Sales Tax Instructions

Sales Tax Instructions, 2009
SRO 695(I)/96, dated 22-08-1996). In case of manufacture-cum-exporters engaged only
in zero-rated supplies, invoice verification was done usually at post refund audit stage.
Section 73 has just provided a mechanism in which the payment of input tax can be
considered to have been verified.
2. The provisions of section 73 carry over riding effect and now the words
―paid during the tax period‖ used in section 7(1) are to be interpreted strictly with
reference to section 73. The input tax in case of transactions valuing more than
Rs.50,000/- shall now be considered to have been paid in the tax period when the
provisions of section 73 are complied with. Mere holding of tax invoice in case of such
transactions is therefore, not sufficient. Tax invoice must be supported with a proof of
payment as required under section 73 if it is to qualify for use for the purpose of refund or
adjustment.
3. In view of the above interpretation, Board‘s letter of even number dated
28.02.2001 is not a ―new‖ interpretation of sections, 7, 23 and 73 of the Sales Tax Act,
1990, it simply reiterates the obvious and patent meaning of the existing law.
4. As regards rules 5 and 6 of SRO 127(I)/96, dated 10.11.1996 (Special
Procedure for Ginning Industry Rules 1996), they provide for a special procedure of
collection and payment of sales tax in respect of ginning industry and their interpretation
by the superior courts stands overshadowed with the issuance of SRO 118(I)/2000, dated
13.03.2000. However, the question of admissibility of refund or adjustment in case of
ginned cotton acquired without compliance to rules 5 and 6 of the said notification during
the period prior to 13.03.2000 has been referred to the Law & Justice Division because
only such input tax can be refunded or adjusted that has ‗actually‘ been paid as laid down
under section 7(1) and refund or adjustment of the input tax not paid by a registered
person prima facie constitutes ‗tax fraud‘ (please see subsection (37) of section 2).
Advice of Law & Justice Division is still awaited and will be conveyed on receipt.
5. In case you wish to respond to this letter with your views, kindly do the
needful at an early date.
[Issued by the C. B. R., Islamabad, under the signature of Mr. Iftikhar Qutab, Chief
(Sales Tax-II), addressed to Mr. Umar Farooq, Collector, Collectorate of Sales Tax & Central
Excise, Lahore.Copy of letter C. No.35-ST/Section 73/Rfe.A.M./2001 /985 dated 13 th March, 2001
is reproduced below:-
C. NO. 35-STT/SECTION 73/REF. A. M. /2001/985 DATED 13 TH MARCH, 2001
SUBJECT:-
INPUT TAX ADJUSTMENT WITHOUT ACTUAL PAYMENT OF INPUT
TAX TO SUPPLIER
Please refer to CBR‘s letter No.3(36)STP/99 Pt-I, dated 28.02.2001. The Board is
requested to issue clarification regarding the following problems as faced by this Collectorate in
the situation.