COMMENTS ON AMENDMENTS IN SALES TAX LAWS MADE THROUGH BUDGETARY MEASURES, 2005

COMMENTS ON AMENDMENTS IN SALES TAX LAWS MADE THROUGH BUDGETARY MEASURES, 2005 COMMENTS ON AMENDMENTS IN SALES TAX LAWS MADE THROUGH BUDGETARY MEASURES, 2005 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, 2005 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 Bill 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. The provisions of the Finance Bill, 2005 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, 2005 are offered in the following paragraphs: 1. LEGAL AMENDMENTS IN SALES TAX ACT, 1990 1.1 AMENDMENTS IN SECTION 2 1.1.1. Insertion of Clause (6B).---Section 34 of the Act provided imposition of Additional tax in cases where the registered person had failed to pay sales tax due or any part thereof in time or in the manner specified under the Act. Section 34 has been substituted and instead of "Additional Tax", "Default Surcharge" has been levied in cases where the registered person does not pay the tax due or any part thereof, whether wilfully or otherwise, in time and manner specified in the Act, rules or notifications issued thereunder or claims a tax credit, refund or makes an adjustment which is not admissible to him, or incorrectly applies the rates of zero percent to supplies made by him. Clause (6B) has been inserted in section 2 which defines "Default Surcharge" as "the surcharge payable by a defaulter at the rate specified in section 34 of this Act". Corresponding amendments have been made in other provisions of the Act and the words "additional tax" where ever occurring in the Act have been substituted with words "Default Surcharge". 1.1.2 Omission of words "or the importer" from Clause (27).---The taxable supplies specified in the Third Schedule to the Act are chargeable to tax at the rate of 15% of the retail price. Clause (27) defines the term "retail price" as with reference to the Third Schedule, means the price fixed by the manufacturers or the importer, inclusive of all charges and taxes other than sales tax at which any particular brand or variety of any article is sold to the general body of consumers. The words "or the importer" have been omitted from clause (27). The condition of printing retail price on the imported goods has been abolished through the said amendment. Board has advised to Collector of Customs to ensure that w.e.f. 1st July, 2005, the concerned staff at the Ports of clearance should not insist for printing retail price on the imported goods. 1.1.3 Omission of words "or enlistment tax" from Clause (34).---Clause (34) defines the term "tax" as retail tax or enlistment tax and includes additional tax or any other some payable under the Act. The enlistment tax was levied under section 3AAA of the Act. The said section has been omitted from the Act by Finance Ordinance, 2002 but the words "enlistment tax" were still available which have been omitted. 1.1.4 Broadening of definition of "tax fraud".---Addition in Clause (37): Clause (37) defines the term "tax fraud" and means knowingly, dishonestly, or fraudulently and without any lawful excuse (burden of proof of which excuse shall be upon the accused) (i) doing of any act or causing to do any act; or (ii) omitting to take any action or causing the omission to take any action including the making of taxable supplies without getting registration under this Act; A new sub-clause (iii) has been added and the act of "falsifying the sales tax invoices" has also been included in the definition of tax fraud. 1.2 AMENDMENT IN SECTION 3AA---RETAIL TAX 1.2.1 Subsection (1) of Section 3AA provides levy of retail tax at the standard rate of 15% by a retailer who is making taxable supplies in the course or furtherance of any taxable activity carried by him. A new proviso has been added in sub-section (1) which empowers the Federal Government to notify any goods or class of goods imported into or produced or any taxable supplies made by a registered retailer or class of registered retailers, on which 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 said notification. Through S.R.O. 539(I)/2005 dated 6-6-2005, a Single stage sales tax at the rate of 3% of the declared turnover, has been levied on retail sale of textile fabrics and made-ups, articles of apparel including readymade garments/fashion-wear, articles of leather including footwear, carpets, surgical and sports goods. No facility of input tax adjustment is allowed and the single stage tax will also absolve the retailers of non-corporate sector from income tax liability. A simplified procedure has been notified vide S.R.O. 539 (I)/2005, dated 6-6-2005 for the purposes of collection of sales tax from retail outlets of aforesaid items with an annual turnover of more than five million rupees, w.e.f 1st July, 2005. 1.2.2 Subsection (4) of Section 3AA provided that a retailer not liable to pay tax, would, after voluntary registration under section 14, opt for paying sales tax under this section. Sub-section (4) has been omitted. 1.3 AMENDMENT IN SECTION 5 --- SUBSTITUTION OF WORDS "BILL OF ENTRY" WITH WORDS "GOODS DECLARATION" 1.3.1 Since the document "bill of entry" has been replaced with another document "goods declaration" for the purpose of clearance of imported goods, the words "bill of entry" wherever occurring in section 5 have been replaced with words "goods declaration" to bring the provisions of the Sales Tax Act, 1990 in line with those of Customs Act, 1969. 1.4 AMENDMENTS IN SECTION 7 - PERMISION TO ADJUST INPUT TAX PAID ON THE PURCHASES IN THE IMMEDIATE TWELVE PRECEDING TAX PERIODS 1.4.1 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 deduct 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. 1.4.2 Through Finance Act, 2003, a proviso was added in sub-section (1) of section 7 through which a taxpayer had been entitled to make adjustment input tax paid on the purchases in the immediate three preceding tax periods from the output tax subject to the condition that the taxpayers specified the reasons for such delayed input tax adjustment in the revised sales tax return for such period or in the return for immediately succeeding tax period. 1.4.3 The word "three" has been substituted with the word "twelve". Now the taxpayers are entitled to adjust input tax paid on purchases in the immediate twelve proceeding tax periods from the out put tax. 1.4.4 A new format of monthly sales tax return has also been notified as Annexure to Chapter-II of the Sales Tax Rules, 2005 notified vide S.R.O. 533(I)/2005 dated 6-6-2005. 1.5 AMENDMENTS IN SECTION 10 - EXCESS AMOUNT TO BE CARRIED FORWARD OR REFUNDED 1.5.1 Section 10 provided that the excess amount of input tax would be carried forward or refunded. 1.5.2 A drastic amendment has been made in Section 10. The amended provisions read as follows 10. Excess amount to be refunded.---(1) Subject to the provisions of subsection (2), if in relation to a tax period, the total deduction of input tax and other adjustments as specified in section 9 exceed the output tax, the excess amount shall be refunded to the registered person. Provided that any excess amount of tax shall be refunded to the registered person subject to such conditions, restrictions and limitations as the Board may, by notification in the official Gazette, specify; 1.5.3 The newly substituted provisions of section 10 does not allow the registered person to carry forward the excess amount of input tax rather it binds him to claim refund of excess amount of input tax which shall be refund to him subject to such condition as Board may specifies. The `carry forward' scheme as had been provided in section 10 of the Act has now been abolished. Instead, the amount of input tax and other adjustments in excess of the output tax liability shall be refunded to the registered person within same tax period. For the purpose of claiming refund of the amount of input and other adjustment in excess of the other output tax liability, the tax return filed by the registered person shall be treated as an application for the refund under section 10 of the Sales Tax 1990. C.B.R. has advised the Collectors to immediately assess the carry forward being reflected in the returns, up to tax period May, 2005 and communicate the final to the Board by 25.06.2005 to assess the total outstanding amount. C.B.R. has also advised the Collectors that Separate "Dedicated Cell" should be setup in each Collectorate, which will handle such claims. 1.5.4 The second proviso to sub-section (1) of section 10 entitled refund of input tax charged on acquisition of plant and machinery to such registered person who, at the time of taking delivery of taxable plant and machinery, its components and spare parts was not making taxable supplies, subject to the condition that he would, within the period specified by the Board, by notification in the official Gazette, commence taxable supplies and complies with such other conditions as were specified therein. Since plant and machinery has been declared zero rating of sales tax, the aforesaid second proviso had become superfluous and has been omitted. 1.5.5 Through S.R.O. 510(I)/2004 dated 12-6-2004, C.B.R. had specified that the excess amount of tax carried forward by a registered person other than an exporter would be refunded, if the amount carried forward was not adjusted within a period of six months from the period in which it had first arisen. Since the provisions of carrying forward have been omitted from the Statute book, S.R.O. 510(I)/2004 had lost its utility so has been rescinded vide S.R.O. 511(I)/2005 dated 6-6-2005. 1.6 AMENDMENTS IN SECTION 22 - RECORDS 1.6.1 Section 22 pertains to the record required to be maintained by the registered person in respect of goods purchased and supplied. An amendment has been made which binds the registered person to also maintain and keep at his business premises or registered office in English or Urdu language the records. in respect of goods imported by him. The records of goods imported shall show the description, quantity and value of goods and the amount of tax paid on imports. 1.7.1 INSERTION OF SUB-SECTION (3) IN SECTION 23 TAX INVOICES 1.7.1 A new subsection (3) has been added in section 23 which provides that a registered person making a taxable supply may, subject to such conditions, restrictions and limitations as the Board may, by notification in the official Gazette, specify, issue invoices to another registered person electronically and to the Board as well as to the Collector, as may be specified. 1.7.2 A registered person making a taxable supply may, subject to such conditions, restrictions and limitations as the Board may, by notification in the official Gazette, specify, issue invoices to another registered person electronically and to the Board as well as to the Collector, as may be specified. 1.8 AMENDMENT IN SECTION 24 Retention of record and documents for three instead of five years.---Section 24 provides that a person who is required to maintain any record or documents under this Act, shall retain the record and documents for a period of five years after the end of the tax period to which such record or documents relates The word "five" has been substituted with word "three". Now the registered person is required to maintain the record or documents in respect of sales tax laws for a periods of three years instead of five years. C.B.R. has communicated that this amendment shall apply prospectively and not to those records where time limit of three years has already elapsed. 1.9 INSERTION OF NEW SECTIONS 1.9.1 After section 30, five new sections 30A, 30B, 30C, 30D & 30E have been added as detailed below:---‑ 30A. Directorate General, (Intelligence and Investigation) Customs and Excise.---The Directorate General (Intelligence and Investigation) Customs and Excise shall consist of a Director General and as many Directors, Additional Directors, Deputy Directors and Assistant Directors and such other officers as the Board, may by notification in the official Gazette, appoint. 30B. Directorate General of Inspection and Internal Audit.---The Directorate General of Inspection and Internal Audit shall consist of a Director General and as many Directors, Additional Directors, Deputy Directors and Assistant Directors and such other officers as the Board, may by notification in the official Gazette, appoint. 30C. Directorate General of Training and Research.--The Directorate General of Training and Research shall consist of a Director General and as many Directors, Additional Directors, Deputy Directors and Assistant Directors and such other officers as the Board, may by notification in the official Gazette, appoint. 30D. Directorate General of Valuation and Post Clearance Audit.---The Directorate General of Valuation and Post Clearance Audit shall consist of a Director General and as many Directors, Additional Directors, Deputy Directors and Assistant Directors and such other officers as the Board, may by notification in the official Gazette, appoint. 30E. Powers and Functions of Directorate, etc.---The Board may, by notification in the official Gazette, specify the. functions, jurisdiction and powers of the Directorates General as specified in the preceding sections and their officers by notification in the official Gazette. 1.10 SUBSTITUTION OF SECTION 33 1.10.1 Section 33 specified different kinds of offences under the sales tax law and general penalties in respect thereof. Section 33 has been substituted and specific penalties have been laid down for contravening/violating the provisions of specific sections of the Act as detailed below:--‑ 1.10.2 Where any person fails to furnish a return within the due date and contravenes the provisions of section 26, such person shall pay a penalty of five thousand rupees. Provided that in case a person files a return within fifteen days of the due date, he shall pay a penalty of one hundred rupees for each day of default. 1.10.3 Any person who fails to issue an invoice when required under the Act and contravenes the provisions of section 23, such person shall pay a penalty of five thousand rupees or three per cent of the amount of the tax involved, whichever is higher. 1.10.4 Any person who un-authorizedly issues an invoice in which an amount of tax is specified and contravenes the provisions of sections 3, 7 and 23, such person shall pay a penalty of ten thousand rupees or five per cent of the amount of the tax involved, whichever is higher. 1.10.5 Any person who fails to notify the changes of material nature in the particulars of registration of taxable activity and contravenes the provisions of section 14, such person shall pay a penalty of five thousand rupees. 1.10.6 Any person who fails to deposit the amount of tax due or any part thereof in the time or manner laid down under this Act or rules or orders made thereunder and contravenes the provisions of sections 3, 6, 7 and 48, such person shall pay a penalty of ten thousand rupees or five per cent of the amount of the tax involved, whichever is higher: Provided that, if the amount of tax or any part thereof is paid within fifteen days from the due date, the defaulter shall pay a penalty of five hundred rupees for each day of default. Provided further that no penalty shall be imposed when any miscalculation is made for the first time during a year. Provided further that if the amount of tax due is not paid even after the expiry of a period of sixty days of issuance of the notice for such payments by an officer of Sales Tax, not below the rank of Assistant Collector of Sales Tax, the defaulter shall, further be liable, upon conviction by a Special Judge, to imprisonment 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. 1.10.7 Any person who repeats erroneous calculation in the return during a year hereby amount of tax less than the actual tax due is paid and contravenes the provisions of sections 7 and 26, such person shall pay a penalty of five thousand rupees or three per cent of the amount of the tax involved, whichever is higher. 1.10.8 Any person who is required to apply for registration under this Act fails to make an application for registration before making taxable supplies and contravenes the provisions of section 14, such person shall. pay a penalty of ten thousand rupees or five per cent of the amount of tax involved, whichever is higher. Provided that such 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, further be liable, upon conviction by a Special Judge, to imprisonment for a term which may extend to three years, or with fine which may. extend to an amount equal to the amount of tax involved, or with both. 1.10.9 Any person who ,fails to maintain records required under this Act or the rules made thereunder and contravenes the provisions of sections 22 and 24, such person shall pay a penalty of ten thousand rupees or five per cent of the amount of tax involved, whichever is higher. 1.10.10 Where a registered person who, without any reasonable cause, in non compliance with the provisions of section 25,-‑ (a) fails to produce the record on receipt of first notice, such person shall pay a penalty of five thousand rupees; (b) fails to produce the record on receipt of second notice, such person shall pay a penalty of ten thousand rupees; and (c) fails to produce the record on receipt of third notice, such person shall pay a penalty of fifty thousand rupees. 1.10.11 Any person who fails to furnish the information required by the Board through a notification issued under subsection (5) of section 26, such person shall pay a penalty of ten thousand rupees. 1.10.12 Any person who submits a false or forged document to any officer of sales tax OR destroys, alters, mutilates or falsifies the records including a sales tax invoice OR knowingly or fraudulently makes false statement, false declaration, false representation, false personification, gives any false information or issues or uses a document which is forged or false, such person shall pay a penalty of twenty five thousand rupees or one hundred per cent of the amount of tax involved, whichever is higher. He shall, further be liable, upon conviction by a Special Judge, to imprisonment for a term which may extend to five years, or with fine which may extend to an amount equal to the loss of tax involved, or with both. 1.10.13 Any person who denies or obstructs the access of an authorized officer to the business premises, registered office or to any other place where records are kept, or otherwise refuses access to the stocks, accounts or records or fails to present the same when required under section 25, 38 or 38A, such person shall pay a penalty of twenty five thousand rupees or one hundred per cent of the amount of tax involved, whichever is higher. He shall, further be liable, upon conviction by a Special Judge, to imprisonment for a term which may extend to three years, or with fine which may extend to an amount equal to the amount of tax involved, or with both. 1.10.14 Any person who commits, causes to commit or attempts to commit the tax fraud, or abets or connives in commissioning of tax fraud in terms of section 2(37), such person shall pay a penalty of twenty five thousand rupees or one hundred per cent of the amount of tax involved, whichever is higher. He shall, further be liable, upon conviction by a Special Judge, to imprisonment for a term which may extend to five years, or with fine which may extend to an amount equal to the loss of tax involved, or with both. 1.10.15 Where any person violates any embargo placed on removal of goods in connection with recovery of tax and contravenes the provisions of section 48, such person shall pay a penalty of twenty five thousand rupees or ten per cent of the amount of the tax involved, whichever is higher. He shall, further be liable, upon conviction by a Special Judge, to imprisonment for a term which may extend to one year, or with fine which may extend to amount equal to the amount of tax involved, or with both. 1.10.16 Any person who obstructs the authorized officer in the performance of his official duties, such person shall pay a penalty of twenty five thousand rupees or one hundred per cent of the amount of tax involved, whichever is higher. 1.10.17 Any person who fails to make payment in the manner prescribed under section 73 of this Act, such person shall pay a penalty of five thousand rupees or three per cent of the amount of tax involved, whichever is higher. 1.10.18 Any person who fails to fulfil any of the conditions, limitations or restrictions prescribed in a Notification issued under any of the provisions of this Act, such person shall pay a penalty of five thousand rupees or three per cent of the amount of tax involved, whichever is higher. 1.10.19 Where any officer of Sales Tax authorized to act under this Act, acts or omits or attempts to act or omit in a manner causing loss to the sales tax revenue or otherwise abets or connives in any such act, such officer of Sales Tax shall be liable, upon conviction by a Special Judge, to imprisonment 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. 1.10.20 Any person who contravenes any of the provisions of this Act for which no penalty has, specifically, been provided in section 33, such person shall pay a penalty of five thousand rupees or three per cent of the amount of tax involved, whichever is higher. 1.11 SUBSTITUTION OF SECTION 34 IMPOSITION OF DEFAULT SURCHARGE INSTEAD OF ADDITIONAL TAX 1.11.1 Section 34 provided that if a registered person or enrolled person did not pay the tax due or any part thereof in time or in the manner specified under this Act, rules or notification issued thereunder or had claimed a tax credit, refund or makes an adjustment, which was not admissible to him, or incorrectly applied the rate of zero per cent to supplies made by him, he would, in addition to the tax due, and the prescribed penalties, pay additional tax at the rate of one percent of the tax due per month or any part thereof. 1.11.2 Section 34 has been substituted and instead of additional tax, Default surcharge has been levied. The new provisions provide that if a registered person does not pay the tax due or any part thereof, whether wilfully or otherwise, in time or in the manner specified under this Act, rules or notifications issued thereunder or claims a tax credit, refund or makes an adjustment which is not admissible to him, or incorrectly applies the rate of zero per cent to supplies made by him, he. shall, in addition to the tax due, pay default surcharge at the rate mentioned below: (a) for the first six months of default, the person liable to pay any amount of tax or charge or the amount of refund erroneously made, shall pay default surcharge at the rate of one per cent per month, of the amount of tax due or the amount of refund erroneously made; (b) from the seventh month onwards, the person liable to pay any amount of tax or charge or the amount of refund erroneously made, shall pay default surcharge at the rate of one and a half per cent per month, of the amount of tax due or the amount of refund erroneously made, till such time the entire liability including the amount of default discharge is paid; and (c) in case, the default is on account of tax fraud, the person who has committed tax fraud shall pay default surcharge at the rate of two per cent per month, of the amount of tax evaded or the amount of refund fraudulently claimed, till such time the entire liability including the amount of default discharge is paid. 1.11.3 It has also been provided that (a) in the case of inadmissible input tax credit or refund, the period of default shall be reckoned from the date of adjustment of such credit or, as the case may be, refund is received; and (b) in the case of non-payment of tax or part thereof, the period of default shall be reckoned from the 16th day of a month (following the due date of the tax period to which the default relates) to the day preceding the date on which the tax due is actually paid. 1.12 OMISSION OF SECOND PROVISO TO SUB-SECTION (3) OF SECTION 36---- ISSUANCE OF SHOW CAUSE NOTICE 1.12.1 The second proviso to sub-section 36 has been omitted. Now it is binding on the Sales Tax Officer to issue show cause notice within the time limit of five and three years as has been prescribed under sub-sections (1) and (2) of section 36 of the Act respectively. 1.13 OMMISSION OF SECTIOON 37C --PROSECUTION AND PUNISHMENT FOR EVASION OF TAX, ETC. 1.13.1 Section 37C provided prosecution and punishment for evasion of sales tax. Since offences and "penalties for contravening various provisions of the Act have been specified in section 33, section 37C has been omitted. 1.14.1 AMENDMENT IN SECTION 40A - SEARCH WITHOUT WARRANT 1.14.1 Section 40A empowers an officer of sales tax not below the rank of an Assistant Collector of Sales Tax to search or cause search to be made any place for any documents or things, if he has reasons to believe that these documents or things may be useful for, or relevant to, any proceedings under the Act which are concealed or kept in any place and there is a danger that these may be removed before a search can be effected after obtaining search warrant from Illaqa Magistrate under section 40. 1.14.2 An amendment has been made in Section 40A and the officer of Sales Tax not below the rank of an Assistant Collector has been empowered either to conduct search himself or cause search to be made in his presence. Now the presence of authorized officer of Sales Tax is mandatory whenever a search without warrant is necessitated. 1.15 AMENDMENTS IN SECTION 45 - POWER OF ADJUDICATION 1.15.1 Section 45 prescribed 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. 1.15.2 The institution of Collectorates of Adjudication has been abolished. Necessary substitutions have been made in section 45 and the Additional Collector of Sales Tax has been empowered to adjudicate the cases falling under sub-section (2) of section 11 and section 36 without any restriction as to the amount of tax involved or amount erroneously refunded. 1.15.3 The Deputy Collector of Sales Tax has been empowered to adjudicate the cases falling under sub-section (2) of section 11 and section 36 provided that the amount of tax involved or the amount erroneously refunded exceeds one million rupees, but does not exceed two and a half million rupees. 1.15.4 The Assistant Collector of Sales Tax has been empowered to adjudicate the cases falling under sub-section (2). of section 11 and section 36 provided that the amount of tax involved or the amount erroneously refunded exceeds ten thousand rupees, but does not exceed one million rupees. 1.15.5 The Superintendent of Sales Tax has been empowered to adjudicate the cases falling under sub-section (2) of section 11 and section 36 provided that the amount of tax involved or the amount erroneously refunded does not exceed ten thousand rupees. 1.16 AMENDMENTS IN SECTION 45A - POWERS OF BOARD AND COLLECTOR TO CALL FOR RECORDS. 1.16.1 Since the institution of Collector Adjudication has been abolished, the word "Collector (Adjudication)" has been omitted from the heading of Section 45A. 1.16.2 Subsection (4) has been substituted. The new provisions provide that the Collector may, suo motu, call for and examine the record of any proceeding under this Act or the rules made thereunder for the purpose of satisfying himself as to the legality or propriety of any decision or order passed by an officer of Sales Tax subordinate to him, and pass such order as he may deem fit. 1.17 AMENDMENTS IN SECTION 45-B - APPEALS 1.17.1 The present system of adjudication and appeals in the Sales Tax and Central Excise statues has been re-organized and simplified, so as to provide maximum relief to the taxpayers. The new arrangement will have the following features: * Adjudication proceedings will now be handled upto the level of an Additional Collector, who will function administratively under the Revenue Collector; * The department would not be having the right of appeal to the Collector (Appeals), however, the department can file appeal before the Appellate Tribunal against the orders of the Collector (Appeals). 1.17.2 Section 45-B provided that any person, including the Sales Tax Department, aggrieved by any decision or order passed under sections 10,11, 36, 45 or 66 by an officer of Sales Tax below the 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). For the word "including", the words "other than" have been substituted. The Sales Tax Department has been stopped from filing Appeals before Collector Appeals against the Orders of Officers of Sales Tax. 1.17.3 All appeals against the orders of the Officers of Sales Tax up to the rank of Additional Collectors will lie to Collector Appeals. 1.17.4 A proviso has been added in sub-section (2) which binds the Collector Appeals to pass orders in a period not later than 90 days from the date of filing of appeal or within such extended period as the Collector (Appeals) may, for reasons to be recorded in writing fix but such extended period shall, in no case, exceed ninety days. 1.17.5 Subsection (4) provides that any person desirous of preferring an appeal under sub-section (1) against any decision or order relating to any tax demanded or any penalty imposed under this Act shall, before presenting the appeal, deposit 15% of the principal amount of tax under such decision or order and subject to such deposit, recovery of the remaining amount of tax due shall be stayed for a period not exceeding six months following the day on which the fifteen per cent amount of principal tax was deposited, unless the case is finally decided. It has now been provided that subject to such deposit of 15% of the principal amount, the recovery of the remaining amount of tax due shall be stayed for a period not exceeding six months following the day on which the fifteen per cent amount of principal tax was deposited, unless the case is finally decided. The deposit of 15% of the principal amount of tax, will entitle the appellant to "automatic stay" towards recovery of remaining amount for a period of six months or till final decision of the appeal, whichever is earlier. 1.18 AMENDMENT IN SECTION 46 - APPEAL TO APPELLATE TRIBUNAL 1.18.1 Section 46 provided that any person including the Sales Tax Department aggrieved by (a) any order passed by a Collector or an Additional Collector of Sales Tax under section 11, 36 or 45; (b) any order passed by the Collector of Sales Tax (Appeals) under section 45B; and (c) any order passed by the Board or the Collector of Sales Tax under section 45A, may, within sixty days of the receipt of such decision or order, prefer appeal to the Appellate Tribunal. 1.18.2 Clause (a) has been omitted and the Appeals against the orders of Additional Collector will now lie to Collector Appeals rather than Appellate Tribunal. 1.18.3 The Appeals against order of Collector of Sales Tax under subsection (4) of section 45A will also lie before the Appellate Tribunal. 1.19 SUBSTITUTION OF SECTION 47----REFERENCE TO HIGH COURT 1.19.1 Section 47 provided the procedure for filing of appeal in High Court. Section 47 has been substituted and the procedure of appeal to the High Court has been changed. Instead of filing appeal, the aggrieved person, including sales tax department, shall make a reference to the High Court. 1.19.2 The new provisions provide that within ninety days of the communication of the order of the Appellate Tribunal under sub-section (5) of section 46, the aggrieved person or any officer of Sales Tax not below the rank of a Deputy Collector may prefer an application in the prescribed form along with a statement of the case to the High Court, stating any question of law arising out of such order. 1.19.3 The statement to the High Court shall set out the facts, the determination of the Appellate Tribunal and the question of law, which arises out of its order. 1.19.4 Where, on an application made under sub-section (1), the High Court is satisfied that a question of law arises out of the order referred to in sub-section (1), may proceed to hear the case. 1.19.5 A reference to the High Court shall be heard by a Bench of not less than two Judges of the High Court and, in respect of the reference, the provisions of section 98 of the Code of Civil Procedure, 1908 (Act V of 1908) shall apply, so far as may be, notwithstanding anything contained in any other law for the time being in force. 1.19.6 The High Court upon hearing a reference shall decide the question of law raised by the reference and deliver judgment thereon specifying the grounds on which such judgment is based and the order of the Tribunal shall stand modified accordingly. The Court shall send a copy of the judgment under the seal of the Court to the Appellate Tribunal. 1.19.7 The cost of any reference to the High Court shall be in the discretion of the Court. 1.19.8 Notwithstanding that a reference has been made to the High Court, the tax shall be payable in accordance with the order of the Appellate Tribunal. Provided that, if the amount of tax is reduced as a result of the judgment in the reference by the High Court, and amount of tax found refundable by the High Court, the High Court may on application by the Collector within thirty days of the receipt of the judgment of the High Court that he intends to seek leave to appeal to the Supreme Court, make an order authorizing the Collector to postpone the refund until the disposal of the appeal by the Supreme Court. 1.19.9 Where recovery of tax has been stayed by the High Court by an order, such order shall cease to have effect on the expiration of a period of six months following the day on which it is made unless the appeal is decided, or such order is withdrawn, by the High Court earlier. 1.19.10 Section 5 of the Limitation Act, 1908 (IX of 1908) shall apply to an application made to the High Court. 1.19.11 An application by a person other than the Collector shall be accompanied by a fee of one hundred rupees. 1.19.12 Through S.R.O. 524(I)/2005 dated 6-6-2005, C.B.R. has prescribed a form of application to refer to the High Court any question of law arising out of the order of the Customs, Excise and Sales Tax Appellate Tribunal. The following documents are attached with the Application: (i) Statement of the case signed by the Appellant. (ii) Certified copy of the order of the Appellate Tribunal from which the question(s) of law stated above arises. (iii) Order-in-Appeal by the Collector (Appeals). (iv) Order-in-Original or any other order. 1.19.13 The Application made by taxpayer must be accompanied by a fee of Rs. 100 and one copy of the Challan will be attached with the Application. 1.20 ALTERNATE DISPUTE RESOLUTION OMISSION OF SUBSECTION (6) OF SECTION 47A 1.20.1 Section 47A prescribes scheme of Alternate Dispute Resolution Committee. Sub-section (6) provided that in case the registered person was not satisfied with the orders of the Board, he might file an appeal with the appropriate authority, 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 was communicated to the registered person. 1.20.2 No appropriate authority, tribunal or Court had been specified where the Appeal against the Orders of Board under section 47A was to be filed. Subsection (6) has been omitted meaning thereby that if any person is not satisfied with the order of Board passed in pursuance of the recommendations of ADRC, he will have no remedy except to file a writ petition. 1.21 AMENDMENT IN SECTION 66- REFUND TO BE CLAIMED WITHIN ONE YEAR 1.21.1 Section 66 provides that "No refund of tax claimed to have been paid or over paid through inadvertence, error or misconception or refund on account of input adjustment not claimed within relevant tax period, shall be allowed, unless the claim is made within one year of the date of payment. A new third proviso has been added which provides that the application or claim filed under section 66 shall be disposed of within a period not exceeding ninety days from the date of filing of such application or claim. 1.22 AMENDMENT IN SECTION 73 1.22.1 Subsection (1) of Section 73 provides that 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. ' 1.22.2 A proviso has been added in sub-section (1) of section 73 which lay down that online transfer of payment from the business account of buyer to the business account of supplier as well as payments through credit card shall be treated as transactions through the banking channel, subject to the condition that such transactions are verifiable from the bank statements of the respective buyer and the supplier. 2. AMENDMENT IN THIRD SCHEDULE - GOODS LIABLE TO SALES TAX ON RETAIL PRICE 2.1 Clause (a) of sub-section (2) of Section 3 of the Act provides that taxable supplies specified in the Third Schedule shall be charged to tax at the rate of fifteen percent of the retail price which alongwith the amount of sales tax shall be legibly, prominently and indelibly printed or embossed by the manufacturer on each article, packet, container, package, cover or label, as the case may be. 2.2 Certain additions/insertions have been made in the Third Schedule and the following taxable supplies will now be charged to tax @ 15% on the retail price. (i) Toilet and laundry soap of HS 3401.1100, 3401.1900 and 3401.2000; (ii) Detergents of Hs 3402.2000; (iii) Shampoo of Hs 3305.1000; (iv) Toothpaste of Hs 3306.1010; (v) Shaving cream of Hs 3307.1000; (vi) Perfumery and cosmetics of Hs Respective sub-headings of 33.03 and 33.04; (vii) Biscuits of Hs 1905.3100 and 1905.3200; (viii) Confectionary of Hs Respective sub-headings of 17.04; (ix) Tea of Hs Respective sub-headings of 09.02; (x) Powder drinks of Hs 21.06; (xi) Milky drinks of Hs 2106.9090; (xii) Footwear of Hs Respective sub-headings of 64.01, 64.02, 64.03, 64.04 and 64.05; 3. SUBSTITUTION OF 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. Sixth Schedule has been substituted. 3.2 The entire Sixth Schedule has been substituted 'so as to rationalize it in line with the changes to Pakistan customs tariff. C.B.R. has communicated that PCT classification mentioned in the Schedule against each entry is provided for ease of reference and commodity classification purposes only and exemption shall be admissible strictly on the basis of description of goods given in column 2 of the Schedule. 3.3 Exemption of Sales Tax on medical equipments, testing, equipment and artificial parts.----In order to provide a cheaper healthcare, all imports & supplies of intra-ocular lenses, adult diapers & sheets, Dextrose and Saline Infusion giving sets, Glucose testing equipment and artificial parts of the human, body shall be exempted from payment of sales tax w.e.f. 1st July, 2005. 3.4 Exemption of Sales Tax on CNG Euro 2 equipped buses.---In order to control the growing problem of environmental pollution, import & supply of CNG Euro 2 equipped buses, whether in CKD or CBU condition, has been exempted' from sales tax by inserting a new entry in the Sixth Schedule to the Sales Tax Act, 1990. It is to be noted that only such CNG buses are to be allowed the benefit of this exemption which comply to Euro 2 emission standards. The concerned Collectors of Customs should ensure strict monitoring of this aspect and if viable, should make administrative arrangements whereby all such 'Goods Declarations' are routed through the concerned Deputy/Assistant Collector. The measure will be effective from 1st July, 2005. 4. RELIEF MEASURES 4.1 Activation Charges in respect of Cellular Phone connection reduced from Rs. 1,000 to Rs. 500.---Through S.R.O. 390(I)/2001 dated 18-6-2001, the Federal Government has granted exemption of customs duty and sales tax on the import or, as the case may be, on the supply of cellular telephone sets (hand-held sets) to the extent that the combined effect of both the levies would be Rs. 1,000 per such set. Through S.R.O. 512(I)/2005 dated 6-6-2005, S.R.O. 390(I)/2001 has been amended and the exemption of customs duty and sales tax on the import or, as the case may be, on the supply of cellular telephone sets (hand-held sets) has been granted to the extent that the combined effect of both the levies shall be Rs. 500 per such set. 4.2 One time waiver of additional tax and penalty.---With a view to enable the defaulting tax payers to liquidate their arrear liability, One time waiver of additional tax and penalty has been granted vide Notification S.R.O. 520(1)/2005 dated 6-6-2005, if they voluntarily deposit the principal amount of sales tax by the 30th June, 2005. The Federal Government has exercised its powers under section 34A of the Sales Tax Act, 1990, and has been pleased to exempt whole of the amount of additional tax and penalties payable by a person against whom an amount of sales tax is outstanding on account of any audit observation, audit report, demand notice or any order; or who has failed to pay any amount of sales tax or claimed inadmissible input tax adjustment or refund due to any reason other than tax fraud, subject to the following conditions, namely:--‑ (a) the outstanding principal amount of sales tax is paid by the 30th June, 2005; and (b) this notification shall not entitle any person to claim or take refund of any amount of sales tax already paid by or recovered from him. 4.3 Zero rating on Supplies of Cotton Seeds and Oil Cake.---Under S.R.O. 500(I)/2004 dated 12-6-2004, as many as Nine items were specified on which rate of sales tax was zero percent. S.R.O. 500(I)/2004 has been rescinded vide S.R.O. 513(I)/2005 dated 6-6-2005 and zero rating has been allowed to different goods as detailed below: 4.3.1 Supplies of Cotton Seeds of HS 1207.2000 and Oil Cake and other solid residues, whether or not ground or in the form of pellets of HS 2306.1000 through S.R.O. 515(I)/2004 dated 6-6-2005. 4.4 Zero rating of Sales Tax on the raw materials, components, sub-components and parts, as are purchased locally from authorized vendors by a recognized manufacturer of tractors.---The Supply of Agricultural Tractors is exempt from sales tax. The CKD Kits of Agricultural Tractors imported by recognized manufacturers are also exempt from whole of customs duty and sales tax. Through S.R.O. 839(I)/1998 dated 23-8-1998, the input tax incurred on purchases made from approved vendors was also exempt in the form of refund and the manufacturers used to claim refund of input sales tax on purchases made during a tax period. Through S.R.O. 531(I)/2005 dated 6-6-2005, the Federal Government is pleased to notify that the raw materials, components, sub-components and parts, as are purchased locally from authorized vendors by a recognized manufacturer of tractors, falling under the PCT heading No. 8701.9020, for use in the manufacturing of such tractors, shall be charged to sales tax at the rate of zero per cent subject to the following conditions, namely:--‑ (a) the manufacturer shall sell tractors against a proper zero-rate sales tax invoice without charging any sales tax; at a price agreed with the Federal Government; and (b) the vendors shall be entitled to input tax adjustment, or as the case may be, refund in respect of zero-rated supply of the components, sub-components and parts supplied to recognized manufacturers of tractors. It has also been provided that the electricity and gas consumed in the plant where tractors are manufactured shall also be zero-rated for the purposes of sales tax levy. Since the purchases of components and sub-components of Tractors has been zero rated, there would no refund of input tax, therefore S.R.O. 839(I)/1998 has been rescinded vide S.R.O. 526(I)/2005 dated 6-6-2005. 4.5 Zero ratify of Sales Tax on raw materials, components and sub-components, parts for use in the manufacture of plant and machinery liable to tax @ zero percent.---Through S.R.O. 527(I)/2005 dated 6-6-2005, the Federal Government has notified that the raw materials; components, sub-components and parts, as are imported or purchased locally for use in the manufacturing of such plant and machinery which is chargeable to sales tax at the rate of zero per cent, shall be zero-rated for the purposes of levy of sales tax, subject to the following conditions, namely:-‑ (a) the importer or the purchaser of the raw materials, components, sub-components and parts, holds a valid sales tax registration showing his registration category as "manufacturer"; and (b) in case of imported components, sub-components and parts, all the conditions, restrictions, limitations and procedures as are prescribed in a notification under section 19 of the Customs Act, 1969 (IV of 1969), shall apply. 4.6 Zero rating of Sales Tax on Plant, machinery and equipment.---Through S.R.O. 530(1)/2005 dated 6-6-2005, the Federal Government is pleased to specify the following plant, machinery and equipment, which shall be charged to sales tax at a rate of zero per cent, subject to the conditions specified therein: (i) Imported plant, machinery and equipment (whether or not manufactured locally), including parts thereof if imported, (a) against statutory rate of customs duty of 5%; or (b) against a notification under section 19 of the Customs Act, 1969. (ii) Supply of plant, machinery and equipment, whether locally manufactured or imported without any condition. The expressions "plant", "machinery" and "equipment", mentioned in this notification, do not include consumer durables and office machines. 4.7 Zero rating of Sales Tax on Leather and articles thereof, Textile and textile articles, Carpets, Sports goods and Surgical goods:---Through S.R.O. 535(1)/2005 dated 6-6-2005, the Federal Government is pleased to specify the following goods, on which sales tax shall be charged at the rate of zero per cent on supply and import thereof Leather and articles thereof Respective headings including 41.01 to 41.15 Textile and textile articles Respective headings including 5001.0000 to 63.10 Carpets Respective headings including 57.01 to 5705.0000 Sports goods Respective headings including 9504.2000,95.06 Surgical goods Respective headings 4.8 Zero rating of Sales Tax on Raw Materials of Leather and articles thereof, Textile and textile articles, Carpets, Sports goods and Surgical goods:--- Through S.R.O. 536(I)/2005 dated 6-6-2005, the Federal Government is pleased to specify the major raw material/ chemicals/Dyes of Textile (245 items), Leather (34 items) Carpets (6 items), Surgical Goods (13 items) and Sports Goods (20 items) on which sales tax shall be charged at the rate of., zero per cent on supply and import thereof. This zero rating has been allowed with immediate effect. Through S.R.O. 538(I)/2005 dated 6-6-2005, the Central Board of Revenue is pleased to direct that no exporter of textile and textile articles, leather and articles thereof, carpets, surgical goods and sports goods shall be entitled to claim any adjustment or refund of sales tax paid on his stocks, after the expiry of the tax period ending the 30th June, 2005. The manufacturers/exporters of these goods are advised to consume their stocks by 30th June, 2005. Refund, if any, on account of unconsumed stocks shall be claimed in the return for the tax period June, 2005, to be filed by 15-7-2005. C.B.R. has directed the Collectors of Sales Tax for regular monitoring of stocks of the goods being subjected to zero rating of sales tax, as well as the amount of carry forward on the same. For this purpose, a Monitoring Cell will be established in each Collectorate, headed by a Deputy Collector/Assistant Collector whose name will be communicated to Secretary Sales Tax Tariff within two days of the Budget announcement. The Collectors have been directed to take all due precautions, including cross-matching of invoices relating to carry forward amount through STARR/STREAM, so as to ensure that the amount of sales tax shown as carry forward by the registered persons has actually been paid as per law; and that the claim is in order and commensurate with the declarations already made in the previous monthly returns. 4.9 Single stage sales tax at the rate of 3% of the declared turnover, has been levied on retail sale of textile fabrics and made-ups, articles of apparel including readymade garments/fashion-wear, articles of leather including footwear, carpets, surgical and sports goods. No facility of input tax adjustment is allowed and the single stage tax will also absolve the retailers of non-corporate sector from income tax liability. A simplified procedure has been notified vide S.R.O., 539 (I)/2005, dated 6-6-2005 for the purposes of collection of sales tax from retail outlets of aforesaid items with an annual turnover of more than five million rupees, w.e.f 1st July, 2005. The Collectors have been advised to immediately have the commercial localities scrutinized to determine the potential registrants. The Collectors have also been advised to contact the concerned Commissioners of Income Tax, in whose jurisdiction such retail-level businesses are being assessed, to obtain lists of all such outlets which should then be intimated of this new levy through appropriately worded communication. C.B.R. has desired that a focal person shall be appointed in the Collectorate who shall monitor progress and report compliance to the Board on a fortnightly basis. Secretary, Sales Tax (Tariff) has been appointed focal person in the Board with whom all the correspondence in this regard shall be made. The Collectors have been advised to ensure that all such exercise is completed well before this provision comes into effect on 01.07.2005. 4.10 Zero rating of Sales Tax on import and supply of Soyabean Meal.---The exemption available on import and supply of Soyabean Meal has been substituted with zero rating. Through S.R.O. 537(I)/2005 dated 6-6-2005, the Federal Government is pleased to notify that with effect from the 1st July, 2005, the import and supply of soyabean meal falling under PCT heading No. 2304.0000 of the First Schedule to the Customs Act,' 1969 (IV of 1969), shall be charged to sales tax at the rate of zero per cent. A simplified procedure is being notified whereby the solvent extractors will be allowed to claim refund to the extent of 50% of the amount of soyabean seeds on a monthly basis. 4.11 Exemption of Sales Tax on services provided and rendered by beauty parlors, slimming clinics, laundries, drycleaners and marriage halls/lawns:-‑ Levy of Provincial Sales Tax on the services provided/rendered by beauty parlors, slimming clinics, laundries & drycleaners and marriage halls/lawns is being withdrawn. Necessary amendments in the respective Provincial Ordinances will follow as part of the Provincial budgets. However registered persons will file returns for the tax period June and thereafter the Collectorates will proceed to de-register them upon receipt of their requests. 4.12 Exemption of sales tax on food supplied on domestic flights by flight kitchens:--‑ As part of the rationalization of existing levies, food supplied on domestic flights by flight kitchens has also been exempted from sales tax. However, the food supplied by restaurants for consumption on-board in local flights shall continue to remain chargeable to sales tax. 5. ADMINISTRATIVE MEASURES 5.1 Rescinding of S.R.O. 508(I)/2004 and 509(I)/2004 both dated 12-6-2004.---Through S.R.O. 508(I)/2004, C.B.R. had specified that 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, textile made-ups and ready made garments were required to furnish a summary of their purchased and sales made during the tax period by 15th day of the month following, the said tax period. Through S.R.O. 509(I)/2004, C.B.R. had specified that all commercial exporters _o1 polypropylene granules (tape yarn grade) were required to furnish a summary of their purchased and sales made during the tax period by 15th day of the month following the said tax period. S.R.O. 508(I)/2004 and S.R.O. 509(I)/2004 have been rescinded vide S.R.O. 517(I)/2005 dated 6-6-2005. 5.2 The registered persons become liable to submit summary statement in respect of sales and purchases.---Through S.R.O. 525(I)/2005 dated 6-6-2005, C.B.R. has required all registered persons who are engaged in the import or supply of taxable goods 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 to the said S.R.O. This notification shall apply to purchases and supplies made on or after the 1st July, 2005. However the persons engaged in the manufacturing or supply of following goods will not be required to submit the said summary statement:--‑ (a) cotton yarn, blended yarn or man-made yarn, textile fabrics, made-ups, garments and articles of apparel; (b) leather and articles thereof, including footwear; (c) carpets of all sorts, (d) surgical goods; and (e) sports goods, 5.3 C.B.R. transfers 144 units to Large Tax Payers Unit Lahore:---Through S.R.O. 529(1)/2005 dated 6-6-2005, C.B.R. has transferred 144 Units to Large Tax Payers Units, Lahore with effect from 1-7-2005. 6. NEW SPECIAL PROCEDURES RULES NOTIFIED UNDER SECTION 71 OF THE ACT 6.1 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. 6.2 In exercise of powers conferred under section 71, Federal Government had notified The Sales Tax Special Procedure Rules, 2004 through S.R.O. 484(I)/2004 dated 12-6-2004 which comprised of 14 Chapters. These rules have been amended many times during a year. In order to integrate all the amendments made so far as well as to accommodate the new procedures/rules necessitated due to anticipated changes in the scope of tax, the Sales Tax Special Procedure Rules, 2004 have been redrafted. In supersession of existing rules, new Sales Tax Special Procedure Rules, 2005 have been notified through S.R.O. 522(I)/2005 dated 6-6-2005. These Rules shall come into force on 1-7-2005. 6.3 Two new Chapters have been added. Chapter XV prescribes special procedure for issuance of tax invoices against advance payment receipt and applies to all registered persons receiving advances against their taxable supplies. 6.4 Chapter XVI prescribes special procedure for issuance of electronic sales tax invoices between buyers and sellers I and applies to electronic transmission of sales tax invoices by the registered persons who opt to do so in the manner specified therein. 1. NEW SALES TAX RULES NOTIFIED 7.1 Section 50 of the Sales Tax Act, 1990 empowers C.B.R., by a notification in the official Gazette, to, make rules for carrying out purposes of the Act.. 7.2 In exercise of powers conferred under section 50, C.B.R. had notified The Sales Tax Rules, 2004 through S.R.O. 485(I)/2004 dated 12-6-2004. These rules have been amended many times during a year. In order to integrate all the amendments made so far as well as to accommodate the new procedures/rules necessitated due to anticipated changes in the scope of tax, the Sales Tax Rules, 2004 have been redrafted. In supersession of existing rules, new Sales Tax Rules, 2005 have been notified through S.R.O. 533(1)/2005 dated 6-6-2005. These Rules shall come into force on 1-7-2005.