Sales Tax Instructions

Sales Tax Instructions, 2009
C.No.1/96-STT/99 DATED 17 TH MAY, 1999
SUBJECT:-
LEVIABILITY OF SALES TAX ON THE SECURITY
MONEY.
I am directed to refer to your letter C.No.168/97/Audit/Adj/ S.Tax/ 2608, dated
22 nd December, 1998 on the above subject and to enclose copies of:-
(1) Board‘s U.O. No.1/96-STT/98 dated 8 th January, 1999 addressed to the
Law & Justice Division;
(2) Law & Justice Division‘s opinion in U.O.No.39/99-Law dated 16 th
February, 1999; and
(3) Mr. Keith Hawkins, Consultant‘s views dated 28 th April, 1999.
2. The Board agrees with the Law & Justice Division that Auditors and
Adjudicating Officers should study each case on individual merits for determining ―time
of supply‖ since it is a question of fact depending on the mode of payment and supply of
goods in each transaction.
3. The case of M/s Rafhan Ltd., may be decided on its individual merits
accordingly.
4. Your attention is also invited to the Ministry of Law‘s O.M. No. F.7
(26)/Sol.I dated 20 th July, 1976 (copy enclosed). You are directed to keep the opinion
dated 16 th February, 1999 of the Law & Justice Division and the opinions dated 28 th
April, 1999 of the Consultant as SECRET and these should not be divulged to any person
or cited in any communication or notice or order.
[Issued by the CBR, Islamabad under the signature of Mr. Muhammad Tahir, Secretary
(STT) addressed to Collector, Sales Tax, Faisalabad. Copy to all the other Collectors of Sales
Tax/Mirpur(AJ&K) and Secretary (ST.Edu.),CBR.]
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ENCLOSURE-I
U.O.No.1/96-STT/98 Dated 8 th January, 1999.
SUBJECT:- LIABILITY OF SALES TAX ON THE SECURITY MONEY.
Collector of Sales Tax, Faisalabad, has referred to a specific situation (copy enclosed)
where M/s Rafhan Ltd., receive orders from all over the country and also the payment relating
thereto before actual supply of goods by them. The payment so received, is termed as ―security
money‖. Later M/s Rafhan Ltd., supply the goods against a tax invoice and the buyer pays the
invoice value to M/s Rafhan. Next month, if the next order‘s value is more than the previous
month, the buyer adds the differential amount to its already-deposited security money and if the
order is less than the previous month, he receives back the differential amount through
substracting from the already-deposited security money. However, under all circumstances, the
fact remains that M/s Rafhan uses the security money for the furtherance of its business activity.
2. M/s Refhan plead that the amount of ―security-money‖ so received/kept cannot be termed
as consideration as the sale value/price against an invoice, is received from the buyer at a later
date post-supply. Only if the invoice amount is not received from the buyer post-supply, the
equivalent amount is deducted from the security money. M/s Rafhan, therefore, do not pay sales