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New system for sales tax collection from food, drink suppliers

ISLAMABAD (June 11 2005): The Central Board of Revenue (CBR) has issued special procedure for collection of sales tax on food and drinks supplied by hotels, restaurants, clubs, caterers, kitchens and other such establishments to canteens and messes, etc The levy will also be applicable on the consumption of such food/drinks inside the premises of hotels/restaurants and clubs.

The CBR has given the new mechanism in Chapter VIII of the Sales Tax Special Procedures Rules, 2005.

According to the procedure, every person supplying food, in or from the premises of clubs, caterers, kitchens, hotels or restaurants shall be liable to charge and pay sales tax irrespective of the fact that the food is consumed in that premise or supplied or catered outside or supplied as take-aways.

Explaining the criteria of registration, the procedure pointed out that every such person, whose total annual turnover from the supply of food exceeds Rs 5 million during the last twelve months, shall be liable to registration and shall get himself registered.

The sales tax on food served in a tax period shall be calculated in accordance with the formula given in the special procedure. The person will have to submit monthly return and tax due and the tax amount along with the return deposited in the Government Treasury under the head '0220000-Sales Tax'.

If the supplies are made free of charge or for some other consideration or a consideration which is lower than the listed prices, sales tax shall be charged as if it were supplied at the price listed in the menu card. Such person shall be entitled for input tax credit for the tax paid on his purchases or utilities consumed for preparation or supply of food against output tax payable subject to the limitations and restrictions imposed under section 8 of Sales Tax Act. Provided that the input tax credit shall only be admissible for amount of tax which was paid on the purchases made during that tax period for which return is submitted.

Where the said person is engaged in making taxable supplies as well as exempt supplies, the input tax credit shall be allowed as per Sales Tax Rules, 2005.

Every person shall print, in his menu card or list of food items to be supplied, the price of each item or combination of foods, as the case may be, intended to be supplied or sold by him which shall include price of the food and all duties and indirect taxes, local Provincial and Federal, also including the sales tax. The recipient or consumer of food shall be invoiced or billed to pay only the price shown in the menu card or the price list.

The food supplied by flight kitchens for a destination outside Pakistan shall be zero-rated. The collector of sales tax may, through a general or a special order, prescribe a special procedure for issuance of invoice or bills by flight kitchens whether for consumption on domestic flights or for foreign bound flights.

The registered persons shall issue a serially numbered sales tax invoice or bill starting with '0001' on first day of every financial year or commencement of business.

The persons using in their business a Fiscal Electronic Cash Register (FECR) or a computerised accounting system may issue the FECR-generated or the computer-generated sales tax invoice and computerised Cash Memo in the prescribed format. 'FECR' means an electronic cash register with fiscal memory (black box), fiscal screw and seal and capability to simultaneously print second copy (record copy) containing all information in addition to that on the first paper roll (customer copy) and having two displays, one for operator and the other for customer.

The persons opting for generation and issuance of Sales Tax Invoices or bills on FECR or a computer shall retain their record electronically.

The hotel, restaurant, club, caterer, kitchen, parlour shall keep a record of their Daily Gross Take (DGT) showing, where applicable, any zero-rated or exempt supplies separately at the end of each business day. 'Daily Gross Take' or 'DGT' means the total value of supply received during each day and includes the amount of tax.

The termed 'caterer' means a person or establishment engaged in supplying foods, drinks under arrangements to canteens, messes or to any organisation, institution or person, whether or not it provides entertainment or supplies furniture or crockery and cutlery, or ornamental or decorative accessories or lighting for illumination, on hire, lease or for any other consideration.

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