Caf sales tax

1. SALES TAX MASTER SHEET-2
BY STT - SIR TARIQ TUNIO CSS (COMMISSIONER FBR) + CA TEACHER (CAF-02 TAX) 0332-2130867
POINT 3: APPORTIONMENT OF RESIDUAL IPT
ALLOCATION (Exclusive link with 1 particular supply):
§ IPT related to purchases exclusively used/to be used in making
taxable supply is deducted from OPT
§ IPT related to purchases exclusively used/to be used in making
zero-rated supply is refunded
§ IPT related to purchases exclusively used/to be used in making
exempt supply is disallowed (which means IPT is neither
deducted from OPT nor refunded.) It gets added in registered
person’s cost.)
APPORTIONMENT (Common link with > 1 type of supply):
§ IPT not exclusively related to any one supply i.e. taxable, zero-
rated or exempt supply is called residual IPT.
§ Since it is common to more than 1 type of supply, residual IPT
is apportioned among all types of supplies in which it is used.
§ Apportionment is done on the basis of gross sales values.
§ Apportionment Formula:
- Residual IPT x Taxable Supply/Total Supplies
- Residual IPT x Zero-rated Supply/Total Supplies
- Residual IPT x Exempt Supply/Total Supplies
POINT 2: TYPES OF SUPPLY
§ There are 2 types of supply:
(1) Taxable Supply
Taxable Supply is further sub-divided into 2 types
(i) Normal Taxable Supply
(ii) Zero-rated Supply
(2) Exempt Supply
3 Key Points to Remember:
1) IPT related to purchases used/to be used in making
taxable supply is deducted from OPT
2) IPT related to purchases used/to be used in making zero-
rated supply is refunded
3) IPT related to purchases used/to be used in making
exempt supply is disallowed (Disallowed IPT is neither
deducted from OPT nor refunded. It gets added in
registered person’s cost.)
POINT 1: REGISTERED PERSON
§ Registered person (Def):
- Registered person means a person who is registered
under STA-90 or who is liable to be registered.
- Person liable to be registered but not registered shall
not be entitled to benefits available to RP.
§ A person can claim IPT only when he/she is registered
under STA-90.
§ Effects of Registration:
Registered Person Unreg’d Person
Purchases from IPT Allowed IPT Not Allowed
Supplies to ST charged at 18% ST charged at 18%
plus 4% further tax
Note: Further tax is added in sales tax liability
POINT 4: DOCUMENTS REQUIRED TO CLAIM IPT
§ RP shall not be entitled to deduct IPT from OPT unless
In Case of Documents
Claim of IPT in
respect of
Taxable Supply
§ He holds tax invoice in his name &
bearing his registration number in-
res-of such supply
§ Electricity or gas – bill bearing his
registration no. & address where
connection is installed.
§ Supplier has declared supply in his
return & has paid tax due as indicated
in his return.
Goods imported
into Pakistan
§ He holds bill of entry or goods
declaration (GD) in his name &
showing his STRN, duly cleared by
customs.
Goods purchased in
auction
§ He holds a treasury challan, in his
name & bearing his registration
number, showing payment of ST.
POINT 5: UNCLAIMED IPT
If RP did not deduct IPT within the relevant period
§ he may claim such tax in return for
§ any of the six succeeding tax periods.
POINT 6: RESTRICTION ON IPT = TO 90% OF OPT
RP is not allowed adjustment of IPT in excess of 90% of OPT
POINT 7: EXCLUSION OF FXD ASSETS FROM RESTRICTION
90%
This restriction of not allowing IPT in excess of 90% of OPT does
not apply to fixed assets or capital goods
POINT 13: TAX CREDIT NOT ALLOWED § 8
(1) G/S used/to be used for purposes o/t taxable supplies
(2) G/S notified by FG (Notification: Food, beverages, garments and
consumption on entertainment; Gift and giveaways; Electricity/gas
used in residential colonies of RP; Crockery, cutlery, utensils
(excluding directly used in taxable actability); Exception: Input tax
allowed stock-in-trade
(3) Extra tax
(4) G/S in/res/of which ST has not been deposited by supplier
(5) Purchases in/res/of which CREST has indicated discrepancy or IPT
is not verifiable in supply chain
(6) Fake invoices
(7) Failure to furnish information to Board u/§ 26(5)
(8) G/S not related to taxable supplies made by RP
(9) G/S acquired for personal or non-business consumption
(10) Goods used in, or permanently attached to, immoveable
property, such as building and construction materials paints electrical
and sanitary fittings, pipes, wires and cables (Exclusion: (1) Pre-
fabricated buildings (2) Goods acquired for sale (3) used directly in
production/ manufacture of taxable goods
(11) Vehicles or parts of vehicles/electrical and gas
appliances/furniture furnishings/office equipment (excluding
electronic cash registers) (Exclusion Goods acquired for sale)
(12) Services in/res/of which IPT adjustment is barred under
provincial sales tax law
(13) Import or purchase of agricultural machinery or equipment
(subject to ST at 7% under 8th
Schedule)
(14) G/S which have not been declared by supplier in his return &
supplier has not paid tax
(15) Input G/S attributable to supplies to unregistered distributor on
prorata basis, for which sale invoice do not bear NIC number or NTN
POINT 9: DISCOUNTS
In case of trade discounts, discounted price is taken, provided
§ tax invoice shows discounted price and related tax and
§ discount allowed is in conformity with normal business
practices
POINT 11: DR & CR NOTES
§ Dr/Cr Notes are issued when value changes after invoice issuance
§ Event 1 – Reduction in value e.g. goods return, cancellation of supply
or due to some other reason
Person Adjustment Document
Supplier Reduces OPT Issues Cr. Note
Buyer Reduces IPT Issues Dr. Note
[Dr./Cr Notes in this case are required to be issue within 180 Days,
which is extendable by another 180 on application to CIR.]
§ Event 2 – Increase in value of supply after issuance of invoice
Person Adjustment Document
Supplier Increases OPT Issues Dr. Note
Buyer Increases IPT Issues Cr. Note
POINT 8: SUPPLY (Def)
Supply means
(1) Sale
(2) Other transfer of right to dispose goods as owner
(3) Sale or transfer under hire-purchase agreement
(4) Putting to private, business or non-business use goods
produced/manufactured in the course of taxable activity for
purposes other than taxable supply
(5) Auction
(6) Disposal of goods to satisfy a debt owed by person
(7) Possession of taxable goods held immediately before a person
ceases to be a registered person
(8) In case of manufacture of goods belonging to another person,
the transfer or delivery of such goods to owner or to a person
nominated by him [Toll Manufacturing]
POINT 12: PAYMENT THROUGH BANKING CHANNEL
Payment of Amount Exceeding 50,000
§ Payment of amount >Rs. 50,000/- is required to be mode by
crossed cheque, c/bank draft, c/pay order or any other
crossed banking instrument showing transfer of amount from
business bank a/c of buyer to business bank a/c of supplier.
§ If not done, IPT shall not be allowed
§ Exception: Utilities
IPT on Credit Purchases:
§ IPT on credit purchases is allowed if supplier has paid tax
§ Payment in this case is required to be made by buyer to
supplier within 180 days.
§ If not done, IPT shall be disallowed/reversed.
POINT 14: COTTAGE INDUSTRY
Cottage Industry (Def) means a manufacturing concern,
which fulfils each of the following conditions
a) does not have industrial gas or electrical connection
b) is located in a residential area
c) does not have a total labour force of more than 10
workers, and
d) annual turnover from all supplies does not exceed
Rs. 8 million
STT Notes:
§ Cottage industry is not liable to be registered
§ Local supplies made by cottage industry are exempt
§ Cottage industry does not charge OPT.
§ No IPT is claimed on purchase from cottage industry
§ However, if taxable goods are supplied to cottage
industry, supplier charges ST as well as further tax.
POINT 10: TREATMENT OF ADVANCE
§ No treatment of advance payment. Ignore.
POINT 15: IMPORTS
Type Treatment
Importer IPT at 18%
Commercial
Importer
IPT at 18%
Plus 3% value addition tax
§ Commercial importer is one who supplies goods in the
same condition in which they were imported.
§ Sales tax paid at import stage is claimed as IPT
(including 3% value addition tax) by importer and
deducted from OPT charged on supply of those goods.
§ 3% value added tax is not refund in any case. It is only
allowed as deduction.
POINT 17: FURTHER TAX
§ While making taxable supplies to a person who has not
obtained registration number or who is not on ATL,
further tax at 4% of supplies is charged.
§ EXCLUSIONS: Further Tax is not charged in the
following cases:
(1) Electricity energy supplied to domestic & agricultural
consumers
(2) Natural gas supplied to domestic consumers & CNG
stations
(3) Motor oil, diesel oil, jet fuel, kerosene oil and fuel oil
(4) Goods sold by retailer to end consumers
(5) Supply of goods directly to end consumers including
food, beverages, fertilizers and vehicles
(6) Third Schedule goods
(7) Second hand worn clothing and other worn articles
(8) Supplies by steel-melters, re-rollers and ship breakers
(9) Supplies covered under 5th
Schedule (Zero-rated)
(10) Supplies made to government, semi-government and
statutory regulatory bodies
(11) Supply of white crystalline sugar
(12) Supply of foam or spring mattress and other foam
products for household use
(13) Supplies by steel sector and edible oil sector
POINT 16: SUSPENSION/BLACKLISTING
§ IPT not allowed on invoices issued during period
of suspension
§ IPT not allowed on invoices issued during, prior
and after blacklisting.
MASTER SHEET # 2
STT SALES TAX
FOR MARCH 2024
ATTEMPT ONLY