Goods delivered under Islamic mode of financing "Murabaha" to or by a bank or a financial institution approved by the State Bank of Pakistan or Securities and Exchange Commission of Pakistan (SECP) were outside the scope of definition of supply as contained under clause (33) of section 2 of Sales Tax Act, 1990 under SRO 445(I)/2004, dated 12.06.2004. Through SRO 588(1)/2017, dated 01.07.2017, SRO 445(1)/2004 has been amended to include goods supplied by banks or financial institutions under other Islamic modes of financing ie "Musawamah, Bai Muajjal, Bai Salam, Istisna, Tijarah and Istijrar" in the scope of exceptions, meaning thereby that goods supplied under these Islamic mode of financing by banks will not be chargeable to sales tax.
The FBR added that budgetary measures relating to sales tax, federal excise duty and Islamabad Capital Territory (Tax on Services) Ordinance, 2001 have been notified through Finance Act, 2017 and also through various SROs issued in exercise of powers conferred under the three laws. A brief summary of the measures is given below for ease of understanding and necessary action by the field formations. At the same time, field formations are requested to consult the provisions of Finance Act, 2017 and notifications/SROs for proper appraisal of the provisions.
Amendment in Sales Tax Special Procedure (Withholding) Rules, 2007: Exclusion from sales tax withholding has been provided vide Rule-S of Sales Tax Special Procedure (Withholding) Rules, 2007. The scope of exclusion has been extended vide SRO 586(I)/2107, dated 01.07.2017, to exclude supplies made by an active taxpayer as defined in Sales Tax Act, 1990 to another registered person, with the exception of advertisement services, from the purview of sales tax withholding.
Admissibility of input tax against supply of locally produced coal: minimum value of locally produced coal has been fixed at Rs 2,500 PMT vide SRO 491(1)/2015, dated 13.06.2015. No input tax adjustment is admissible against supply of locally produced coal as stipulated by SRO 549(I)/2006, dated 05.06.2006. However, this restriction regarding admissibility of input tax to persons making supplies of locally produced coal has been relaxed vide SRO 592(1)/2017, dated 01.07.2017 subject to the conditions that value of supply exceeds Rs 5,000 PMT.
Copyright Business Recorder, 2017