The ATIR has also ruled that the zero-rating SRO(s) under Sales Tax Act, 1990 are goods specific and not sector specific and goods specified in these SRO are major factor to claim benefits of zero rating under Sales Tax law.
It is reliably learnt that a Faisalabad based chemical manufacturing company through Lahore based lawyer Waheed Shahzad Butt has challenged stance of FBR that SRO(s) issued under reduced rated regime are sector specific and any sale to other than zero rated sectors shall be charged to sales tax at normal rate of 17%.
Source told that ATIR while accepting the stance of the taxpayer ruled that SRO(s) issued under reduced rated regime are goods specific. If the said SRO 1125 was sector-specific by virtue of conditions prescribed therein, there was no need to include goods relating to five sectors. Had the said SRO 1125 been sector-specific, their inclusion in the Table would have been treated as surplus which is against settled principles of interpretation of "Statute".
LHC has confirmed the order passed by ATIR and dismissed the sales tax appeal preferred by the FBR against the ATIR order and holds that ATIR was justified in holding that the benefit of reduced rate was available to the goods specified in the table irrespective of their consumption within five sectors or outside five sectors.
ATIR observed that IRO's version that these SROs are not goods specific for claiming benefits of reduced rated supplies, the persons either registered or unregistered has to be qualified from Five Specified Sectors. We feel IRO strangely misconceived the spirit of the SRO(s), reduced rate regime has always been goods specific from SRO 621(I)/2015 dated 17.06.2005 to the SRO issued till date. The goods specified in table to these SRO are deciding factor either to be used in Five Reduced Rated /Textile Sectors or Non-reduced rated sector. The usage of goods specified in Table decides the rate of sales tax to be charged without considering the buyers.
LHC order states, "The basic contention of the Applicant is that the ATIR did not consider the fact that there were supplies made to persons outside of the five sectors provided for in the SRO. The counsel argued that this issue was raised in the show cause notice and the Respondent did not provide a satisfactory answer. The assessment officer also did not consider this matter as there were supplies made to persons not belonging to the five sectors provided in the SRO 1125(I)/2011 and SRO 154(I)/2013.
The counsel argued the onus was on the Respondent to prove that it made supplies to persons outside the five sectors which was not done, hence the ATIR has erred in law by deciding the matter in favour of the Respondent. This aspect has also been considered by the ATIR who held that the law does not require verification of supplies made to unregistered persons and that the Respondent has satisfied its burden to show that all the buyers are from the five sectors.
Under the circumstances, we find no substance in this Reference, hence, decline to exercise out jurisdiction. Reference application is decided against the Applicant, the LHC ordered.