Sales Tax Instructions

Sales Tax Instructions, 2009
3. It is therefore requested that sales tax at the rate of 15% ad val be
charged on the supplies made by beverage industry on and from the 22 nd March, 1994
and intimate progress. Input tax credit shall only be given for raw materials purchased on
or after 22 nd March, 1994. Similarly adjustment of sales tax shall only be available to
plant and machinery acquired on or after 22 nd March, 1994.
4. It is further requested that data for the last two years of sales of
beverages declared to the Income Tax Department by each manufacturer and assessed by
the Income Tax Department may please be obtained from the said department so that a
benchmark is available to you to cross check the date of sales that is likely to be declared
in the remaining period of the current fiscal year.
[Issued by the CBR., Islamabad, under the signature of Mr. Javed Iqbal Mirza, Secretary
(Sales Tax Tariff), addressed to the Collector, CE&ST,Karachi/Lahore; the Collector of Customs,
Central Excise and Sales Tax, Peshawar/Rawalpindi /Multan/Hyderabad /Quetta.]
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SALES TAX GENERAL ORDER NO.5/1994 DATED 6 TH APRIL, 1994
SUBJECT:- VALUE OF GOODS SUPPLIED BY VENDOR TO PRINCIPAL.
A question has arisen about calculation of sales tax liability of a vendor or job
worker who makes goods for his principal with the help of raw materials supplied by the
principal. Moreover, the principal uses the goods supplied to him by the vendor for
making another commodity.
2. The question has been examined in the Central Board of Revenue. Under
section 7 of the Sales Tax Act a registered person is entitled to deduct input tax from the
output tax that is due from him in respect of the relevant tax period. However, such input
tax credit can be availed if he buys the raw materials and pay sales tax thereon. In the
case under consideration the vendor/job worker does not buy raw materials; he gets them
free of cost from his principal.
3. The situation under consideration is covered by sub-section (31) of
section 2 of the Sales Tax Act. According to this section ―value of supply‖ in respect of
taxable supply, means the consideration in money including excise duty if any, which the
supplier receives from the recipient for that supply. Since a vendor receives only his
charges for making a commodity by converting raw materials into finished products, the
value of supply for calculating sales tax is the gross amount of conversion charges
without any deduction therefrom. In such a situation sales tax is to be calculated on the
gross amount of such charges and excise duty, if any, levied thereon. However, input tax
credit for sales tax paid on the raw materials and packing materials or other goods,
supplied by the principal will not be adjusted against the tax so calculated.