Sales Tax Instructions

Sales Tax Instructions, 2009
Act, 1990, SI. No. 29 of the said Sixth Schedule exempts the following goods from the
levy of 12.5 % standard rate of sales tax: --
Defence stores imported by Federal Government against foreign exchange
allocation for defenc;
Defence Stores supplied by manufacturers under Defense Production Division;
and
Trucks assembled or manufactured by local manufacturers for supply to Armed
Forces.
2. All other goods are liable to sales tax at the standard rate of 12.5%. A 1%
further tax (in addition to the said 12.5 % sales tax) is levied under section 3(1A) of the
Sales Tax Act, 1990, when such sales taxable goods are sold to or supplied to nonregistered
persons. However, under the proviso to said section 3 (1A), ―the aforesaid one
per center further tax shall not to be charged, levied and paid if the said taxable supplies
are made 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 sub-section (4) of section 50 of the said Ordinance.
3. Accordingly, if Defence Procurement Agencies are not liable to income
tax on their income, they are also not liable to the 1%further tax (though liable to 12.5%
standard rate of sales tax, where levied) in terms of the proviso to the said section 3(1A)
on their purchases of sales taxable goods. Therefore, it may be ensured whether the
income of these Defence procurement Agencies are liable to income tax or not.
[Issued by the CBR, under the signature of Mr. Muhammad Tahir secretary (STP), being
addressed to the Defense, (Brig, Zahid Munir, Joint secretary-III) DP-4, Government of Pakistan,
Rawalpindi with reference to his letter No DPD. U.O. NO.1043/DP-4/98, dated 31 st October,
1998.] Copy of letter is reproduced below:--
LETTER NO.DPD.U.O.NO.1043/DP-4/98 DATED 31 ST OCTOBER, 1998
MINISTRY OF DEFENCE
DEFENCE PRODUCTION DIVISION
DP-4
SUBJECT: ADDITIONAL 1 % SALES TAX.
Various firms are asking Defence Procurement Agencies for Sales Tax Registration
Certificate/Number to ensure collection of additional 1 % Sales Tax in terms the following
amendment made in Sales Tax Act, 1990 through Finance Act, 1998: --
―All manufacturers, importers and sellers are required to sell goods to registered persons
(Buyers) against Sales Tax invoices. Persons not having Sales Tax Registration Numbers shall pay
an additional 1% Sales Tax‖.
2. Defence Procurement Agencies do not have the requisite Certificate/Number, as the
Armed Forces are not private consumers.
3. It is, therefore, requested that Defence Production Division Establishments who are
making procurements/indigenous Defence production for the Armed Forces may kindly be
exempted from the purview of sales tax and necessary instruction issued to all concerned.