Sales Tax Instructions

Sales Tax Instructions, 2009
I am directed to refer to your letter C.No.R/G-668/99/954, dated 4.12.1999, on
the above subject and to say that the fixed sales tax schemes have been abolished and are
no more operative or lawful. You are requested to inform all your members to pay sales
tax in an invoice-based VAT-mode, as prescribed under the Sales Tax Act, 1990.
2. As regards your request for adjustment/deduction of the input tax (on
account of sales tax on electricity and gas) from the amount of fixed tax, the Board
reiterates that notwithstanding the aforesaid position that there is no more any fixed sales
tax scheme, the deduction/adjustment of any input tax from the fixed sales is even
otherwise inadmissible under section 8(5) of the Sales Tax Act, 1990. Your request for
continuation/revival of the fixed sales tax scheme and also of allowing input tax credit in
the fixed tax scheme cannot be acceded to.
3. In his Economic Revival Plan, the Chief Executive has already
announced that sales tax shall be levied at all stages. The request for exemption, whether
for sizing industry, weaving industry or processing industry cannot be acceded to. Your
Association may cooperate with the Government in enforcement of invoice based GST in
VAT-mode at all stages in general and at the processing stage, in particular.
4. All industrial units (including processing units) with annual turnover
below Rs.0.5 million are exempt from sales tax. The industrial units having annual
turnover between Rs.0.5 million to Rs.2.5 million may pay turnover tax of 2% (plus 1%
income tax) under section 3A of the Sales Tax Act, 1990, read with Turnover Tax Rules,
1999 without any input tax credit/adjustment in terms of sub-section (4) of the Sales Tax
Act, 1990. Industrial units which annual turnover exceeding Rs.2.5 million have to pay
sales tax in an invoice-based VAT mode as prescribed in the Sales Tax Act, 1990, with
entitlement of input tax credit/adjustment. Industrial units are not governed by the
Development Tax Scheme, if any.
5. As regards supplies to persons other than a registered person, further tax
is payable under section 3(1A) of the Sales Tax Act, 1990. Notwithstanding the fact that
the Federal Government/CBR does not have powers to grant exemptions under the Sales
Tax Act, 1990, various High Courts have held that the further tax @ 3% levied under
section 3(1A) of the Sales Tax Act, 1990, on supplies to un-registered persons, is lawful.
Your request for exemption of the said further tax cannot be acceded to.
6. As regards assessment on vendor‘s charges in terms of STGO No.1/98,
dated 17.06.1998, your members may avail of that provided that they comply with clause
(v) thereof. Assessment on the basis of vendor‘s charges can be made only in respect of
processing of goods which have paid sales tax against the prescribed tax invoices at the
previous stage of taxable activity (i.e. un-processed or partialy-processed fabrics stage)
failing which provisions of section 2(46)(f) of the Sales Tax Act, 1990, read with clause
(v) of STGO No.1/98 shall apply. However, the CBR may consider a proposal to allow
processing mills to levy sales tax on vending charges of goods not supported by a
prescribed tax invoice subject to the condition that for each such transaction, the
processing mills makes a complete and true declaration about:-