Sales Tax Instructions

The Member Sales Tax,
Central Board of Revenue, Islamabad.
Sales Tax Instructions, 2009
SUBJECT:
APPLICABILITY OF SECTION 3(1A)
Further to our letter St/295/98/772, dated 14 th July, 1998 filed with the Secretary (STP)
CBR (Copy enclosed) for case of reference) we respectfully draw your kind attention to the
grievance and hardship being faced by non-resident contractors as a consequence of insertion of
section 3(1A) which connotes:-
―(1A) Where taxable supplies are made in Pakistan to a person other than registered person
there shall be charged, levied and paid a further tax at the rate of one percent of the
value in addition to the rate specified in sub-section (1):
Provided that the aforesaid one percent further tax shall not be charged, levied
and paid if the said taxable supplies are made:-
(1) by a person registered as a retailers; or
(2) by any registered person to a person whose income is not liable to tax under the
Income Tax Ordinance, 1979 (XXXI of 1979) but has deducted income tax at source
under subsection (4) of section 50 of the said Ordinance.‖
The non resident construction companies carrying out government /public sector
construction contracts are not required to be registered for sales tax, as clarified in CBR Circular
No.3(62)STP/97, P.T.1 dated 12 th March, 1998 and number 3(62)STP/97 P.T.1 and 26 th March,
1998 not being commercial importers / suppliers. Copies of these letters are enclosed as Annexure
I & II respectively.
However, an additional cost arises from a charge of 1% further sales tax levied on
supplies being made to these non-resident construction companies in the capacity of unregistered
person.
We understand that the spirit and intent of charge section 3(1A) is levy a further charge
of 1% on the person liable for registered under the Act who has not got registered. Thus the
provision has been made to encourage and promote their registration.
As a consequence of the implementation of this provision it now seems that a penalty is
also being levied on person who were never intended to be the focus of this application. To this
extent we feel that the scope of this provision is defective and needs redressal.
It would be appreciated if the above ambiguity in provisions of law i.e. section 3(1A) and
section 14 be clarified at your end and corrected.
We may add here that the parties in question have help up their transactions so that the
payments can be made on correct basis, therefore, it is requested that your clarification may be
issued at its earliest.
Yours faithfully,
Anjum Asim Shahid & Co.
SHAHID AHMED KHAN, Partner.]
********
SALES TAX GENERAL ORDER NO.5/1998.
C.No.4/76-STB/97 DATED 28 TH AUGUST, 1998
SUBJECT:-
DECLARATION OF COUNTS/DENIERS AND CONSTRUCTION
OF TEXTILE GOODS IN THE TAX INVOICES ISSUED BY
MANUFACTURERS, PRODUCERS, WHOLESALERS,