Sales Tax Instructions

Sales Tax Instructions, 2009
I am directed to enclose a copy of Notification No.S.R.O. 118(I)/2000 dated
13.03.2000 and to state that the enclosed notification amends the Special Procedure for
Ginning Industry Rules, 1996, notified vide SRO.1271(I)/96, dated 10.11.1996 in that
besides the enabling section 71 of the Sales Tax Act, 1990 quoted in the preamble of the
said rules, another enabling clause, i.e. sub-section (3-A) of section 3 of the said Act, has
also been quoted. Under clause (a) of sub-section (3) of section 3, in case of supply of
goods in Pakistan, the liability to pay sales tax is on the person making the supply.
Keeping in view the peculiar circumstances i.e. seasonal operation of ginning industry,
Rule 6 stipulates the procedure for the discharge of this shifted responsibility. This
responsibility was shifted to the buyer to pay the amount of sales tax due through bank
draft, crossed in the name of the Collector of Sales Tax of jurisdiction where the ginner
was registered. This arrangement was embodied in the aforesaid rules with a clear
understanding that the Federal Government has the enabling power to do so under subsection
(3A) of section 3 which says that the Federal Government may through a
notification specify the goods in respect of which the liability to pay tax shall be of the
buyer (recipient of goods).
2. But while deciding the Writ Petition No.20602/99 and Writ Petition
No.20689/99, the Honourable Lahore High Court did not accept the department‘s
argument based upon the above referred understanding and declared rules 5 and 6 of the
Special Procedure for Ginning Industry Rules, 1996 ultra vires of the provisions of subsection
(3) of section 3. Relying upon this judgement of the Lahore High Court dated
22.11.1999 several buyers started delaying payment of sales tax on ginned cotton on the
pretext that responsibility to pay tax on such supplies no more rests on them but it now