Value Addition Working - Printable Version

Value Addition Working - Printable Version

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Value Addition Working - Helpme - 08-03-2011

Please tell me the new update.

"INPUT SALES TAX ON RS. 125 @17% RS.21.25
VALUE ADDED SALES TAX @2% RS. 2.50
TOTAL INPUT SALES TAX RS.21.25+2.50 = TOTAL RS.23.75

SALES TAX INVOICE FOR CUSTOMER
RS. 139.70 @17% RS.23.75 TOTAL RS.163.45

OUTPUT SALES TAX RS.23.75
LESS INPUT SALES TAX RS.23.75

SALES TAX PAYABLE NIL"

- Helpme - 08-05-2011

Please advise me

- student_of_law - 08-06-2011

Please elaborate the addition of value added tax @ 2% is under which section or SRO?

Generally speaking, according to s.8B of the sales tax Act, 1990, "a registered person shall not be allowed to adjust input tax in excess of ninety percent of the output tax for that tax period"

For example if out put tax is Rs.100, a registered person cannot claim input tax exceeding Rs.90.

Exception to the above rule is given in sub section 2 of s.8B

However, the input tax not so adjusted would be carried forward to next tax period as provided in Proviso to sub-section 1 of S.10. Later refund may also be claimed subject to such restrictions as notified by Board.

- umar_khi08@yahoo.com - 08-08-2011

Salaamx!!

Dear HELPME,

There is no any value addition in as per your above example. However it is depand upon the status of registration of registered person to claim / adjust such additional tax 2% at import stage.
This additional tax 2 % is increases to 3 %.

In this case there is no payment / refund. (Kindly follow below two condition)

Cond # 1

If the Registered person is trader / Importers

He must pay 10 % of their sales as out put tax liability. only adjust 90 % of out put with input.

Cond # 02

in case of manufacturer/ Exporter

Registered person has not any obligation to pay / refund as per your example.

Dear Student of Law,

U r rite that 90% of the input is claimable. But i would like to explain that rule/Sec 8.b states that this rule only valid for those registered person who are traders or importers. such registered person must pay 10 % of their sales as out put tax.

- student_of_law - 08-08-2011

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by umar_khi08@yahoo.com

Dear Student of Law,

U r rite that 90% of the input is claimable. But i would like to explain that rule/Sec 8.b states that this rule only valid for those registered person who are traders or importers. such registered person must pay 10 % of their sales as out put tax.
<hr height="1" noshade id="quote"></blockquote id="quote">

Dear Umar,

Thanks a lot for your valuable guidance. But I need your further assistance.

You said that manufacturers are exempt from operation of s.8B(i.e. rule that input tax claimed should not exceed 90% of output tax). After reading your reply I re-read s.8B but did not find such exemption there. Then on searching SRO I found SRO 647(I)/2007 dated 27.06.2007

[url="http//www.fbr.gov.pk/sros/SalesTaxSROS/2007/2007sro647.pdf"] click for SRO 647(I)2007[/url]

After going through a few amendments through 2 SROs, later the whole table was changed w.e.f 01.07.2008 vide
[url="http//www.fbr.gov.pk/sros/SalesTaxSROS/2008/2008SRO529.pdf"] SRO529(I)/2008[/url]
A few entries were further added vide
[url="http//www.fbr.gov.pk/sros/SalesTaxSROS/2008/2008SRO713.pdf"] SRO713(I)/2008[/url]

After the above amendments now the updated version of SRO 647enlists persons and items who are currently exempt from s.8B. On reading it I found that all manufacturers are not exempt but it allows exemption to only such manufacturers who have paid input tax at certain rates exceeding 17%. Similarly, it also gives exemption to commercial importers subject to certain conditions. Distributors and wholesalers are all exempt

Please quote the relevant section or SRO on the basis of which you are of the view that all manufacturers and exporters are exempt while all traders and importers are not exempt from operation of s.8B

I once again thank you that your point has lead me to undertake this research and to share it with the other readers. Please correct me where I am wrong. Please also give basis of your stance that all manufacturers are exempt

- LapTop - 08-08-2011

NOTIFICATION
(SALES TAX)

S.R.O. 647(I)/2007.â In exercise of the powers conferred by the second proviso to sub-section (1) of section 8B of the Sales Tax Act, 1990, the Central Board of Revenue is pleased to direct that the registered persons specified in column (2) of Table below shall be excluded from the purview of the said sub-sectionâ
TABLE
1. Persons registered in electrical energy sector.
2. Oil marketing companies and petroleum refineries.
3. Fertilizers manufacturers.
4. Manufacturers consuming raw materials chargeable to sales tax at the rate of 18.5% or 21% provided value of such raw materials exceeds 50% of value of all taxable purchases in a tax period.
5. Wholesalers-cum-retailers operating in Chapter XII of the Sales Tax Special Procedures Rules, 2007.
6. Commercial importers provided the value of imports subjected to 2% value addition tax under Chapter X of the Sales Tax Special Procedures Rules, 2007, exceeds 50% of value of all taxable purchases in a tax period.
7. Person making zero-rated supplies provided value of such supplies exceeds 50% of value of all taxable supplies in a tax period.â(sro.529-2008 )
8. Distributors and wholesalers.
9. Gas distribution companies.
10. Solvent extracting units of edible oils.â( sro.713-2008)
11. Telecommunication Servicesâ. (sro.1234-2008)
12. Pakistan Steel ,Bin Qasim, Karachi. (sro.36-2009)

This notification shall take effect from 1st July, 2007.

- Sayub - 08-13-2011

laptop might have shared this sro to highlight importers covered under sales tax special procedure rules, who are subject to 2%(now 3%) value addition tax at import stage which is non-adjustable/non refundable(subject to such conditions as specified in special procedure rules.) #8626;
#8626;#8626;
Dear Student of law i would appreciate your comments made after reading these rules to enrich my knowledge. <blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by LapTop
 

NOTIFICATION
(SALES TAX)

S.R.O. 647(I)/2007.â In exercise of the powers conferred by the second proviso to sub-section (1) of section 8B of the Sales Tax Act, 1990, the Central Board of Revenue is pleased to direct that the registered persons specified in column (2) of Table below shall be excluded from the purview of the said sub-sectionâ
TABLE
1. Persons registered in electrical energy sector.
2. Oil marketing companies and petroleum refineries.
3. Fertilizers manufacturers.
4. Manufacturers consuming raw materials chargeable to sales tax at the rate of 18.5% or 21% provided value of such raw materials exceeds 50% of value of all taxable purchases in a tax period.
5. Wholesalers-cum-retailers operating in Chapter XII of the Sales Tax Special Procedures Rules, 2007.
6. Commercial importers provided the value of imports subjected to 2% value addition tax under Chapter X of the Sales Tax Special Procedures Rules, 2007, exceeds 50% of value of all taxable purchases in a tax period.
7. Person making zero-rated supplies provided value of such supplies exceeds 50% of value of all taxable supplies in a tax period.â(sro.529-2008 )
8. Distributors and wholesalers.
9. Gas distribution companies.
10. Solvent extracting units of edible oils.â( sro.713-2008)
11. Telecommunication Servicesâ. (sro.1234-2008)
12. Pakistan Steel ,Bin Qasim, Karachi. (sro.36-2009)

This notification shall take effect from 1st July, 2007.

<hr height="1" noshade id="quote"></blockquote id="quote">