special procedure for supply of sugar to Trading Corporation of Pakistan and comprises from rule 63 to rule 67 of the Sales Tax Special Procedure Rules, 2004 and applies to supply of sugar by the registered manufacturers of sugar to Trading Corporation of Pakistan (TCP) for further supply or export thereof. 7.2.10 Chapter X prescribes the special procedure for payment of sales tax on supply of food and comprises from rule 68 to rule 71 of the Sales Tax Special Procedure Rules, 2004 and applies for collection and payment of sales tax on food, drinks and other eatable supplied by hotels, restaurants, clubs, caterers, parlours, kitchens and other such similar establishments, whether for consumption inside the premises of such establishments or for supply of outside consumption or use. 7.2.11 Chapter XI prescribes the special procedure for persons providing or rendering taxable services and comprises from rule 72 to rule 86 of the Sales Tax Special Procedure Rules, 2004 and it comprises of four parts. Part 1 pertains to hotels, clubs, caterers, marriage halls and lawns. Part 2 pertains to custom house agents, steavedores and ship chandlers. Part 3 pertains to courier services and Part 4 pertains to advertisement on television and radio. 7.2.12 Chester XII prescribes the special 'procedure for payment of sales tax by steel melters and rerollers and comprises from rule 87 to rule 92 of the Sales Tax Special Procedure Rules, 2004 and applies to steel melting and steel rerolling units except Pakistan Steel Mills Karachi. 7.2.13 Chanter XIII prescribes the special procedure for ship breaking industry and comprises from rule 93 to rule 100 of the Sales Tax Special Procedure Rules, 2004 and applies ship breakers. 7.2.14 Chapter XIV prescribes the special procedure for zero rating of hand knotted carpets and comprises from rule 101 to rule 107 of the Sales Tax Special Procedure Rules, 2004 and applies hand knotted carpets by registered persons to foreign nationals against payment in foreign exchange through a foreign credit card for subsequent export as personal baggage Of foreign national. 8. MERGER OF RULES NOTIFIED UNDER SECTION 50 OF THE ACT 8.1 Section 50 of the Sales Tax Act, 1990 empowers the Central Board of Revenue, by a notification in the official Gazette, "to make rules for carrying out the purposes of this Act, including rules for charging fee for processing of returns, claims and other documents and for preparation of copies thereof. 8.2 In exercise of powers conferred‑under section 50, Central Board of Revenue has notified a number of Rules: Out of these, 11 notifications have been repealed and a new The Sales Tax Rules, 2004 have been notified through SRO 485(1)/2004. dated' 12‑6‑2004 which comprises of 11 Chapters. These Rules shall come into force on 1‑7‑2004 except Chapter V which shall come into force on such date as is notified by the Central Board of Revenue by notification in the official Gazette. Chapter V pertains to REFUND. 8.2.1 Chapter I prescribes registration, voluntary registration and de registration and comprises from rule 2 to rule 11 of the Sales Tax Rules, 2004 and applies to (a) a person required to be registered under the Act; (b) a person required, under any other Federal or Provincial law, to be registered for the purpose of any duty or tax collected or paid as if it were sales tax under the Act; (c) a person who opts for voluntary registration; (d) a person who is subject to compulsory registration; (e) a person who is already registered and requires a change in the name, address or other particulars of registration; (f) a person who is blacklisted or whose registration is suspended; and; (g) a person who is required to be de‑registered 8.2.2 Chapter II prescribes filing of monthly returns and comprises from rule 12 to rule 19 of the Sales Tax Rule, 2004 and applies all registered peons required to file return under section 26 of the Sales Tax Act, 1990. 8.2.3 Chapter III prescribes credit and debit note and destruction of goods and comprises from rule 20 to rule 24 of the Sales Tax Rules, 2004 and applies where a registered person has issued a tax invoice in respect of a supply made by him and as a result of any of the events specified in section 9 of the Sales Tax Act, 1990, the amount shown in the tax invoice or the return needs to be modified. 8.2.4 Chapter IV prescribes apportionment of input tax and comprises from rule 25 to rule 27 of the Sales Tax Rules, 2004 and applies to the registered persons who make taxable and exempt supplies simultaneously. 8.2.5 Chapter V prescribes procedure for refund and comprises from rule 28 to rule 40 of the Sales Tax Rules, 2004 and applies to all refund claims made under the Act. The provisions of Chapter V shall come into force on such date as may be specified by the Board by a notification in the official Gazette. 8.2.6 Chapter VI prescribes procedure for special audit and comprises from rule 41 to rule 46 of the Sales Tax Rules, 2004 and applies to registered persons who are subject to Special Audit in terms of section 32A of the Act. Chapter VII prescribes procedure for zero rating of supplies against international tenders for afghan refugees and comprises from rule 47 to rule 53 of the Sales Tax Rules, 2004 and applies to supplies of taxable goods made by registered persons against International Tenders to UNICEF, UNDP, WHO EFP, UNHCR, Euron Aid and ICRC for Afghan Refugees. 8.2.7 Chapter VIII prescribes procedure for supply of zero rated goods to diplomats diplomatic missions privileged persons and privileged organizations and comprises from rule 54 to rule 59 of the Sales Tax Rules, 2004 and applies of zero rated goods to diplomats diplomatic missions, privileged persons and privileged organizations. 8.2.8 Chapter IX pertains to tax‑payer's authorized representatives and comprises from rule 60 to rule 65 of the Sales Tax Rules, 2004 and applies persons authorized by the tax‑payers to represent them or appear on their behalf before the Appellate Tribunal or any other adjudicating authority. 8.2.9 Chapter X prescribes rules for alternate disputes resolution and comprises from 'rule 66 to rule 76 of the Sales Tax Rules, 2004 and applies all cases of disputes brought or specified for resolution under section 47A of the Act. 8.2.10 Chapter XI prescribes procedure for recovery of arrears and comprises from rule 77 to rule 158 of the Sales Tax Special Procedure Rules, 2004 and applies to recoveries made under section 48 of the Act. LETTER FROM MUHAMMAD SHARIF & COMPANY, SAHIWAL TO THE CHAIRMAN, CENTRAL BOARD OF REVENUE [12th June, 2004] (Maintaining the Sovereignty of Taxation in Pakistan) The Chairman; Central board of Revenue, Islamabad. SUBJECT: MAINTAINING THE SOVEREIGNTY OF TAXATION IN PAKISTAN Respected Sir, I acknowledge, with a bundle of thanks, the receipt of C.B.R.'s C. No.S(10) ST‑1&P/2003; dated 28‑5‑2004. Your honour in the past S.R.O. 50(I)/2003 dated 7‑6‑2003 was issued. Later on a Circular No. 16 of 2003 was issued on 21‑6‑2003 whereby the following restriction was imposed:‑‑ "It is further clarified that the persons against whom the cases have already been made out or contravention report or audit observation had been issued for any short levied/short paid amount or tax evasion/tax fraud, are not entitled for exemption from payment of sales tax under the said S.R.O.". Your honour, in my best knowledge, no penny was deposited by any person due to aforesaid restriction. Now although S.R.O. 500(1)/2003 dated 7‑6‑2003 had been superseded by S.R.O's. 246 and 247 but Circular No.l6 had neither been withdrawn nor cancelled. In such circumstances I do hope that no person will be eligible to avail benefit of these S.R.Os. In my view the person whose cases had been referred to adjudication office or pending in Appellate Courts must be allowed so as to avail benefit of amnesty. It is also suggested that simplified procedure be directed to be adopted for granting registration in these events only. It is, therefore, suggested that the condition imposed by Circular No. 16 of 2003 be waived with a condition that the cases already referred and or under adjudication or decided will not be withdrawn and the persons concerned will only be entitled to avail legal rights through revision appeals or any other legal remedy. Consequently they will face the results of and of the matter, as the case may be, so as to entitle them to avail the benefit of recent S.R.Os. ' Thanking you in anticipation.