Sales Tax Instructions

Sales Tax Instructions, 2009
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C. NO.2(26)STP/97 DATED 31 ST JULY, 1997
SUBJECT:- REFUND OF INPUT TAX OF INVESTORS
Section 10 of the Sales Tax Act, 1990 deals with refund of input tax. On 8 th
March 1996, an important amendment was introduced in this section through the Sales
tax (Amendment) Ordinance 1996. By virtue of this amendment, the investors were made
eligible to claim refund of input tax paid on machinery subject to the condition that they
start making taxable supplies within two years. As a result many investors filed refund
claims and obtained the same from the Department.
2. On 28 th March, 1997 exemption was granted to Plant and machinery.
Hence, no claim for refund was filed for such items imported after 28 th March, 1997.
However, an issue has arisen in respect of refund granted between 8 th March, 1996 to 28 th
March, 1997 in respect of those investors whose products also became exempt from tax.
Cement is one such item which was taxable till 13 th June 1997. In the budget 1997-98 it
was exempted from sales tax. The investors in that sector had claimed refund of input tax
paid on Plant and machinery subject to the conditions that they would start making
taxable supplies within two years, however, now that there is no sales tax on cement the
proposition has become in fructuous.
3. Guidance from Law & Justice Division has therefore, been solicited on
the following issues:-
(i)
(ii)
May the refund of input tax paid to such investors be recovered; and
May the refund of input tax paid to regular manufacturers of such cement, be
also recovered, in accordance with Apportionment of Input Tax Rules, 1996
in respect of:
(a)
(b)
Plant and machinery used only for limited period of March, 1996 to
13 th June, 1997 for production of cement; and
For raw materials which were not utilized in taxable supplies, but were
either incorporated in supplies made after 13 th June, 1997 or even
remained unutilized till that day.
4. Meanwhile you are requested to compile the unit wise data of all such
refunds and send the same to the Board at your earliest.
[Issued by the CBR., Islamabad, under the signature of Mr. Ahad Nawaz, Secretary
(STP), addressed to the Collector, Sales Tax, (East/West) Karachi /Multan /Hub/Hyderabad/
Peshawar/ Rawalpindi/Gujranwala/ Lahore/Faisalabad.] Copy of the Sales Tax (Amendment)
Ordinance, 1996 and Apportionment of Input Tax Rules, 1996 are reproduced below:-