In the beginning there was only FBR, responsible for collection of Sales Tax on goods. Then came the famous 18th amendment which shifted the assessment & collection of Sales Tax from Center to provinces. As a result each province formed its own Revenue Agencies and we now have SRB, PRA, KPRA & BRA to deal with.
Therefore Sales Tax is divided into two broad categories, first one is related to supply of goods and second one is related to supply of services. Sales Tax on supply of goods is Federal Government subject and is governed by Sales Tax Act 1990, whereas supply of services is provincial subject, each province has created their own laws for collection of Sales Tax in respect of services.
GST was a provincial subject at the time of Pakistan’s Independence, however, it was subsequently converted into Federal Subject and extended to imports and domestic sale of goods by manufacturers and wholesalers;
In 1995-96, GST was converted into a full-fledged Value Added Tax model and in 1997 the scope was extended to importers and in 1998 to wholesalers and retailers;
Since the Constitutional right to GST on services vest with the Provinces, the scope of GST was extended to certain services through Provincial Sales Tax in 2000, however, the collection was administered by the FBR. until 2011 when the Province of Sindh started collecting sales tax on a wide range of services through its own revenue Board – called Sindh Revenue Board. Punjab has also introduced its own Sales Tax law and established Punjab Revenue Authority to collect sales tax from July 1, 2012 and so on, each province formed its own revenue collecting authority.
Overview Of Sales Tax System
Sales tax is a value added tax (VAT) system. It is indirect tax collectable from the whole supply chain i.e. importers, manufacturers, wholesalers (including dealers and distributors) and retailers with certain exceptions. Therefore the sales tax is a multi stage tax payable on the value of:
- Taxable supplies by a registered person in respect of any taxable activities carried on by him.
- Goods imported into Pakistan.
- Specific taxable services.
- VAT is a percentage tax levied on the price each registered person charges for goods supplied or taxable services rendered by him.
VAT is a tax on final consumer, it utilizes a system of tax credit (called input tax adjustment) to place the ultimate and real burden of tax on the final consumer and to relieve the intermediaries from tax burden
Persons required to get Sales Tax registration:
- Retailers (conditions applies);
- Wholesalers and distributors; and