Sales Tax Instructions

Sales Tax Instructions, 2009
C. No. CA – II/R.P.B.A/ST &
CE/2004/536
DATED 04 th JANUARY, 2005
SUBJECT:
SITUATION PAPER ON PAPER & PAPER BOARD INDUSTRY
Kindly refer to Board‘s letter C. No. 1(2) STM/2003 dated 29-11-2004 on the
subject cited above.
2. In pursuance of Board‘s letter C. No. 1(2) STM/2003 Pt dated 20-04-
2004 the audits of M/s Premier Paper Mills Limited and M/s Mandiali Paper Mills (Pvt)
Ltd were conducted. An amount of Rs. 1,112,427/- was found to be recoverable on
amount of advances received against supplies. In respect of M/s. Premier Paper Mills
Limited for the audit period July 2001 to June 2003, out of which 25% amounting to Rs.
278,107/- were deposited by the registered person availing the benefit of SRO 247(I)2004
dated 05-05-2004. Whereas liability of Rs. 1,262,318/- was detected against M/s
Mandiali Paper Mills (Pvt) Ltd against advances received and sale of plant and
machinery without payment of sales tax. The unit discharged all the liability detected by
auditor.
3. The issue of difference in value of supplies made by paper industry in
open market as compared to the supplies made to different Text Book Boards was also
deliberated. It was observed that the paper supplied to Text Book Boards is specially
produced as per contractual obligations and is of high quality with both sides glazed
having smooth surface which is free from specks and shrives or any manufacturing
defects. Whereas for supplies made to market, no specific conditions are required and
paper is not necessarily to be glazed on both sides. To glaze the paper sides, extra rollers
are used which cause extra power load. The supply to Text Book Boards is in shades of
colors causing the consumption of dyes and to comply with the requirements of quality
the consumption of wood pulp (imported) and chemicals is on both sides as compared to
supplies of paper made to open market. Furthermore, the suppliers are responsible for the
freight payment to transport for carrying of paper to Punjab Text Book Board Godowns
in Lahore. Necessary inspection arrangements and lab test further enhance the value of
supply.
4. The contents of the complaint have been scrutinized and observed that
the sale in packaging industry is usually done in number of cartons while the input
material is purchased in Kgs, therefore, it is required to conduct cost analysis and
quantity analysis of raw material i.e. kraft liner, liner II, liner III, fluting paper and box
board at the time of audit. The nature of supplies of packaging industry is of wide range
and diversified. Supply invoices bear number of cartons under description of material
which cannot be converted into weight at the time of audit. However, value addition can
be checked by backward computation method by taking into account the cost of raw
material manufacturing cost, profit margin and wastage. All the factors are generally
taken into consideration during audit process of different units of paper board. The