Sales Tax Special Procedures Rules, 2007 SRO.480(I)/2007, Dated 09 June February 2008

2 Key features Objectives of separate set of Special Procedure Rules [SPR] History [Several notifications merged effective 01 July 2004] SPR withdrawn / merged effective 01 July 2007 Preamble to SPR – Important considerations Applies on specific business segments / categories of registered persons

3 Business segments / categories of RP under SPR [11] Retailers Electric power Natural gas Sugar [Supplies to Trading Corporation of Pakistan only] Service providers under Provincial Sales Tax Ordinances Oil marketing companies [Joint installations at Mahmoodkot] Vehicle dealers Cotton ginners [Sales tax refund] Commercial importers Steel melters, re-rollers and ship breakers Biscuit confectioners and snacks manufacturers

4 Retailers Frequent changes in regime and low compliance level Applies on retailers & jewellers but not wholesalers-cum-retailers Proviso for wholesalers-cum-retailers: Not relevant Registration threshold – Annual sales exceeding Rs.5 million [Sixth Schedule] Slab table for collection of sales tax and income tax on collective basis – Final tax Corporate sector retailers allowed adjustment of WIT against final income tax liability Rates are applicable on all supplies including exempt, zero-rated and retail price items Slab table not applicable for retailers of mild steel products [MVA of Rs.1330 PMT] No input tax adjustment / refund Deposit of taxes and filing of sales tax return on quarterly basis Invoices / cash memos for each supply are mandatory, not necessarily through FECR

5 Slab table for Retailers S. No.Annual TurnoverSales tax rateIncome tax rate 1.Upto Rs.5 million Nil0.5% of total turnover 2.Exceeding Rs.5 million upto Rs.10 million 0.5% of turnover exceeding Rs.5 million Rs.25,000 plus 0.5% of turnover exceeding Rs.5 million 3.Exceeding Rs.10 million Rs. 25,000 plus 0.75% of turnover exceeding Rs.10 million Rs. 50,000 plus 0.75% of turnover exceeding Rs.10 million

6 Electric Power Applies on NEPRA’s licensed companies including dealers and agents or any other person. Generally applicable on IPPs, public & private sector projects; Captive Power Projects, WAPDA & KESC For WAPDA / KESC, CPP, persons other than IPPs: Sales tax rate is 15% of value of supply including all charges other than late payment surcharge, rents, commissions, duties & taxes. For IPPs including private sector projects: 15% on EPP component only Certificate of WAPDA / KESC deemed to be a credit note for S-9 purpose Deposit of sales tax on accrual basis, when billed Due dates for filing of returns [21 st, 25 th and 15 th of the following month] Input tax adjustment - Immunity from S-8B & SRO.660 Conditions for claiming input tax by buyers Registration No. to be printed on sales tax invoices

7 Natural gas Applies to gas well-head, gas transmission and distribution companies [DISCOs], distributors, dealers, agents, retailers of CNG & LPG Value of supplies excludes late payment surcharge billed by DISCOs Rate of sales tax is 15% generally, however supply of natural gas to CNG stations by DISCOs is subject to sales tax at 24% i.e. 9% value addition rate. No liability towards sales tax on CNG stations Input tax admissible – Immunity from provisions of S-8B & SRO.660(I)/2007 Gas invoice should reflect ST registration number & address of business premises for validity of input tax of the registered buyers Daily stock and sales tax to be maintained by suppliers other than DISCOs Due date for filing of sales tax return by DISCOs is 15 th of second month following the month of supply.

8 Sugar manufacturers – Supplies to TCP Applies on registered sugar mills for supply of sugar to TCP TCP pays value of sugar to the mill at the time of successful grant of tender against commercial invoice issued by the mill In case of delivery for exports, mill will issue zero-rated tax invoices TCP pays sales tax on removal of quantity from the mill against sales tax invoice Report supplies when invoice is issued Monthly statement to be filed by TCP with the Collector – Annexure ‘A’ of SPR

9 Service providers under Provincial Ordinances Applies to hotels, clubs, caterers, TV / radio advertisers, customs agents, ship chandlers, stevedores, courier. No registration threshold for service providers Differentiate between restaurants and hotels providing room services in addition to restaurants Time of service when completed or payment is received, whichever is earlier Invoicing at the end of month in case of credit facility Specific special procedures for advertisers, customs agent and stevedores

10 Service Providers – Advertisements Applies to broadcasting of advertisements other than exempt advertisements Value of service is gross amount received How to claim input tax by registered clients – Routed invoice prescribed under Annexure ‘B’ of SPR Payments be made through banking channel verifiable readily

11 Service providers – Customs agent & ship chandlers Value of supply for customs agent excludes certain charges which are reimbursable – No minimum values of services effective 01 July 2007 Sales tax registration and license number of customs agent are required to be mentioned on GD / duty drawback / refund claim Value of supply for ship chandler also defined and exclusive of certain charges paid on behalf of the clients

12 Service provider - Stevedores Who are stevedores: Container terminal operators, commercial tank terminal operator, bulk terminal operator, other service providers engaged in discharge and loading of cargo from / to vessels SP re-enacted and rates enhanced vide SRO.678 of 6 July 2007 No input tax adjustment allowed – Fixed assets are exempt Invoice is compulsory

13 Sales tax rates applicable for stevedores S. No.Nature of cargoRate of sale tax 1.Loading and discharge of laden containers at Karachi Port and Port Qasim. Rs. 220 per move 2.Dry bulk or break bulk cargo handled at Karachi Port and Port Qasim Rs. 25 per metric ton 3.Liquid bulk cargo handled by commercial tank and bulk terminals at Karachi Port and Port Qasim. Rs per metric ton

14 Vehicle dealers Applies to manufacturers, importers & dealers of local or imported vehicles, new or used Liability on manufacturers to furnish vehicle wise amounts of commission payable to dealers Manufacturer or importer required to mention full particulars of dealers and buyers in booking documents with exception to imports under Baggage, Transfer of Residence, Gift schemes Invoices issued by manufacturer – in the name of dealer or directly to customer Invoice of motorcycle compulsorily to be issued to dealer by the manufacturer Sales tax is payable by manufacturer in normal 15% Dealer shall pay sales tax to on commission received, if not already charged by manufacturer or importer. In case of exchange of vehicles between two dealers, sales tax is payable on actual sale

15 Cotton ginners – Refund claims Applies to refund claims filed by cotton ginning and pressing units – Zero-rated supplies Input tax refunds admissible on electricity and other inputs – fixed rates Monthly statement of production and sales by cotton ginning units to be filed with Collector – Annexure D of SPR Notices on commencement & closure of activity to be given by ginning unit to the Collector Final statement of cessation of ginning activity within 15 days – Annexure E of SPR

16 Commercial importers Commercial importers but not the manufacturers SRO.645/2007 of 27 June 2007 specifies sales tax rate applicable for commercial imports i.e. 2% ad-valorem plus 15%. Ambiguous whether final discharge of liability as per SRO.645 and Rule 58B of SPR or otherwise Sales 15% applies on locally purchased goods if traded by commercial importer 58C binds commercial importer to restrict sales tax amount in invoices in accordance with actual incidence of sales tax at import stage Option provided in STGO No.03/2007, dated 30 July 2007 to charge sales tax on invoice value and discharge of sales tax liability accordingly Immunity from requirement of audit if actual sales tax not charged in invoices Quarterly sales tax returns by 15 th day of following the end of quarter 2% sales tax should not be included for withholding income tax purpose Immunity from Section 8B but not from SRO.660 [Withholding of Sales Tax]

17 Options available to commercial importer Option I Option II Import value including Customs Duty Rs. 100 Sales Tax paid on import (15%+2%) Rs. 17 Sales price invoiced by importer excluding sales tax Rs.150 Sales tax charged in invoice Rs.17Rs Differential payable NilRs.5.50

18 Steel melters, re-rollers and ship breakers Applies to steel melting, steel re-rolling, ship breaking units and PSMCL, PSM To pay sales Rs.4.75 per unit of electricity consumed for production of steel billets, ingots and mild steel [MS] products – Final discharge of sales tax liability Payment through electricity bills if mentioned or through monthly return if not mentioned in the electric bill Rule 58Ha inserted effective 03 October 2007, which prescribes rates of sales tax for steel melters and re-rollers producing electricity with gas generators – Gill bills Rate for ship breakers is Rs.3500 PMT of re-rollable scrap Steel mills shall pay sales tax under normal regime Various amounts of sales tax prescribed for disclosure in sales tax invoices – Rule 58I Due date for filing of return is 28 th day of the month following the tax period to which electricity bill relates Values of steel products to be assessed for sales tax purpose – Table provided

19 Minimum values for sales tax - Steel products S. No.DescriptionHS CodeValue (1)(2)(3)(4) 1.Billets supplied by Pakistan Steel Mills and Peoples Steel Mills Respective headingRs. 32,300/- PMT 2.Imported billets- do -US$ 500 PMT 3.Imported re-rollable scrap72.04US$ 400 PMT 4.Re-rollable scrap supplied by ship breakers - do -Rs. 24,000/- PMT 5.Ingots and billets supplied by other steel melters. Respective headingRs. 27,335/- PMT

20 Biscuits, confectionery and snacks Applies to manufacturers paying sales tax on retail price basis under Third schedule with exception of cheese balls [19.04] Sales tax is levied in two phases: 15% on ex-factory price 15% on MVA of 12% on ex-factory price Printing of retail price, declaration of MRP to Collector No sales tax liability on distributors and wholesalers

21 Thank you.