Sales Tax Instructions

1-A)
Sales Tax Instructions, 2009
Where taxable supplies are made in Pakistan to a person other than a registered
person there shall be charged levied and paid a further tax at the rate of three
percent of the value in addition to the rate specified in sub-section (1), clause (c)
of sub-section (2) and sub-sections (4) and (5);
4. The petitioners are producers of sugar, bottlers of soft drinks, and manufacture of iron
and steel of different kinds. Only one petitoner in Writ Petition No.15114/98 is manufacturer of
Polythene items of different kinds. They have challenged the vires of the above provisions both
distinctively as well as when read with other provisions of the Act. Their various objections being
that amendment is against the basic scheme of the Sales Tax Act in as much as the above levy of
1% in 1998 and 3% in 1999 has nothing to do with sale or supply; that the levy in the garb of
sales tax is actually a penalty for non-registration which falls outside the domain of Federal
Legislative List particularly entry No.49; that levy of said additional tax will result in a strange
economic anomaly as the product of one producer/importer will have two prices i.e. one for
registered persons and other for un-registered person. Accordingly to them in such situation there
would be a supply of the same product at two different prices. Further that under section 13 of the
Sales Tax Act the supply or import of goods mentioned in 6 th Schedule are exempt from levy of
sales tax but the additional levy when seen in the light of definition of ―tax‖ as contained in
section 2(34) will make all such provisions redundant. In other words through the additional tax
under section 3(1-A) the Sales Tax has indirectly been re-introduced in respect of these supplies
which were otherwise exempted from levy; that section 13 over rides section 3(1-A) and therefore
no tax directly or indirectly could be charged from the persons who are exempted or are not liable
to the levy; that levy of a further tax of one percent (in the year 1998) and of 3% (from the year
1999 and onwards) amounts to double taxation; that further tax levied by section 3(1-A) of the Act
is violative of Article 25 of the Constitution being discriminatory; that the amount levied is also
violative of Articles 4, 18 and 24 of the Constitution which guarantees free trade and business and
protection of property.
5. The petitioners who are bottlers have a further grievance. They claim that in the first
amendment in the year 1998, no reference was made to sub-section (1) of section 3 of the Sales
Tax Act. Therefore, according to them as section 3 of the Act provided for a levy only with
reference to the value of the supplies made in Pakistan or goods imported into Pakistan the new
levy has nothing to do with these suppliers which were covered by retail tax system under third
schedule of the Sales Tax. System was otherwise protected through a non-obstante clause from the
main charging section i.e. section 3(1) of the Act which was necessarily value based system. It is
accordingly placed that additional tax under section 3(1A) did not at all relate to the retail price
regime provided for under section 3(2) of the Act. In this connection a specific reference to the
phrase ―in addition‖ as used in the newly inserted sub-section is made. According to these
petitioners the makers of beverages and soft drinks of various brands the import of concept of
further tax into the regime of retail price was not only un-practicable but also against the spirit of
the Act. Therefore, it is stressed that their products like Pepsi Cola, Coca Cola, Mirinda and Team
etc. will have two different sale prices i.e. one for registered persons and the other for unregistered
persons. The supplying of the one product at two different rates, according to portions
is practically impossible as these could not have two different rates of prices mentioned on their
labels as required by sub-clause (c) of section 3 of the Act.
6. the first three categories of the applicants namely manufacturers of sugar, producers of
iron, steel and polythene makers have addressed similar arguments while the bottlers mostly
represented by Mr. Salman Akram Raja, Advocate, have taken the said additional plea that the
provisions of section 3(1-A) are not attracted to retail tax regime.
7. For the petitioners in terms of the contents of the petition, it is stressed that the newly
added sub-section is ultra vires of the Constitution because it is against the basic scheme and
scope of the sales tax as levied under the Sales Tax, 1990; that all the petitioners are already