Cottage industry is defined as having annual turnover

below Rs.5 million and whose annual utility bill

(including electricity , gas and telephone) does not
exceed rupees six hundred thousand

Defaulter mean a person and in case as a

company or firm or every director or partner of
the company or as the ease made of the firm of
which he is a director, partner, or a proprietor
and include granter or successor who fail to pay
the arrears.

Distributor mean a person appointed by the

manufacturer, importer or any other person for a
specified area to purchase goods from him for
further supply.

Exempt supplies are goods and services which are not

subject to GST and not included in your GST return.
Exempt supplies include:
Donated goods and services sold by non-profit bodies
Financial services
Renting a residential dwelling
Residential accommodation under a head lease
 The supply of fine metals (gold, silver and platinum),
other than zero-rated supplies
Penalty interest

Manufacturer is an entity that makes a good

through a process involving raw materials, components,
or assemblies, usually on a large scale with different
operations divided among different workers. Commonly
used interchangeably with producer

Output tax It is the total amount of sales tax charged at

current rate of sales tax on taxable sales made during
the month i.e. total sales excluding exempt and zero-
rated supplies.
Input tax It is the amount paid by the registered person
on business purchases and imports. He/she can claim a
deduction for the sales tax paid as input tax if used in
the manufacture of taxable supplies.

Sales Tax is a tax levied by the Federal Government

under the Sales Tax Act, 1990, on sale and supply of
goods and services and on the goods imported into
Pakistan.
 Arrear is liability or obligation not met on the due date.
Loan payments are in arrears the day after they are due.
Also called arrearage.

A default surcharge is a penalty levied on businesses

that submit late VAT returns or make payments late.

REGISTRATIONWho is to be registered?
1 All importers
2 All wholesalers (including dealers) and
distributors
3 Manufacturers not falling in cottage industry.
4 Retailers (having value of supplies of over 5
million rupees, in any tax period during the last
12 months.
5 A person required under any Provincial or
Federal Law to be registered for purpose of any
duty or tax collected or paid as if it were a levy of
sales tax, e.g. service providers like hotels, clubs,
caterers, customs agents, ship chandlers,
stevedores, courier services etc.
f. Persons making zero-rated supplies, including commercial
exporter who intends to obtain sales tax refund against his
zero rated supplies .
g. A person who is required to be registered by virtue of
aforesaid criteria, but still avoids registration, can be
compulsorily registered by the department, after proper
enquiry , under sub- rule 1 of Rule 6 of Sales Tax Rules,
2006.
Procedure of Registration
1. The application may be submitted electronically on
Form STR-1 as well as either through post or courier
services to Central Registration Office (CRO). Application
can also be sent to Local Registration Office (LRO) in the
form of hard copy. The LRO after proper scrutiny of
documents and necessary editing of the application and
particulars, electronically forwards the application to CRO.
2. All the columns of the Forms have to be duly filled in as
per instructions given with the Form.
3. After verification, the Central Registration Office will issue
a Registration Certificate bearing registration number and
mail the same to the Registered Person, on a prescribed
Form (STR-5)
Office (CRO) normally verifies the contents from the data
available with it, but has an authority to get an enquiry
conducted through Local Registration Office, to verify
contents of declaration by a person. The CRO may reject
the application within fifteen days from the date, the
complete application is received in CRO, under intimation
to the applicant, specifying the reasons for such rejection.
Penalties for Late Return Filing
If a return is not filed within 15 days after the end of the
relevant tax period, a registered person will be liable to a
penalty besides additional tax at the rate of Rs 100/- per
day. If the delay is beyond 15 days , a penalty of Rs. Five
Thousand is payable.
If full amount due is not paid, any outstanding balance will
also attract additional tax and a penalty.
If a registered person fails to deposit the correct amount of
tax for two consecutive months he/she will be deemed to
have committed a tax fraud for which the penalty is Rs.
10,000 or five percent of the amount of tax involved,
whichever is higher, besides prosecution.

Offences Penalties Section of the Act to which offence has

reference (1) (2) (3) 1. Where any person fails to furnish a return
within the due date. Such person shall pay a penalty of five
thousand rupees: Provided that in case a person files a return
within fifteen days of the due date, he shall pay a penalty of one
hundred rupees for each day of default. 26 2. Any person who
fails to issue an invoice when required under this Act. Such
person shall pay a penalty of five thousand rupees or three per
 cent of the amount of the tax involved, whichever is higher. 23
3. Any person who unauthorizedly issues an invoice in which an
amount of tax is specified. Such person shall pay a penalty of
ten thousand rupees or five per cent of the amount of the tax
involved, whichever is higher. 3, 7 and 23

TABLE

Offences Penalties Section of the Act to which offenc

(1) (2) (3)

Such person shall pay a

penalty of five thousand
rupees:
1. Where any person fails
to furnish a return within Provided that in case a
the person files a return 26
within fifteen days of the
due date. due date, he shall pay a
penalty of one hundred
rupees for each day of
default.

Such person shall pay a

2. Any person who fails to penalty of five thousand
issue an rupees or three per cent
23
invoice when required of the amount of the tax
under this Act. involved, whichever is
higher.

3. Any person who un- Such person shall pay a 3, 7 and 23

authorizedly penalty of ten thousand
 rupees or five per cent
issues an invoice in
of the amount of the tax
which an amount of tax is
involved, whichever is
specified.
higher.

37
The Sales Tax Act, 1990
4. Any person who fails to notify the
changes of material nature in the Such person shall pay a penalty of
particulars of registration of taxable five thousand rupees. 14
activity.

5. Any person who fails to deposit
the amount of tax due or any part
thereof in the time or manner laid
down under this Act or rules or
orders made there under.
Such person shall pay a penalty of 3, 6,
ten thousand rupees or five per
cent of the amount of the tax
involved, whichever is higher:
Provided that, if the amount of tax
or any part thereof is paid within
fifteen days from the due date, the
defaulter shall pay a penalty of five
hundred rupees for each day of
default:
Provided further that no penalty
shall be imposed when any
miscalculation is made for the first
time during a year:
Provided further that if the amount
of tax due is not paid even after the
expiry of a period of sixty days of
issuance of the notice for such
1
payments by an officer of Inland
 Revenue, not below the rank of
2
Assistant Commissioner Inland
Revenue, the defaulter shall, further
be liable, upon conviction by a
Special Judge, to imprisonment for
a term which may extend to three
years, or with fine which may
extend to amount equal to the
amount of tax involved, or with
both.

1 2
Substituted vide Finance (Amended) Ordinance, 2009. Substituted vide Finance
(Amended) Ordinance, 2009.

38
The Sales Tax Act, 1990
6. Any person who repeats
Such person shall pay a penalty of
erroneous calculation in the return five thousand rupees or three per
during a year whereby amount of cent of the amount of the tax 7 and
tax less than the actual tax due is involved, whichever is higher.
paid.

7. Any person who is required to Such person shall pay a penalty of 14

apply ten thousand rupees or five per
cent of the amount of tax involved,
for registration under this Act fails to whichever is higher:
make an application for registration
before making taxable supplies. Provided that such person who is
required to get himself registered
under this Act, fails to get registered
within sixty days of the
commencement of taxable activity,
 he shall, further be liable, upon
conviction by a Special Judge, to
imprisonment for a term which may
extend to three years, or with fine
which may extend to an amount
equal to the amount of tax involved,
or with both.

8. Any person who fails to maintain Such person shall pay a penalty of
ten thousand rupees or five per
records required under this Act or cent of the amount of tax involved, 22 an
the rules made there under. whichever is higher.

39
The Sales Tax Act, 1990
9. Where a registered person who,
without any reasonable cause, in non
compliance with the provisions of such person shall pay a penalty of five
section 25, thousand rupees;
(a) fails to produce the record on such person shall pay a penalty of ten
receipt of first notice; thousand rupees; and 25
(b) fails to produce the record on such person shall pay a penalty of fifty
receipt of second notice; and thousand rupees.
(c) fails to produce the record on
receipt of third notice.

10. Any person who fails to furnish the

information required by the Board Such person shall pay a penalty of ten
26
through a notification issued under sub- thousand rupees.
section (5) of section 26.

11. Any person who, Such person shall pay a penalty of 2(37)
twenty five thousand rupees or one
(a) submits a false or forged document
to any officer of sales tax; or
hundred per cent of the amount of tax
(b) destroys, alters, mutilates or falsifies
involved, whichever is higher. He shall,
the records including a sales tax
further be liable, upon conviction by a
invoice; or
Special Judge, to imprisonment for a
(c) Knowingly or fraudulently makes term which may extend to five years, or
false statement, false declaration, false with fine which may extend to an
representation, false personification, amount equal to the loss of tax
gives any false information or issues or involved, or with both.
uses a document which is forged or
false.

40
The Sales Tax Act, 1990
Such person shall pay a penalty of
12. Any person who denies or obstructs twenty five thousand rupees or one
the access of an authorized officer to hundred per cent of the amount of tax
the business premises, registered office involved, whichever is higher. He shall,
or to any other place where records are further be liable, upon conviction by a 25, 38
kept, or otherwise refuses access to the Special Judge, to imprisonment for a
stocks, accounts or records or fails to term which may extend to three years,
present the same when required under or with fine which may extend to an
1
section 25, 38 38A or 40B. amount equal to the amount of tax
involved, or with both.

13. Any person who commits, causes to Such person shall pay a penalty of 2(37)
commit or attempts to commit the tax twenty five thousand rupees or one
fraud, or abets or connives in hundred per cent of the amount of tax
commissioning of tax fraud. involved, whichever is higher. He shall,
further be liable, upon conviction by a
Special Judge, to imprisonment for a
term which may extend to five years, or
with fine which may extend to an
amount equal to the loss of tax
 involved, or with both.

Such person shall pay a penalty of

twenty five thousand rupees or ten per
cent of the amount of the tax involved,
whichever is higher. He shall, further be
14. Where any person violates any
liable, upon conviction by a Special
embargo placed on removal of goods in 48
Judge, to imprisonment for a term
connection with recovery of tax.
which may extend to one year, or with
fine which may extend to amount equal
to the amount of tax involved, or with
both.

1 2
Amended vide Finance Act, 2009. Amended vide Finance Act, 2009.

41
The Sales Tax Act, 1990
15. Any person who obstructs the Such person shall pay a penalty of
twenty five thousand rupees or one
authorized officer in the hundred per cent of the amount of 31 an
performance of his official duties. tax involved, whichever is higher.

16. Any person who fails to make Such person shall pay a penalty of
payment five thousand rupees or three per
73
in the manner prescribed under cent of the amount of tax involved,
section 73 of this Act. whichever is higher.

17. Any person who fails to fulfil any Such person shall pay a penalty of 71 an
of the five thousand rupees or three per
cent of the amount of tax involved,
conditions, limitations or restrictions whichever is higher.
prescribed in a Notification issued
under any of the provisions of this
Act.
1
Such officer of Inland Revenue
18. Where any officer of Sales Tax shall be liable, upon conviction by a
authorized to act under this Act, Special Judge, to imprisonment for
acts or omits or attempts to act or a term which may extend to three Gene
omit in a manner causing loss to years, or with fine which may
the sales tax revenue or otherwise extend to amount equal to the
abets or connives in any such act. amount of tax involved, or with
both.

19. Any person who contravenes

any Such person shall pay a penalty of
five thousand rupees or three per
of the provision of this Act for which cent of the amount of tax involved, Gene
no penalty has, specifically, been whichever is higher.
provided in this section.

1
Substituted vide Finance (Amended) Ordinance, 2009.

42
The Sales Tax Act, 1990
20. Omitted

Such person shall pay twice

21. Where any person repeats an offence for the amount of penalty
which a penalty is provided under this Act provided under the Act for t
said offence

22. Any person who,-

(a) knowingly and without lawful authority gains
access to or attempts to gain access to the
computerized system; or
(b) unauthorizedly uses or discloses or publishes
or otherwise disseminates information obtained
from the computerized system; or
(c) falsifies any record or information stored in the
computerized system; or
(d) knowingly or dishonestly damages or impairs
the computerized system; or
(e) knowingly or dishonestly damages or impairs
any duplicate tape or disc or other medium on
which any information obtained from the
computerized system is kept or stored; or
(f) unauthorizedly uses unique user identifier of
any other registered user to authenticate a
transmission of information to the computerized
system; or
(g) fails to comply with or contravenes any of the
conditions prescribed for security of unique user
identifier.

Determination of tax liability.

(1) Subject to the provisions of section 8B, for the purpose of
determining his tax liability in respect of taxable supplies made
during a tax period, a registered person shall, subject to the
provisions of section 73, be entitled to deduct input tax paid or
payable during the tax period for the purpose of taxable supplies
made, or to be made, by him from the output tax that is due from
him in respect of that tax period and to make such other
adjustments as are specified in Section 9: The Sales Tax Act,
1990 21 Provided that where a registered person did not deduct
input tax within the relevant period, he may claim such tax in
the return for any of the six succeeding tax periods.

(2) A registered person shall not be entitled to deduct input tax

from output tax unless,--
(i) in case of a claim for input tax in respect of a taxable
supply made, he holds a tax invoice in his name and bearing his
registration number in respect of such supply for which a return
is furnished;
(ii) in case of goods imported into Pakistan, he holds bill
of entry or goods declaration in his name and showing his sales
tax registration number, duly cleared by the customs under
section 79 or section 104 of the Customs Act, 1969 (IV of
1969);
(iii) in case of goods purchased in auction, he holds a
treasury challan, in his name and bearing his registration
number, showing payment of sales tax;

(3) Notwithstanding anything in sub-sections (1) and (2), the

Federal Government may, by a special order, subject to such
conditions, limitations or restrictions as may be specified therein
allow a registered person to deduct input tax paid by him from
the output tax determined or to be determined as due from him
under this Act.
(4) Notwithstanding anything contained in this Act or rules
made there under, the Federal Government may, by notification
in the official Gazette, subject to such conditions, limitations or
restrictions as may be specified therein, allow a registered
person or class of persons to deduct such amount of input tax
from the output tax as may be specified in the said notification.

APPEAL TO THE APPELLATE TRIBUNAL

An appeal can be filed against the order of the
Collector(Appeals) before the Appellate Tribunal.
Limitation and computation of time:-
The limitation for preferring an appeal against any order or
decision of an officer of Sales Tax under the Act is 60 days
from the date of receipt of such order or decision. The day
on which the order is passed and the period upto issue
and receipt of the order is to be excluded in computing the
period of limitation of 60 days.
Condonation of delay:-
The Appellate Tribunal has been empowered to condone
the delay in filing the appeal, if it is satisfied that the
appellant had sufficient cause for not filing the appeal
within time.
Payment of Appeal fee:-
For filing appeal a fee of Rs. 1000 has to be deposited in
the government Treasury ( or in any designated branch of
the National Bank of Pakistan) under the head B02341-
Sales Tax.

Credit Note
A credit note is issued to correct a genuine mistake or
to give a credit to your customer under the following
situations:

1. Correction of a genuine mistake (e.g. goods invoiced

as standard-rated which should have been exempt or
zero-rated);
2. Supply did not take place;
3. Charges are partly or fully waived before/after
delivery of the goods;
4. Goods or services are accepted, but terms of the
contract are not fully met (e.g. sub-standard goods
are accepted by the customer at a reduced price);
5. Goods are returned or services are not accepted; or
6. Goods and services are supplied for an unconfirmed
consideration.
Information Required on Credit Notes
To be valid for GST purposes, a credit note must show
clearly:
 1. An identifying number e.g. a serial number;
2. The date of issue;
3. Your name, address and GST registration number;
4. Your customer's name and address;
5. The reason for the credit (e.g. "returned goods");
6. A description sufficient to identify the goods and
services for which credit is being allowed;
7. The quantity and amount credited for each
description;
8. The total amount credited excluding tax;
9. The rate and amount of tax credited; and
10. The total amount credited including tax.

Debit Note
Generally, you are required to issue a tax
invoice or simplified tax invoice (if the total amount
payable including GST does not exceed $1,000)
for standard-rated supplies made to your GST-registered
customer. This is to enable your GST-registered customer
to support his input tax claims.

You may issue a debit note to request for payment for

transactions where no GST is charged (e.g. internal
billings within the same company).
Treatment

Where a registered person has issued a tax invoice in respect of

a supply made by him and as a result of cancellation of supply
or return of goods or a change in the nature of supply or change
in the value of the supply or some such event the amount shown
in the tax invoice or the return needs to be modified, the
registered person may, subject to such conditions and limitations
as the Board may impose, issue a debit or credit note and make
corresponding adjustment against output tax in the return.

Taxable Supply
For VAT purposes, a taxable supply can be defined as a sale of
taxable goods and/or a delivery of taxable services. An
importation of taxable goods is also a taxable supply. Taxable
means that VAT is applied on these transactions.

There are two VAT rates: the standard rate at 15% applied on
most of goods and services imported and sold in Seychelles,
and the zero rate at 0% mainly applied on exports and a
specific list of items as per Schedule 2 of the Value Added Tax
Act, 2010.
 Exempt Supply
An exempt supply is a sale of good or delivery of service which
is not taxable, no VAT is charged on such supply. Exempt
supplies are enumerated schedule I of the VAT Act 2010; they
include educational, health and financial services as well as
goods of first necessity such as rice, infant formulae, lentils,
and so on.

Zero Rating
Zero rated goods are those goods on which the impact of
tax paid is offset by subsequently allowing refund or input
adjustment equivalent to the tax already paid. Zero rating
is different from exemption in the sense that no tax is to be
paid on the exempt goods whereas in case of zero rated
goods not only that no sales tax is payable on supply but
refund or input tax adjustment of tax already paid is
allowed.
Following categories of goods fall in the category of zero
rated goods:
(a) All exports (except those made by land route to
Afghanistan) are zero-rated.
(b) Other zero-rated supplies are mentioned in section 4
and the Fifth Schedule of the Sales Tax Act, 1990, which
include supplies to diplomats, privileged persons and
privileged organizations, supplies of raw materials to
Export Processing Zones,
and
(c) Supplies made against international tenders.
A person making both zero-rated supplies and taxable
supplies or providing taxable services will charge sales tax
only on the taxable supplies /services