Sales Tax Instructions

Sales Tax Instructions, 2009
SUBJECT:
EXEMPTION OF SALES TAX ON PLANT AND MACHINERY
IMPORTED UNDER SRO. 27(I)/98 DATED 17.1.1998
I am directed to refer to the subject cited above and to say that SRO 27(I)/98
dated 17.01.1998 envisaged conditional exemption of customs duty and sales tax leviable
on import of plant, machinery and equipment. The two main conditions for availing
exemption under the said SRO were that the importing unit shall annually export
minimum average 50% of its production in first 10 years or attain a minimum value
addition of 40% of production value to be determined by the Committee comprising of
representatives of EDB, NTC, CBR, BOI and Ministry of Industries. SRO 27(I)/98 was
issued by invoking the relevant exemption provisions of both Customs Act, 1969 as well
as Sales Tax Act, 1990.
2. Later on, vide SRO 582(I)/98 dated 12.06.1998 and SRO 987(I)/98, sales
tax exemption regime was separated from customs exemption regime and through the
said SROs issued under section 13 of the Sales Tax Act, 1990, manufacturers registered
with the Sales Tax Department were allowed to import plant and machinery without levy
of sales tax chargeable thereon. The conditions of achievements of value addition/export
target were also withdrawn. The sales tax exemption regime was further widened for
plant, machinery and equipment vide SRO 500(I)/2004 dated 12.06.2004.
3. On the Customs side, SRO 369(I)/2000 dated 17.06.2000 was issued
(rescinding SRO 27(I)/98 dated 17.01.1998) for exemption of customs duty subject to the
conditions contained therein. The said SRO was superseded by SRO 439(I)/2001 dated
18.06.2001.
4. A number of contravention cases were instituted against the
manufacturers who had imported plant, machinery and equipment under SRO 27(I)/98
dated 17.01.1998 for non-observance of conditions of value addition and export target
laid down therein. These cases pertain either to the recovery of customs duty / sales tax
chargeable on import of plant and machinery or to the recovery of sales tax on account of
suppression of domestic sale value. Some of these cases are still under adjudication. In
some cases, the adjudication proceedings have been completed and the parties have
deposited the demanded amounts of sales tax.
5. Vide SRO 455(I)/04 dated 12.06.2004 amended vide SRO 734(I)/2004
dated 28.08.2004, a scheme was announced by the Federal Government whereby the
importers of plant, machinery and equipment who had made imports under SRO 27(I)/98,
SRO 369(I)/2000 and SRO 439(I)/2001 were given an option to pay customs duty @ 1%
per defaulting year with a maximum of 5% of dutiable value provided the period of
import of the relevant machinery is equal to or more than 5 years with a commitment that
payment of custom duty on these lines will be considered as full and final discharge of
the entire liabilities. Administrative instructions were also issued for withdrawal of all