Meant by change in Tax rate and impact on different transactions under the Sales Tax Act, 1990

Change in the rate of tax:

If there is a change in the rate of tax, the tax shall be charged in the following ways:

i) In respect of taxable supply made by a registered person:

A taxable supply made by a registered person shall be charged to tax at such rate as is in force at the time of supply.

In other words, such supply shall be taxed at the present rate prevailing at the time of supply.

ii) In respect of goods imported into Pakistan:

a) If goods are entered for home consumption, the rate of tax shall be the prevailing rate on the date on which a goods declaration is presented u/s 79 of the Customs Act, 1969.

b) If good are cleared from warehouse, the rate of tax shall be the prevailing rate on the date on which a goods declaration for clearance of such goods is presented u/s 104 of the customs Act 1969.

iii) Rate applicable where goods declaration is presented in advance of the arrival of the conveyance:

The tax shall be charged at the rate prevailing on the date on which the manifest of the conveyance is delivered.

iv) Rate where tax is not paid within seven (7) days of the goods declaration:

The tax shall be charged at the rate prevailing on the date on which tax is actually paid.

v) Effect on return where rate is changed:

Where, there is a change occurs in tax rates, the registered person is required to file a separate return for each rate. In other words, the person is required to file two returns for a tax period (i.e. one for the period prior to the change in tax rate and other for the period after the change in tax rate)

Time and manner of payment [6]

1) Goods Imported in Pakistan:

Where a person imports goods into Pakistan, following procedure regarding payment will be adopted:

a) Time of payment:

The tax in respect of goods imported into Pakistan shall be charged at the same time as if it were a duty of customs payable under the Customs Act, 1969.

b) Manner of payment:

The tax in respect of goods imported into Pakistan shall be paid in such manner as if it were a duty of customs payable under the Customs Act, 1969.

2) Taxable supplies made by a registered person:

Where a taxable person makes taxable supplies to a registered person, following procedure shall be adopted in respect of payment:

a) Time of payment:

The tax due on taxable supplies shall be paid by a registered person at the time of filing of return.

b) Mode / Manner of Payment:

i) Through deposit in a bank designated by the Board; and

ii) Through such other mode and manner as may be specified by the Federal Board of Revenue.

3) Special mode, manner or time of payment of tax:

In addition to above-mentioned criteria, the FBR may notify that the tax in respect of all or some classes of supplies (other than zero rated supplies) shall be charged, collected and paid in any other way, mode, manner or at time as may be specified in the notification.

Determination of Tax Liability: [7]

The liability of a registered person is determined by deducting input tax from the output tax of a particular period.

Total output tax of the period XXX

Total input tax of the period (Subject to section 8B & 73 and also other requirements) XXX

Net sales tax liability of the period XXX

Note: 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.


Requirements regarding input tax claim:

To claim input tax against the output tax, a person has to fulfill the following requirements:


1) Tax invoice:

Tax invoice is the basic requirement, where a person claims an input tax credit in the process of determination of its tax liability, if a person has no tax invoice, cannot deduct such input tax from output tax.

2) Bill of entry or goods declaration:

In case of goods imported into Pakistan, a registered person shall be held a bill of entry or goods declaration in his name and bearing his registration number, duly cleared under the Customs Act, 1969.

3) Treasury challan:

In case of goods purchased in auction, a registered person holds a treasury challan, in his name and bearing his registration number showing payment of sales tax.

4) Special order of the Federal Government:

The Federal Government may issue any special order regarding deduction of input tax from output tax, where a person has to follow such order instead of other requirements.

Adjustable input tax: [8B]

(1) Notwithstanding anything contained in the Sales Tax Act, 1990, in relation to a tax period, a registered person shall not be allowed to adjust input tax in excess of ninety per cent of the output tax for that tax period:

Provided that the tax charged on the acquisition of fixed assets shall be adjustable against the output tax in twelve equal monthly installments:

Provided further that the Federal Board of Revenue may, by notification in the official Gazette, exclude any person or class of persons from the purview of sub-section (1).

(2) A registered person, subject to section (1), may be allowed adjustment of input tax not allowed under sub-section (1) subject to the following conditions, namely:–

(i) in the case of registered persons, whose accounts are subject to audit under the Companies Ordinance, 1984, upon furnishing a statement along with annual audited accounts, duly certified by the auditors, showing value additions less than the limit prescribed under sub-section (1) above; or

(ii) in case of other registered persons, subject to the conditions and restrictions as may be specified by the Federal Board of Revenue by notification in the official Gazette.

(3) The adjustment or refund of input tax mentioned in sub-section (2), if any, shall be made on yearly basis in the second month following the end of the financial year of the registered person.

(4) Notwithstanding anything contained in sub-section (1) and (2), the Federal Board of Revenue may, by notification in the official Gazette, prescribe any other limit of input tax adjustment for any person or class of persons.

(5) Any auditor found guilty of misconduct in furnishing the certificate mentioned in sub- section (2) shall be referred to the Council for disciplinary action under section 20D of Chartered Accountants, Ordinance, 1961.

Levy and collection of tax on specified goods on value addition [7A]

The Federal Government may specify some goods on which sales tax shall be charge on value addition basis (the difference between the value of supply for which the goods are acquired and the value of supply for which the goods, either in the same state or on further manufacture, are supplied)

The Federal Government may specify the minimum value addition required to be declared by certain persons or categories of persons, for supply of goods of such description, or class as may be prescribed, and to waive the requirement of audit or scrutiny of records if such minimum value addition is declared.

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