Sales Tax Instructions

Sales Tax Instructions, 2009
collectively, would not exceed Rs.2100/- per tonne, the assessable value of sugar for the purpose
of sales tax was frozen at Rs.13000/- per tonne vide SRO. 207(I)/98 dated 31.03.1998 (Annex-V)
read with SRO 208(I)/98 (Annex-VI). The incidence of sales tax was thus Rs.1625/- per tonne @
12.5% and cumulative incidence (including CED) was Rs.2025 per tonne. On the eve of increase
in rate of sales tax from 12.5% to 15%, the central excise duty was reduced to Rs.150 per tonne
bringing the total incidence to Rs.2100 per tonne. At present, central excise duty is exempt and the
assessable value for sales tax is frozen at Rs.14000/- per tonne, thus yielding sales tax of
Rs.2100/- per tonne of sugar.
2. Before 1 st April, 1998, certain manufacturers paid excise duty at the rate of Rs.2100/- per
tonne, after preparation of proper AR.I prescribed under Central Excise Rules, but could not
remove their goods from the factory before 1 st April, 1998. As sugar was supplied after 1 st of April,
it became liable to sales tax, also under the sales tax law, irrespective of its having paid excise
duty at old full rates prior to 1 st April, 1998.
3. M/s. Haseeb Waqas Sugar Mills, Fauji Sugar Mills, and few others, who paid central
excise duty at old full rates of Rs.2100/- per tonne but did not clear such duty paid sugar before 1 st
of April, 1998, have approached CBR to resolve this issue. Their demand is that either sales tax
may not be charged from them on that quantity of un-cleared sugar which has been subjected to
old rate of excise duty OR the central excise duty in excess of Rs.400/- per metric tonne may be
refunded to them.
4. The Board feels that such cases are hardship cases as relevant date for purposes of
payment of central excise duty is date of preparation of AR-1. The problem has arisen only
because Sales Tax Act, 1990, does not recognize such an excise procedure and levies sales tax
payable at the ―time of supply‖. However, equity demands that manufacturers should either pay
excise duty @ Rs2100/- per tonne or composite tax of Rs.2025/- per tonne (excise duty of Rs.400/-
plus sales tax of Rs.1625). Demanding Rs.3725/- per tonne (central excise duty of Rs.2100/- per
tonne plus sales tax of Rs.1625/- per tonne) on such stock of sugar held by sugar mills on
01.04.1998 should be unjust, harsh and inequitable.
5. It is, therefore, proposed that sales tax of Rs.1625/- per metric tonne may not be charged
from the sugar manufacturers on such quantity of un-cleared stock (as of 01.04.1998) of sugar in
respect of which central excise duty has already been paid @ Rs.2100/- per tonne against AR-1
prior to 01.04.1998 subject to the following conditions:-
* Where sales tax has already been charged/recovered on such stocks of 01.04.1998, no
cash refund of sales tax will be given. However, the manufacturers will be allowed to apply for
adjusting the sales tax paid, if any, against their future liabilities. Collector of sales tax shall
allow adjustment only in genuine and bonafide cases after due verifications;
* The quantity of sugar which has been supplied to registered taxpayers (where possibility
of claiming adjustment as input tax exists) will remain liable to sales tax. In such cases the central
excise duty in excess of Rs.400/- per tonne will be refunded by the Collector of Central Excise
after due verification.
6. As CBR or federal Government has no more the powers to grant exemption of sales tax,
the date of deposit of central excise duty (date of AR-1) will be deemed to be the ―time of supply‖
for the purpose of sales tax, in such cases, as a special case.
7. Approval of the Finance Minister is solicited to the proposals in paragraph 5 & 6 above.
This will avoid audit objections and will still resolve the genuine and bona fide grievances of the
sugar mills on the basis of fair play and equity.
[Issued by the CBR, Islamabad, under the signature of Mr. S. M. Kazimi, Member (Sales
Tax).]
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