Sales Tax Instructions

Sales Tax Instructions, 2009
SALES TAX GENERAL ORDER NO.4/1999.
C.No 1(23) STE/ 99 DATED 8 TH APRIL, 1999
SUBJECT:-
BENEFITS OF SALES TAX REGISTRATION.
The VAT-mode regime envisages a self – policing and self assessment based
sales tax system. It relieves the registered persons of inventory controls and physical
supervision. The registered persons also become entitled to claim input tax credits and
adjustments against their output tax liability. This benefit of multi stage tax (leviable on
the marginal/incremental value addition) is not available to unregistered manufacturers
and suppliers. Besides, the registered person is not required to pay 1%further tax (in
addition to the standard rate of sales tax) which an unregistered person has to pay and
bear the whole incidence of standard rate. Moreover, being a consumption tax the
respective seller (of each stage) can pass on the burden to the buyer and incidence of the
tax is eventually borne by the final consumer. Registered person can also transact
business with and supply goods to the government semi government and defence
department and other autonomous corporations DFIs, banks, airlines and limited
companies etc; who are otherwise, authorized to deduct advance tax under section 50(4)
of the Income Tax Ordinance, 1979.
2. All persons liable to be registered as manufacturers producers
wholesalers, dealers, distributors, suppliers, importers or retailers are therefore, well
advised to get themselves registered under the Sales Tax Act, 1990 so as to benefit from
the said fiscal monetary and trade advantages.
3. However it appears that there are certain apprehensions in the minds of
taxpayers that the turnover of the persons registered with sales tax department shall be
used for income tax assessments. These apprehensions are not correct. Attention in this
regard is invited to clause (24) of part IV of the Second Schedule to the Income Tax
Ordinance, 1979 which reads as follows:-
that: -
"(24) the provisions of sections 56,65 or 66-A shall not apply to a registered
person under the Sales Tax Act, 1990 deriving income under the head "business
or profession" in respect of an assessment prior to 1999-2000 on account of
suppression or non-declaration of sales detected on the basis of sales tax returns
filed by such persons‖.
4. CBR‘s Income Tax Circular No 10 of 1996 dated 16.07.1996 explains
"Through the insertion of this new clause (i.e. clause 24 cited above) immunity
has been given from re-opening of income tax assessments prior to the year 1999
–2000 to such sales tax payers who declare their correct sales in sales tax returns.
The income tax assessments would therefore not be re-opened for the said year
on account of suppression or non-declaration of sales declared on the basis of
sales tax returns filed by such persons"
5. The aforesaid legal provision and ensuing benefits, privileges and
immunities make it un-ambiguously clear that the advantage of sales tax compliance and