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Input tax adjustment for PTV ads: Revenue Board issues procedure

ISLAMABAD (November 02 2003): The Central Board of Revenue (CBR) has issued procedure for adjustment of input tax paid on advertisement services by Pakistan Television Corporation (PTV) registered clients.

The CBR has superseded ruling 12/2003 through a directive issued to collectors of sales tax here on Saturday.

The CBR has informed Pakistan Advertising Association and PTV, Karachi, that banking instruments would be accepted for the purposes of input tax adjustment under section 73 read with section 7 of the Sales Tax Act, 1990.

Details show that a question had been raised whether or not a banking instrument (such as bank draft, cheque, etc) issued in the name of advertising agency covering the invoice amount (including agency commission) for onward payment to PTV by such agency after deduction of agency commission is admissible for the purposes of input tax adjustment.

This input tax adjustment is claimed under section 73 read with section 7 of the Sales Tax Act, 1990, despite the fact that the invoice is issued by PTV (service provider) directly in the name of client (registered person) and that the advertising agency is a non-registered person for the purposes of the Sales Tax Act,1990.

The matter had been re-examined in the Board. Considering the special nature of transaction as well as the established business practice in advertisement sector, the intermediary role of advertising agency cannot be avoided by the client, and the banking instrument has to be invariably routed through the advertising agency.

The CBR is of the view that such banking instruments would be accepted for the purposes of input tax adjustment under section 73 read with section 7 of the Sales Tax Act, 1990.

Moreover, the provisions of section 73 stand relaxed to that extent in all such cases subject to the observance of following conditions viz: Payments for all such advertisements are made by the registered person through the banking channel, so that payment against a particular invoice through banking channel could be easily verified.

All the invoices issued by PTV are in accordance with the specimen invoice appended with this ruling.

The CBR observed that while claiming input tax adjustment, the provisions of Apportionment Rules notified vide SRO 698(I)/96 August 22, 1996 are adhered to, if and as applicable.

No input tax adjustment for items mentioned in notification SRO 578(I)/98 dated 12.06.1998 is claimed or availed.

No refund of the sales tax already paid by the registered person on this account shall be allowed/claimed on the basis of this ruling, the CBR added.

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