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010423
GOVERNMENT OF PAKISTAN REVENUE DIVISION CENTRAL BOARD OF REVENUE (SALES TAX WING)
C.No.2(1)STP/2000(Pt.III)
Islamabad, the 23rd April, 2001
1. The Collector of Sales Tax & Central Excise (East/West), Karachi.
2. The Collector of Sales Tax & Central Excise,
Peshawar/Rawalpindi/Lahore/Faisalabad/Gujranwala.
3. The Collector of Customs, Sales Tax & Central Excise, Hyderabad/Quetta/Multan.
SUBJECT:
IMPACT OF SECTIONS 7 & 73 OF THE SALES TAX ACT, 1990 - CLARIFICATIONS REGARDING
Upon a careful review of various provisions of the Sales
Tax Act, 1990. It has been concluded that there are some inconsistencies within the scheme
of the registration. While on the one hand the underlying scheme of the Sales Tax Act,
1990 envisages the indivisible nature of a "tax period" (sections 26, 66, etc),
the changes introduced in section 7 during 1998 imply otherwise. The said section 7,
envisages the possibility of a tax period during which a tax invoice was issued as being
distinction the tax period in which input adjustment can be claimed on account of payment
made by the holder of the invoice. Consequently, the taxpayer’s account keeping
becomes somewhat more complicated as he has to keep track of whether payment was made by
him in the same tax period when tax invoice was issued to him by his supplier. The audit
trail also gets complicated accordingly.
2. It has also been observed that promulgation of section 73 without recognizing and
accommodating the fact that transactions sometimes take place on credit brought forth the
latent complication in the provisions of section 7 as observed at para 1 above.
3. It has, therefore, been decided that the said complications in the sales tax law would
be rectified through necessary amendment in the text of the Sales tax Act, 1990 at the
earliest opportunity (during the budget at the latest). The objectives of amendments would
be:-
(i) by amending section 7 to enable the claim of adjustment by the holder of tax invoice
in the same period in which the tax invoice is issued irrespective of whether or not he
had made payment of such sales tax to his supplier; and
(ii) to provide in section 73 that transactions made on credit would be permissible in
accordance with the existing mercantile practice and the terms of dealing between buyers
and sellers.
4. Pending the bringing about of necessary changes in the text of the law as mentioned at
para 3 above it is directed as under:-
(i) That no infringements/contraventions should be framed by deduction if input tax under
section 7 by holders of bonafide tax invoice in the same tax period when the holder gets
such invoice. Such deduction/adjustment should be allowed;
(ii) That all existing proceedings covered under (i) above whether under adjudication or
otherwise under scrutiny/preparation in the Collectorates, should be stayed until
necessary changes are brought about. Instructions will then be issued to formally settle
all such matters;
(iii) Not to question transactions on grounds of having been made on credit; ad
(iv) To hold in abeyance all adjudication or other proceedings covered under (iii) above.
5. These instructions have the approval of the competent authority.
(IFTIKHAR QUTAB)
Chief (Sales Tax-ii)
TEL: 9207472
Copy to:-
(1) The Collector of Customs, Sales Tax & Central Excise (Adjudication),
Karachi-I/Karachi-II/Karachi-III.
(2) The Collector of Customs, Sales Tax & Central Excise (Adjudication),
Quetta/Faisalabad/Lahore/Rawalpindi.
(3) The Chairman, Export, Promotion Bureau, Karachi.
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