Sales Tax Instructions

Sales Tax Instructions, 2009
Take the cost of raw materials and other goods on which input tax is being claimed.
Compare that total cost with selling prices and indicate value addition on basis of input
costs claimed vs sales prices. This may be related to costs as a value addition %.
Now list separately other costs such as:-
Other raw materials (without input tax claim)
Labour
Production overheads
Depreciation
Financial costs (relating to plant & machinery)
Other production related expenses
Adjust work in process
= cost of goods produced
Adjust finished goods
= cost of goods sold
Now examine the value addition and see if it covers all other costs and leave a
reasonable gross profit to cover other expenses such as administrative, selling & financial
and leaves a reasonable net profit. Only after this exercise the auditor can give judgment
on sales value declared.
2. CHECKS ON PURCHASES INVOICES:
Check purchase invoices with copy of requisitions, copy of orders issued, copy of goods
received notes and purchase ledger.
While checking the purchase invoices special attention be given to the following points:-
It is made out in the name of the client.
The goods mentioned in the invoice are of a nature in which the business is carried on.
Purchase invoices also be checked with the store records maintained by the client.
Select a number of accounts and cash purchase invoices and check these on the list of
creditors and cash book.
INPUT:
Checks whether the purchase invoices, on the basis of which input tax adjustment was
claimed related to the same tax period and fulfill the requirements of section 7 and 8-1(a)
of the Sales Tax Act, 1990 read with SRO. 578(I)/98, dated 12.06.1998.
Check that the registered person has not claimed input tax adjustment on the goods
returned by him to the suppliers as provided under section 9 of the Sales Tax Act, 1990,
read with SRO. 696(I)/96, dated 22.08.1996.