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Islamabad, the 12th June, 2004



The Central Board of Revenue is pleased to direct that the following amendments shall be made in its Customs General Order No. 12/2002, dated the 15th June, 2002, namely:-

In the aforesaid CGO, in Chapter XIII, Paragraph 1 against S.No. 50, shall be substituted with the following paragraph: -

"In pursuance of exemption from the payment of whole of Customs Duty and Sales Tax granted on the goods imported into and exported from the Export Processing Zone and permission granted to the industrial undertakings established in the Export Processing Zone for duty free import of vehicles for handling and transportation of the goods outside the limits of Export Processing Zone and further the duty free import of a car for office use not exceeding 1600 CC engine capacity and a vehicle for transport of labour by each industrial undertaking under Rule 228 of SRO 450(1)72001, dated the 18th June, 2001. The following procedure is prescribed for expeditious clearance of the vehicle at the time of importation.".

(C.No. 1/6/Mach./2004)




Islamabad, the 12th June, 2004.


In line with the Government's desire to simplify the tax laws and regulations, it has been decided to reduce the number of rules, notifications and General Orders in the Budget 2003-04. Consequently, the Sales Tax Rules, 2004 and Sales Tax Special Procedures, 2004 are being issued after updating and consolidating a number of Rules and Special Procedure Rules issued from time to time.

2. Similarly, various General Orders issued by the Board from time to time are also hereby consolidated and updated, to reflect the current status. This General Order shall replace the existing Sales Tax General Orders issued by the Board from time to time as specified in Part VII.



3. According to the definition of "time of supply" given in clause (44) of section (2) of Sales Tax Act, 1990, supply is deemed to take place at the earlier of the time of the delivery of goods or the time when any payment is received by supplier in respect of that supply. This means that sales tax is chargeable if the amount is received in advance. Although this concept is clear, problems arisewhen full payment is not received and only some percentage of the actual amount is received in advance. Similarly, in certain other situations, supplies are made in parts over a period of time. Thus, a supply can spread over a period of several months.

4. It is therefore, clarified that sales tax for a tax period should be charged only on that portion of money which is received or only on that portion of supply which is made during that tax period and not on the whole of amount which is to be received in due course or on the whole of the supply which has yet to be completed.


5. Value of a supply has been defined in clause 46 of the section 2 of the Sales Tax Act, 1990, which does not allow any deductions except the sales tax itself and the trade discounts which are in conformity with normal business practices. On the question as to whether or not the mark up on credit sales be included in the assessable value for the purpose of assessment of sales tax, it is clarified that the mark up on credit sales should not be taken into account for arriving at the assessable value for the purpose of assessment of sales tax.


6. A question has arisen as to whether for the purposes of clearances made under Chapter-X of the Central Excise Rules, 1944, the amount of central excise duty remitted would also be included in the value of taxable supply or not.

7. Since the amount of central excise duty is remitted under Chapter - X of the Central Excise Rules, 1944, and is also not actually paid to the seller, the bond submitted under rule 192 of the Central Excise Rules, 1944, cannot be considered as "money" received by supplier.8. Therefore, the amount of Central Excise Duty remitted under Chapter - X of the Central Excise Rules, 1944, and accordingly not received by the supplier of the taxable goods shall not form an ingredient of the value of taxable supply under section 2(46) of the Sales Tax Act, 1990.


9. A question has arisen as to the value of supply of the electricity supplied by independent Power Projects (IPPs) to M/s. WAPDA and M/s. KESC. The contracts between M/s. WAPDA/KESC and different IPPs envisage a tariff structure comprising a number of categories e.g. the consideration of money on account of Energy Purchase Price (E.P.P.), Capacity Purchase Price (C.P.P.), Energy Purchase Price Premium, Excess Energy Bonus and Supplemental Charges (S.C.) etc.

10. The EPP is payable by WAPDA/KESC on account of purchase of "electrical energy" while the consideration received by I.P.Ps on account of CPP is for net capacity of the plant which is to be paid during the contractual period. The payment of CPP, etc. is not reliable to the supply of electricity.

11. The issue has been examined in the Central Board of Revenue and it is ruled that the value of supply of electricity by IPPs is the amount received on account of Energy Purchase Price only. Therefore, any amount in excess of EPP received on account of Capacity Purchase Price, Energy Purchase Price Premium, Excess Bonus, Supplemental Charges etc. is not to be included in the value of supply as defined in clause (46) of section 2 of the Sales Tax Act, 1990. However, the assessment of sales tax is to be done in accordance with the provision of sections 7, 8 and all other relevant provisions of the Act, rules and notification. The IPPs will be entitled to claim full input tax adjustment against thesales tax paid on purchase of furnace oil and other tax-paid purchases for making supply of electricity subject to the provisions of section 8 and the notifications issued thereunder.

12. This ruling applies only to IPPs including HUBCO and KAPCO, because of their peculiar arrangements with WAPDA/KESC and is not applicable to any other person, including Captive Power Projects, engaged in the production and supply of electricity.


13. In cases where raw materials and/or semi-manufactured goods are supplied by a principal to a vendor for further processing, the following chargeability of sales tax and value of taxable supply shall be determined as follows:-

(a) The first issue is whether a vendor is providing a "service" e.g. printing, textile processing, corrugation, etc. or is a manufacturer: The definition of "manufacture" in section 2 (16)(c) of the Sales Tax Act, 1990, covers the processes and operations of assembling, mixing, cutting, diluting, bottling, packaging, repackaging or preparations of goods in any other manner. A "manufacturer" is a person who is involved in any of the said processes. Therefore, vendors, by very nature of their job, are manufacturers and liable for registration.

(b) The definition of "supply" in section 2(33) of the Act states that "supply" includes sale, lease or other disposition of goods in the course or furtherance of business carried out for consideration.Supply by such vendor is covered by words "other disposition of goods" and hence is chargeable to sales tax.

(c) The next question is about the value on which such vendor shall charge and pay the tax. According to the definition laid down in section 2 (46) of the Act, "value" is the consideration in money against which the registered person supplies the goods. Therefore, a vendor is required to charge sales tax on the consideration/charges of conversion. If during this "disposition of goods", he has used tax-paid raw materials procured by the vendor himself, tax credit of the same shall be available to the vendor.

(d) The aforesaid principle will inter alia apply even to cases where goods are chargeable to sales tax on the basis of retail price. The principal will pay tax on the basis of retail price whereas the vendor will be liable to pay tax only on his gross conversion charges.

(e) There is, however, one exception to the foregoing. Under section 2 (46)(f), in case of processing of non-taxable raw materials, the value of processed goods will be the open market price of finished goods and not the processing charges alone.



14. A registered person is allowed under section 22 of the Sales Tax Act, 1990, to maintain and keep the records of goods purchased and supplies made by him in English or Urdu language.15. For the further convenience of taxpayers, the Central Board of Revenue is pleased to direct that all other forms prescribed under the law or notified under any sales tax notification or Rules, e.g. application for registration, sales tax return-cum-payment challan, sales tax invoice, etc. may also be kept and used as the case may be, in either English or Urdu language at the discretion of the registered/person.


16. It was reported that some of the designated branches of the National Bank of Pakistan were not accepting the prescribed return-cum-payment challans from registered persons if presented at the bank counter after the prescribed due date (generally, the 15th day of a month).

17. It is clarified that in case where a registered person submits the prescribed return-cum-payment challans after the prescribed due date, the designated branch of National Bank of Pakistan should still accept the same. The bank's acceptance of such late-tendered return-cum-payment challans shall invariably be considered without prejudice to the additional tax and any other action as prescribed under the Sales Tax Act, 1990, for such late-filing or against such late-filers. In other words, while officers of the Sales Tax Collectorate shall proceed against the late-filers in accordance with the law, the designated branches of National Bank of Pakistan shall not refuse late-submission of the prescribed return-cum-payment Challans.

18. This directive has the concurrence of the National Bank of Pakistan (Head Office), Karachi, vide their letter No. MDD/SES/98 dated 12.09.1998 received in response to the CBR's fax C.NO. 3(56)-STP/96, dated the 12th September, 1998. All designated branches of the National Bank of Pakistan may be guided accordingly.(H) DECLARATION OF COUNTS/DENIERS AND CONSTRUCTION OF TEXTILE GOODS IN SALES TAX INVOICES ISSUED BY MANUFACTURERS, PRODUCERS, WHOLESALERS, STOCKISTS, DEALERS AND DISTRIBUTORS.

19. It has been observed that in certain cases, the counts /deniers and construction of textile goods have not been declared in the tax invoices issued by registered persons making taxable supplies thereof. This causes problems in verification of value (as the value of textile goods is directly relatable to the counts/ deniers and construction thereof) and also of its use in the goods in which these have been used as inputs.

20. All textile mills and persons making taxable supplies of textile items (specially yarns and fabrics) should specify the count/denier and construction thereof in the tax invoices issued by them.


21. Consequent upon the addition of section 11 (5) in the Sales Tax Act, 1990, the Central Board of Revenue is pleased to specify the following conditions to determine minimum tax liability of a registered person who fails to file a return:

(a) the minimum tax liability of the registered person shall not be less than the highest amount of tax paid by the registered person in any of the previous twelve months.

(b) In case tax paid in the previous twelve months is Nil, the minimum tax liability shall be calculated on the basis of monthly average of the sales declared by the registered person to the income tax department for the last assessment year.(c) In case minimum tax liability cannot be determined in the manner given above, it shall be determined taking into account three or more of the following factors:

(i) Location of business;

(ii) Type of business (i.e. retail etc);

(iii) Item produced / supplied or service provided;

(iv) No of persons employed;

(v) Capital employed in the business;

(vi) Amount of utility bills i.e. phones, electricity, gas and water;

(vii) Production capacity of machinery installed;

22. If the registered person pays the due amount of sales tax for the month along with additional tax and penalty under section 33(1) of the Sales Tax Act, 1990, within one month of the determination made as above, the notice of minimum tax liability determination will be considered to have been withdrawn. In case the registered person does not pay the amount of sales tax determined for the tax period, the tax liability determined will be recovered under section 48 of the Sales Tax Act, 1990 without issuance of Show Cause Notice.

23. Determination and / or payment of minimum tax liability for a tax period shall not be the final tax liability and the registered person shall be liable to discharge actual liability which may accrue or determined at a later stage through audit.


24. In order to standardize the format of guarantees accepted by Collectorates in litigation/cases where recovery of sales tax is ordered to be stayed against a Bank Guarantee to the satisfaction of the respondent department viz. the Federal Government, Central Board of Revenue, Collector or any subordinate officer, adraft of the acceptable Bank Guarantee is at Annex A. In such cases, the officers of sales tax shall require the petitioners to submit the Guarantee in the enclosed format, with such modifications/alterations as are considered necessary and appropriate by the said respondent officer/department for his satisfaction.


The Collector of Sales Tax, We_________________ (Bank)___________________ do hereby bind ourselves on this ____________ day of ____________, 200_ on behalf of

M/s_________________________, (the petitioner in W.P No._________), to pay to the Government of Pakistan through the Collector of Sales Tax,

_____________________an amount of Rs. ________ (Rupees (in words) __________________________only) being sales tax involved in Writ Petition

No. ___________ filed by M/s.___________________________, in the Honourable_____________ Court,_____________ Bench,________ in terms of

its ad-interim order dated ________________ passed in C.M. Application No.________________ relating to the said Writ Petition.

2. This unconditional Guarantee shall be binding on us till its discharge in terms of the decision of the case in W.P. No.________________and we agree

and undertake to make payment of the above sum of sales tax amounting to Rs.____________________ (Rupees (in words)______________________),

to the Government of Pakistan within seven days of the receipt of demand from the Collector of Sales Tax or his Sales Tax Officer_____________________,

duly authorized by him in this behalf, without delay and default, on the happening of any of the following events, whichever is earlier:

Honorable ___________________ Court's Order, if any, altering its interim order dated __________________ in a manner that the amount becomes payable to the

Government; or Afflux of time on expiry of the prescribed period in terms of clause (4-A) of Article 199 of the Constitution of Pakistan; or Honourable____________________ High Court's judgment in W.P. No.______________________ as and when passed, holding that the sales tax involved in the bank guarantee was payable by the petitioner M/s.________________________


Authorised signature of the Bank


Authorised signature of the Bank with Official bank Seal.



25. A question was raised whether a Collectorate of Customs can allow refunds of sales tax paid at the import stage due to inadvertence, error or misconception. On the basis of advice received from Law and Justice Division, it is clarified that refund of import-related sales tax paid in excess due to inadvertence, error or misconception arising out of classification dispute, SRO application dispute or valuation dispute can be decided and allowed by the customs importing station. However, before processing import-related refund claims, the concerned Collectorate of Customs must seek confirmation from the concerned Collector of Sales Tax that no adjustment of input/refund of the said amount has been claimed by the applicant or paid by the Sales Tax department, to avoid double payment of refund. The concerned Collectorate of Sales Tax on receipt of a reference from Collectorate of Customs, shall issue requiredconfirmation within thirty days to the effect that no adjustment of input/refund of the amount involved has been claimed by the registered person in the Sales Tax Collectorate

26. While applying for refund, the applicant must endorse a copy of the refund application to the Refund Division of the Sales Tax Collectorate. The refund sanctioning authority of the Customs Collectorate shall mention in his sanction order the number and date, etc. of Sales Tax Collectorate's confirmation of input/refund having not been allowed earlier. A copy of the sanction order shall invariably be endorsed to the Refund Division of the concerned Sales Tax Collectorate.


27. A question was raised that while section 66 of the Sales Tax Act, 1990 disallows refund of tax claimed to have been paid or overpaid due to inadvertence error or misconception unless the claim is made within one year of the date of payment, what would be the fate of such refund claims which have accrued in consequence of the decisions made by appellate fora but where the time limitation of one year specified in the said section 66 has expired.

28. On consultation by the Board, Law Justice & Human Rights Division has advised that the period of claming refund under section 66 of the Sales Tax Act, 1990 is not applicable in matters pending with judicial or quasi-judicial fora. In any particular case where the issue has been taken to a competent statutory forum for adjudication, the decision of such Court or Tribunal has to be honoured irrespective of the period consumed in such litigation or any delay in the execution of such decision.(M) FORMAT OF BANK GUARANTEE TO BE FURNISHED BY COMMERCIAL EXPORTERS IN TERMS OF SRO 203(1)72003 DATED 27.02.2003.

29. The Central Board of Revenue is pleased to prescribe the following format of bank guarantee to be furnished by commercial exporters in terms of S.R.O. 203(1)72003, dated the 27th February, 2003 if they want to claim refund of sales tax before issuance of the Bank Credit Advice (BCA) confirming remittance of sales proceeds of their exported goods.


Whereas the Collector of Sales Tax,_____________has consented to release / sanction refund claim pertaining to the period___________, filed by

__________(commercial exporter)______ on ______________, in respect of shipping bill(s) #______________dated____________, pending production of

Bank Credit Advice (BCA) from the country to which goods have been exported or from the letter of credit opening bank and verification of payment of sales tax by suppliers, on furnishing a Bank Guarantee equivalent to the amount of input sales tax, Rs. (in figures) [Rupees (in words)] involved against the purchases used in the manufacture of goods exported vide the said shipping bill(s).

Whereas we the _____(Bank)_____ do hereby undertake to make payment of aforementioned amount of input sales tax, along with additional tax @ 2% per month and penalty @ 3% on demand to the Collector of Sales Tax, or any Officer authorized by him in this regard without objection or reservation or any reference to the above named commercial exporter, within seven days of the receipt of the demand notice.

In case we the______(Bank) ______fail to make the payment within seven days of the said demand, the_____(Bank)____shall be liable to pay a

compensation @ 20% per annum for the period from the expiry of the seventhday to the date when the actual payment is made to the Collector of Sales Tax. The Guarantee shall remain valid till payment of whole of the amount demanded along with compensation as prescribed above or receipt of release orders issued by the Collector of Sales Tax, whichever is earlier.

We the ____(Bank) _____ bind ourselves to pay, unconditionally, the amount of sales tax etc. mentioned above, in case no release order is received

from Collector of Sales Tax,________, before the expiry of this Bank Guarantee on For and on behalf of the__________( Bank)


Name Name

NIC No.________________________ NIC No.

Address________________________ Address

Signature_______________________ Signature,


30. In order to ensure that the Sales Tax Collectorates follow a uniform policy for blacklisting and suspension of sales tax registration of suspected persons under section 21(2) of the Sales Tax Act, 1990 and for subsequent proceedings in such cases, the Board is pleased to make the following procedure:


31. Under section 21(2) of the Sales Tax Act, 1990, a registered person may be blacklisted or his registration suspended pending further inquiry where the Collector is satisfied that he has issued fake invoices, evaded tax or committed tax fraud.32. Before blacklisting or suspending the registration of any registered person, the Collectorate shall make efforts to confirm the facts and veracity of the information. In case of reported non-availability at the given address, it may be checked from the Registration Division whether the person submitted any information about change in address, the given address may be visited by an officer of the Collectorate, or an attempt may be made to trace the person from documents such as National Identity Card, income tax records, bank account, etc. In case of reported non-access to the premises and/or non-production of record, a notice may be issued through registered post to the person to allow access/produce records, clearly indicating that refusal or delay will result in blacklisting or suspension of his registration.

33. If the Collector is satisfied that the person needs to be blacklisted or his registration suspended, he shall first issue notice to the registered person and give him an opportunity of being heard. In case the registered person does not respond to the notice within the specified time, or his reply is not satisfactory, the Collector may issue order for blacklisting or suspension of his registration, mentioning reasons for such the same. Copies of the order shall be endorsed to the registered person concerned, all other Sales Tax Collectorates, the Sales Tax Wing computer system and the STARR computer system. Each Collectorate shall circulate all such lists to their refund, audit and other concerned staff to ensure that no refund is paid or input adjustment is taken on invoices issued by such persons.

Removal from blacklisting or suspension

34. After issuing order for blacklisting or suspension of registration/enrolment, the Collectorate should proceed to conduct inquiry under section 21(2) of the Sales Tax Act, 1990, and in case of confirmation of the offence, proceed to take legal and penal action under the relevant provisions of the Sales Tax Act, 1990. Such inquiry may extend to suppliers and buyers of the blacklisted/suspendedperson to ascertain whether any inadmissible inputs or refunds have been taken by them.

35. Where the case is not established against a suspected person, the Collector shall issue an order revoking the blacklisting or suspension of registration/enrolment, endorsing copies to the person concerned, all other Sales Tax Collectorates, the Sales Tax Wing computer system, and the STARR system for deletion from their lists. Each Collectorate shall circulate copies of all such orders to their concerned staff for information.

36. Unless the Collector specifies otherwise, such orders shall have effect from the date of original blacklisting or suspension of registration/enrolment of the concerned person, so that invoices issued by him during the intervening period are acceptable.

37. In case audit of the blacklisted/suspended person was already conducted before initiating the inquiry under section 21(2) of the Sales Tax Act, 1990, and such audit report is approved by an officer not below the rank of an Additional Collector, it may be accepted for the purpose of revoking the blacklisting or suspension/enrolment. However, if the audit report is not so approved, and upon inquiry, an offence is established against the blacklisted/suspended person, appropriate action shall also be taken against the officials who submitted the defective audit report.

38. In case of Sales Tax House, Karachi, the order for blacklisting/suspension shall be issued by the Collector of Sales Tax (Headquarters) on the advice of Collector of Sales Tax (Enforcement) or (Audit) or on his own information. The order for revoking any blacklisting/suspension order shall be issued by the Collector of Sales Tax (Headquarters) immediately on receipt of a clearance report from the Collector of Sales Tax (Enforcement) or (Audit) after completion of the inquiry under section 21(2) of the Sales Tax Act, 1990, or audit, as thecase may be. Each such order shall cite the reference number of the relevant letters from Collector (Enforcement) or (Audit).



39. With a view to streamlining the audit of registered units/persons including composite units paying excise duty as well as sales tax and to eliminate the grievances of trade and industry in this regard, the following criteria are laid down for conduct of audit of registered persons:-

(a) the routine, scheduled audit of any registered person shall be conducted only once during a financial year. However, in exceptional circumstances and under the specific instructions in writing by the Collector concerned, a particular registered person can be re-audited for that financial year or within that financial year;

(b) in case of composite units manufacturing and supplying excisable and sales taxable goods, a joint audit will be conducted by the team of officials of Sales Tax and Excise Collectorates. Whenever such a registered person is selected by Sales Tax Collectorate for audit, the respective Excise Collectorate shall be informed at least 10 days in advance and the Collector of Central Excise may nominate his representative for conducting a joint audit. The team will prepare a report for the respective Collectorates regarding any discrepancy in the records and any tax liability thereon; and

(c) the staff of the Directorate General of Intelligence and Investigation (Customs, Excise & Sales Tax) and the Directorate General ofInspection, Internal Audit and Training (Internal Audit and Inspection Wing) shall not undertake any audit of any registered person except under specific written authorization by the CBR in each such individual case. However, in case of any information regarding evasion of sales tax or any other illegal activity on the part of any registered person, the respective Directorate will pass on the information to the concerned Collector of Sales Tax who will order for the audit of that particular person by sales tax auditors/special auditors. The representative of the said Directorate/Directorate General may also be associated at the time of conducting such audit.


40. Audit of registered persons is conducted by auditors and senior auditors of the department as well as by the Special Auditors appointed under section 32-A of the Sales Tax Act, 1990.

41. Selection of registered persons for audit should not be left to the auditors/senior auditors or the Audit Division itself. Rather the selection of registered persons and assignment of an auditor/senior auditor for a particular registered person should be done through computer programming. Only the Collector/Additional Collector may select registered persons manually, on the basis of his choice or information or direction from CBR, for the purpose of audit. However, such a manual selection may not generally exceed 10% of the total audits conducted. The same auditor/senior auditor or Special Auditor should not, as a general rule, audit the same registered person more than once in 2 years. In other words, auditors/audit teams for particular registered persons should keep on changing.42. The following procedure is laid down in order to ensure transparency in the whole process.

(a) Audit should be conducted in a systematic and organized in a way to ensure that a registered person is subjected to audit not more than once in a year, unless, of course, some emergent situation calls for another audit during the aforesaid period.

(b) The registered person should be informed about the audit and details of records to be audited at least 15 days before the scheduled date of audit.

(c) Audit should be completed normally within 3 to 4 days unless situation requires more time, for which written permission should be granted by an officer not below the rank of Assistant Collector on receipt of written request of the senior auditor or auditor containing plausible reasons for extension of the duration of audit.

(d) The audit reports, duly signed by the senior auditors or auditors containing approval of the Deputy/Assistant Collector Incharge of Audit Division should be submitted to the Additional Collector within 14 days from the date of commencement of audit.

(e) On receipt of the Audit Report, the officer incharge of the Audit Division, not below the rank of an Assistant Collector, shall critically evaluate the same with a view to ensure the following:-

(i) that the audit has been conducted purely in a

professional manner;that the audit was comprehensive and did not

overlook or left any important area of audit

deliberately or negligently;

the provisions of sales tax law have been quoted


(f) The Deputy/Assistant Collector Incharge Audit shall forward the audit report to the Additional Collector and the Collector within 3 days of receipt of the audit report after making his comments on each aspect as detailed at para (e) above. Recovery action/demand notice/show cause notice if necessary, should not be delayed but rather should be pursued vigorously.

(g) If the Collector is convinced that the audit was not conducted effectively or the audit report was not prepared properly or that there is an apparent lack of professional outlook, malafide intent or negligence, he should proceed against the senior auditor, auditor and Deputy/Assistant Collector, Incharge Audit Division, as he may deem fit.

(h) Audits by Special Auditors under section 32-A shall be conducted in accordance with chapter VI of the Sales Tax Rules, 2004, and the Terms of Reference in this regard. Their report shall also be scrutinized by the Audit Division of the Collectorate and shall be submitted to the Additional Collector/Collector accordingly.

(i) One copy each of such of the audit reports (whether by departmental auditors or by the Special Auditors) which reflects detection of sales tax amounting to Rs. 1 million or above or which points out towards a serious procedural lapse should invariably be sent to the Secretary ST-AIU Section of CBR and also to theDirector General of Training & Research (Customs, Central Excise & Sales Tax), CDA Block No. 3 (Old CBR Building), Islamabad for record and study.

(j) On receipt of audit report as mentioned at para (i), above, the AIU Section shall critically examine the same propriety of the audit report. In case of any important detection, the matter shall be brought into the knowledge of Member (Sales Tax) for further necessary action.


43. In order to further streamline the procedure regarding audit of registered persons and to facilitate taxpayers, the following procedure shall be adopted by the audit officers of sales tax:-

(a) All officers dealing with audit matter shall ensure that all correspondence, notices and orders issued by the Collectorate, which are sent to the registered persons or any other person, should bear the seal and signature with telephone/fax numbers and e-mail address of the officer issuing it.

(b) All senior auditors and auditors shall affix their signatures on records checked during the audits with official seals.

(c) The concerned Deputy/Assistant Collector, on completion of routine audit of a specific period, shall forward the audit report to the registered person within four weeks of submission of the report.

(d) After approval of the audit report, the senior auditor/auditor shall issue a signed and sealed certificate of completion of audit to theregistered person in the format appended to this Order as Annex "A".

44. This order will however, not in any way curtail the powers of Collector of Sales Tax or Central Board of Revenue to order for re-audit for the reasons to be recorded or audit by the functionaries of the department of the Auditor General of Pakistan or any other department legally authorized to conduct audit of the records of the registered person.


This is to state that the audit of M/s_________________________(address),

bearing Sales Tax Registration No._________________, has been carried out

by the undersigned on a test basis for the Period/Year ended___________.

The audit has been performed on a routine basis as per the provisions of the Sales Tax Act, 1990 and the schedule issued by the Assistant Collector, Audit Division__________________________for the month of________________.



45. The post of Member (Audit) was specifically created to cater for the supervisory and monitoring needs of audit in the field formations of Central Board of Revenue. In order, therefore, to specify and streamline the functions of Member (Audit) relating to sales tax audit, the Central Board of Revenue is pleased to specify that Member (Audit) shall perform the following functions: -(a) development and review of audit strategy (short term and long term), the selectivity criteria, audit re-assessment and analysis system, post-audit monitoring system, monitoring system for audit detections and recoveries of detected amounts and re-engineering of audit processes;

(b) preparation and follow-up of audit schedules for desk audit, snap audit and comprehensive audit, excluding refund audit and investigative audit;

(c) scrutiny and analysis of audit reports on selective basis and issuance and monitoring of guidelines for the preparation of audit reports and review of the formats of audit report writing from time to time;

(d) preparation and updation of the sales tax Audit Manual and industrial notes;

(e) preparation of monthly, quarterly and annual audit reports indicating the overall audit performance of the Sales Tax department at national level;

(f) coordination for audit efforts between different taxes including interchange of data acquired as a result of audit;

(g) handling of special audits and related matters; (h) liaison with DRRA for sales tax audit purposes;

(i) handling of all audit-related issues with Federal Tax Ombudsman

and consequent actions; (j) assessment of the audit training needs, preparation of audit training

modules and coordination for audit-related training of the Sales Tax

department in consultation with Member, Sales Tax; (k) consultations with Member (Legal) for expeditious adjudication of

cases detected through audit; and (I) removal of grievances of the taxpayers community pertaining to

audit matters in consultation with Member (Sales Tax).46. In the Central Board of Revenue, Member (Audit) shall be assisted by one Chief (Audit), one Secretary (Audit Policy) and one Secretary (Audit Operations). In the field, all the Assistant Collectors or Deputy Collectors and Additional Collectors handling audit matters at Collectorate's level shall work under the control and guidance of Member (Audit). 66% of total number of auditors/senior auditors in each Collectorate shall be posted to conduct audit other than refund audit and investigative audit. The inter-Collectorate posting and transfer of auditors and senior auditors posted for conducting audit shall be made by Member (Audit) in consultation with Member (Sales Tax).


47. The Cost Accountants in the CBR (Sales Tax Wing) and in the Collectorates of Sales Tax will work under the administrative control of Chief (Sales Tax) and Collector or the Additional Collector in charge of sales tax, respectively.

48. The functions to be performed by cost Accountant are as under:-

(a) To develop selection criterion for audit of the taxpayers in coordination with the Collector, Additional Collector and Deputy/Assistant Collector (Audit);

(b) To examine and tender his opinion on any audit report referred to him by Deputy/Assistant Collector (Audit);

(c) To personally conduct audit of large taxpayers under special circumstances if so desired by Collector or Additional Collector (Audit);

(d) To study the Financial Report referred to him of large companies prepared by their own auditors, compare it with the taxpayers profile and submit his report to the Additional Collector (Audit) for further necessary action;(e) To ensure that the Sector Notes and Industry Notes are updated and are relevant at all times through liaison with CBR, and to make proposals, through the Collector, for updating, modifications and amendments therein for CBR's approval;

(f) To ensure that the Audit Manual is updated and is relevant at all times through liaison with CBR, and to make proposals, through the Collector, for updating, modifications and amendments therein for CBR's approval;

(g) To be responsible for the training of all audit officers, staff and audit managers within the Collectorate. Such training will include:-

(i) Guidance on costing techniques and analysis of financial

statements; (ii) Calculation of installed capacity and operating capacity of

industrial units; (iii) Comparative sectoral studies with reference to input tax and

output tax ratios; (iv) Calculation of input output coefficients and percentages of

wastage; (v) Critical examination of the declared value of supply with

reference to input cost inventory and value addition at

various stages of activity; (vi) Critical examination of the declared turnover as filed under

the Sales Tax Act, 1990 and /or the Companies Ordinance;

and (vii) Computerized auditing and audit of computer records;

(h) Any other assignment given by the CBR, the Collector or the Additional Collector (Audit), or any reference made or advice sought by Deputy/Assistant Collector (Audit) for achieving the purposes of the Sales Tax Act, law and procedures thereof.49. The Cost Accountant will be a resource person for the Collector in respect of tendering professional advice in the matters relating to audit, training of senior auditors, auditors and other officials of Collectorate. He will be required to tender prompt and comprehensive advice whenever requested for the same by the Collector, Additional Collector and Deputy/Assistant Collector.



50. In order to give effect to the provisions of section 65 of Sales Tax Act, 1990, the following procedure shall be followed:-

(a) If a registered person claims that the supplies made by him during a certain period qualify for exemption under section 65 of the Sales Tax Act, 1990, he may make an application to the Collector having jurisdiction in the area where the registered person is located. The Collector will examine the case, collect relevant information from other Collectors and if he is satisfied that the case falls within the scope of section 65, he will refer the same to the Revenue Division;

(b) Before making a reference to the Revenue Division the Collector will also fix responsibility on the staff who failed to detect that a taxable item is being cleared without payment of tax and thus caused loss of revenue. He will initiate disciplinary action, against the officials concerned and send a report to the Revenue Division;(c) The case will be processed in the Revenue Division and if the conditions specified in section 65 are met the Federal Government may, by means of a notification in the official Gazette, exempt the said supplies from sales tax.


51. Supplies to duty free shops are entitled to zero-rating under serial No. 3 of the Fifth Schedule to the Sales Tax Act, 1990, provided clearances from duty free shops are made against various baggage rules issued by the CBR, Islamabad under the Customs Act, 1969 and treated as import for the purpose of levy of sales tax. Under serial No. 33 of the Sixth Schedule to the Sales Tax Act, 1990, personal wearing apparel and bonafide baggage imported by overseas Pakistanis and tourists is exempt from sales tax provided the same is also exempt from customs duty under various baggage rules. Currently, baggage concessions are covered under Chapter II of the Customs Rules, 2001.

52. M/s Duty Free Shop Limited (hereinafter-called DFSL) have approached the Board for prescribing a procedure for the procurement of locally manufactured goods under zero-rated scheme as aforesaid. The following procedure is, therefore, laid down for immediate compliance: -

(a) DFSL will apply to the respective Collector of Sales Tax for grant of authorization for taking sales tax free delivery of the goods intended to be purchased from a specified registered manufacturer. In the application DFSL will exactly specify the description and quantity of goods besides particulars including sales tax registration number of the manufacturer-cum-supplier. Only such goods shall be included in the application as DFSL intends to sell against duty free allowances under different baggage concessions.(b) At the time of filling application under (a) above, DFSL will furnish an indemnity bond in a proper form to the effect that in case goods intended to be purchased free of sales tax are used for the purpose other than the purpose of supplying the same against duty free allowance under different baggage concessions, DFSL shall pay the amount of sales tax invoiced in such goods besides additional tax payable under section 34 of Sales Tax Act, 1990. Original indemnity bond shall be retained under safe custody in the Collectorate and two attested photocopies of the accepted indemnity bond shall be given to DFSL and DFSL shall give one copy to the concerned manufacturer.

(c) On the basis of authorization given by the Collector of Sales Tax after acceptance of the indemnity bond furnished by DFSL as aforesaid, the manufacturer shall deliver the goods against a zero-rated invoice issued in the name of DFSL and quote the reference number and date of authorization issued by the Collector. The zero-rated invoice shall show the value of goods in Pak rupees as well as in US dollar. The goods shall be delivered to DFSL only after affixing irremovable sticker containing a caution to the effect that it is meant exclusively for supply to and sales by DFSL under duty free allowances of the baggage concessions.

(d) DFSL shall pay price of the goods in foreign currency (US dollars) which shall be surrendered by the manufacturer to the State Bank of Pakistan and manufacturer shall receive the payment in Pak rupees as per the prevailing State Bank of Pakistan's procedures and foreign exchange regulations.(e) On receipt of goods DFSL shall issue a certificate of receipt indicating the reference number and date of the aforesaid authorization and serial number and date of zero-rated invoice. This certificate shall be duly attested by the customs staff posted at duty free shops. A copy of this certificate shall be sent each to the manufacturer as well as to the Collector of Sales Tax.

(f) DFSL shall maintain proper separate records of the tax-free purchases and tax-free sales of goods purchased under this order. Full particulars of the persons buying these goods under duty free allowances shall be invariable mentioned in the records. Similarly, the manufacturer shall maintain proper record relating to the supplies made to DFSL without payment of sales tax. Both DFSL and the manufacturer shall present these records to the sales tax staff for inspection or audit as and when required.

(g) The manufacturer shall be entitled to input tax adjustment in respect of goods supplied to DFSL against zero-rated invoices and in case excess input tax credit is not available, the manufacturer shall be entitled to refund of the input tax involved in such goods on the basis of the following documents: -

(ii) Input tax invoices/bill of entry;

(iii) Zero-rated invoices;

(iv) Authorization issued by the Collector of Sales Tax;

(v) Certificate of receipt issued by DFSL duly attested by

Customs; (vi) Proof of surrendering to the State Bank of Pakistan foreign

exchange received from DFSL; and (vii) Proof of transportation of goods in case goods have been

transported through commercial or third party means.(h) The said documents shall be furnished in original with a set of photocopies and returned to the manufacturer after tallying an endorsement of verification on the photocopies by the officer-in-charge of Refund Division of the Sales Tax Collectorate. Refund shall be processed and sanctioned in accordance with chapter V of the Sales Tax Rules, 2004 treating the claimant as manufacturer-cum-exporter.

(i) DFSL shall procure goods under this order to meet its requirements for a period not exceeding three months and shall ensure that these goods do not find way in the local market. DFSL shall be responsible to pay sales tax and additional tax in case any such goods are found being sold in the local market.

(j) The indemnity bond furnished by DFSL shall be released by the Collector of Sales Tax only after satisfying himself either through audit or otherwise that goods have been sold by DFSL only against duty free allowances under the relevant baggage concessions.

53. The foregoing provisions, shall mutatis mutandis, be applicable to other Duty Free Shops, duly licensed by the Collectorate having jurisdiction.


54. Payment of sales tax on services rendered or provided by customs agents is a requirement in terms of Ordinances issued by the four provinces and the Federal Capital Area. For a correct implementation of the said requirement, the following procedure shall be observed:-(a) the sales tax registration number of the customs agent shall be quoted along with the license number on the bill of entry (home consumption, into-bond and ex-bond), shipping bill, Pakistan Customs Declaration, baggage declaration, rebate/refund or duty drawback claim as the case may be; and

(b) in addition to already prescribed requirements a photo-copy of the last month's bank-receipted sales tax return of the customs agent shall be appended with the bill of entry, shipping bill, baggage declaration, rebate/refund or duty drawback claim so filed. For example bills of entry filed after 15th June, 2004 shall be appended with a photo-copy of the bank-receipted sales tax return for May, 2004 filed on or before 15th June, 2004.

(c) in case any agent fails to submit the return-cum-payment challan as mentioned in (a) above, customs documents filed through him shall not be entertained.


55. In the light of the provisions contained in the second proviso to subsection (1) of section 45, sub-section (3) of section 46 and sub-section (2) of section 47 of the Sales Tax Act, 1990, the Central Board of Revenue is pleased to direct that above referred all fee amounts shall be deposited in the Government Treasury (or in any designated branch of the National Bank of Pakistan) under the head "0220000-Sales Tax".

56. The original copy of the duty paid challan shall be attached with the appeal/application so filed with the competent authority as referred to above.(X) BENEFITS OF SALES TAX REGISTRATION.

57. The VAT-mode regime envisages a self-policing and self-assessment based sales tax system. It relieves the registered persons of inventory controls and physical supervision. The registered persons also become entitled to claim input tax credits and adjustments against their output tax liability. This benefit of multi-stage tax (tax leviable on the marginal/incremental value-addition) is not available to unregistered manufacturers and suppliers. Being a consumption tax, the respective seller (of each stage) can pass on the burden to the buyer and incidence of the tax is eventually borne by the final consumer. A registered person can also transact business with and supply goods to the government, semi-government and defence departments and other autonomous corporations DFIs, banks, airlines and limited companies etc., who are otherwise authorized to deduct advance income tax under the Income Tax Ordinance, 2001.

58. All persons liable to be registered as manufacturers, producers wholesalers, dealers, distributors, suppliers, importers or retailers are therefore, well advised to get themselves registered under the Sales Tax Act, 1990 so as to benefit from the said fiscal monetary and trade advantages.

59. The aforesaid legal provision and ensuing benefits, privileges and immunities make it unambiguously clear that the advantage of sales tax compliance and sales tax registration far outweigh the misapprehensions and misconception against it. All traders, businessmen, manufacturers, producers, wholesalers, dealers, distributors, importers, suppliers and retailer of sales taxable goods are accordingly advised in their own interest to get themselves registered under the Sales Tax Act, 1990. Non-registration would render the offenders liable to legal actions and added burden of sales tax by way of additional tax and penalties which are mandatory under the Sales Tax Act, 1990.60. The Sales Tax Collectorates, F.P.C.C. & I., Chambers of Commerce & industry, EPB, Trade & Industry, Associations and Groups are also requested to inform all concerned about the benefits, privileges and advantages of registration and compliance of sales tax law and procedures made thereunder


61. For achievement of revenue targets, the Government has laid emphasis on greater interaction amongst the taxpayers, their representative trade bodies and tax collectors for better coordinative revenue generating activities and for solution of problems faced by the taxpayers' community as well as the tax collection machinery in this process. For this purpose, there is a dire need to reactivate and re-invigorate the Advisory Committees already functioning at Collectorate levels. The composition of these committees also requires to be reconsidered for the purposes of giving representation to FPCCI, local Chamber of Commerce & Industry, OICCI, various Trade & Industry Associations/ Groups and certain individual taxpayers (like those paying substantial amount of taxes honestly and regularly) so as to ensure their enhanced cooperation, participation, guidance, voluntary compliance and redressal of problems/ inconveniences.

62. All Sales Tax Collectors are, therefore, advised to take following actions in this regard:-

(a) Constitute the Advisory Committee, if already not constituted, (or re-constitute it in terms of this STGO) within 7 days and report the composition to the Board;

(b) Hold regular meeting of the Advisory Committee at least on bimonthly basis. Minutes of the meetings should invariably be issued within 7 days of the meeting;(c) The representation in the Committees should be comprehensive, covering all important trade bodies and individuals, as aforesaid in paragraph 70 above;

(d) Where Collectors are not available, Committees should operate at Additional Collectors level with participation of all concerned, as above;

(e) Receipt of revenue and recovery of arrears may also be discussed in the meetings along with the difficulties / problems faced by the Collectorates / manufacturers / trading community; and

(f) Performance of the Committee be regularly monitored and evaluated at Collectorate level, as the case may be, under intimation to the Board. Issues requiring action by CBR should be referred to the Board separately too, along with a copy of the minutes of the meeting.


63. The following functions shall be supervised by the Collectors of Sales Tax, Sales Tax House, Karachi.


(a) Registration and De-Registration.

(b) Assessment, processing and analysis of sales tax returns.

(c) Information Processing and Management Information System.

(d) General Administration of Sales Tax House, Karachi.

(e) Taxpayers Facilitation and Education.

(f) Matters relating to Federal Tax Ombudsman.

(g) Matters relating to Establishment, (h) Human Resource Development.

(i) Co-ordination with CBR and other outside agencies.(j) Any other function given by CBR for achieving the purposes of Sales Tax Act, Law and Procedures thereof.


(a) Audit of registered persons.

(b) Audit selection and allocation strategy.

(c) Risk based audit through profiling and analysis.

(d) Review of audit reports for quality and integrity.

(e) Recovery of un-disputed liability detected during audit.

(f) Monitoring of audit schedule etc.

(g) Maintenance and analysis of audit records and audit related database.

(h) Matters relating to External Audit (Revenue Receipt Audit) including

Public Accounts Committee, (i) Any other function given by CBR for achieving the purposes of

Sales Tax Act, Law and Procedures thereof.


(a) Processing and sanctioning of refund claims filed under Sections 10 and 66 of the Sales Tax Act.

(b) Post Refund Audit.

(c) Co-ordination for submission of contravention reports/ show cause notices to the proper Adjudication forum for adjudication.

(d) Ensuring department's representation before the adjudication and appellate forums and courts.

(e) Dealing with non-filers and untraceable units.

(f) Industrial surveys as required under concessionary notifications.

(g) Recovery of all government dues recoverable under the Sales Tax Act and Central Excises Act.

(h) Investigation and Prosecution.(i) Investigative audits after action under Section 38 of the Sales Tax


(j) All matters relating to Central Excise, (k) Enforcement issues related to Services Sector. (I) Any other function given by CBR for achieving the purposes of

Sales Tax Act, Law and Procedures thereof.


64. Attention is invited to the provisions of sections 45, 45B, 46 and 47 of the Sale Tax Act, 1990. Respective Collectors are advised to take necessary steps to ensure that they receive, monitor and scrutinize each and every order-in-original, order-in-appeal, appellate order / decision passed by the Tribunal for the purposes of determination of propriety and justification of filing of appeal under sections 45B, 46 and 47 of the Act or of filing an application under section 47(7) of the Act as the case may be, within the prescribed limitation. For this purpose, the Collectors may consider creating special cell in the Collectorate. The Collector may also ensure that no appeal/application, where justified, necessary and appropriate, is delayed or defaulted. The Directors of Intelligence & Investigations and Inspection & Audit, where they themselves do not file the appeal/application, shall also assist the concerned Collector of Sales Tax in this regard in relation to such sales tax cases which were detected / reported by them.

65. The Collectors/Directors are also advised to ensure that a fully-conversant and duly-briefed departmental representative appears (along with relevant records) before the Appellate Collector / Appellate Tribunal whenever a sales tax case, relevant to their jurisdiction, comes up for hearing before the said Collector (Appeals)/Tribunal.66.


The following Sales Tax General Orders are hereby rescinded, namely:-

S. No. Sales Tax General Order Number and date
(1) (2) (3)
1 5 of 1991 , the 23rd October, 1991.
2 1 of 1992 , the 29th July, 1992.
3 6 of 1994 , the 6th June, 1994.
4 6 of 1995 , the 1st June, 1995.
5 4 of 1996 , the 5th November, 1996
6 5 of 1996 , the 11th November, 1996.
7 1 of 1997 , the 15th July, 1997.
8 2 of 1997 , the 26th August, 1997.
9 3 of 1997 , the 29th August, 1997.
10 4 of 1997 , the 11th October, 1997.
11 1 of 1 998 , the 17thJune,1998.
12 2 of 1998 , the 29th June, 1998.
13 3 of 1998 , the 31st July, 1998.
14 4 of 1998 , the 12th August, 1998.
15 5 of 1998 , the 28th August, 1998.
16 6 of 1998 , the 31st August, 1998.
17 7 of 1998 , the 24th September, 1998.
18 8 of 1998 , the 30th November, 1998.
19 9 of 1998 , the 12th December, 1998.
20 10 of 1998 , the 22nd December, 1998.
21 1 of 1 999 , the 7thJanuary,1999.
22 2 of 1999 , the 16th February, 1999.
23 3 of 1999 , the 27th March, 1999.
24 4 of 1999 , the 8th April, 1999.
25 5 of 1999 , the 29th June,1 999.
26 6 of 1999 , the 28th July,1 999.
27 7 of 1999 , the 29th July,1 999.
28 8 of 1999 , the 18th September, 1999.
29 9 of 1999 , the 22nd September, 1999.
30 10 of 1999 , the 29th September, 1999.
31 11 of 1999 , the 2nd October, 1999.
32 12 of 1999 , the 12th November, 999.
33 13 of 1999 , the 28th December, 1999.
34 1 of 2000 , the 24th January, 2000.
35 2 of 2000 , the 11th April, 2000.
36 4 of 2000 , the 1stSeptember,2000.
37 1 of 2001 , the 26th May, 2001 .
38 2 of 2001 , the 30th June, 2001.
39 1 of 2002 , the 31st August, 2002.
40 3 of 2002 , the 24th September, 2002
41 4 of 2002 , the 1st November, 2002
42 5 of 2002 , the 8th November, 2002
43 6 of 2002 , the 26th November, 2002
44 1 of 2002 , the 27th February, 2003
45 2 of 2002 , the 7th June, 2003
46 3 of 2002 , the 23rd June, 2003
47 4 of 2002 , the 7th August, 2003.
48 5 of 2002 , the 5th December, 2003.
49 6 of 2002 , the 20th December, 2003.

[0. No. 1/33-STB/20041

(Dr. Ashfaq Ahmed Tunio)

Secretary (ST L&P)

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