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Section 3B of Sales Tax Act not to be invoked for refund to pharmaceutical

ISLAMABAD (December 03 2002) : The Central Board of Revenue (CBR) has announced that the authorities could not invoke section 3B of the Sales Tax Act, 1990 for issuance of general sales tax (GST) refund to the pharmaceutical industry.

Under SRO 869(I)/2002 issued on Monday, the department is not empowered to invoke the provision of section 3B of the Sales Tax Act, 1990, while processing, sanctioning and paying of refund to the national and multinational pharmaceutical companies.

Section 3B says: “Any person who has collected or collects any tax or charge, whether under misapprehension of any provision of this Act or otherwise, which was not payable as tax or charge or which is in excess of the tax or charge actually payable and the incidence of which has been passed on to the consumer, shall pay the amount of tax or charge so collected to the Federal Government”.

This section could be exercised by the sales tax department while paying refund to the pharmaceutical industry.

According to the amendment introduced in the SRO.555(I)/2002, the manufacturers and importers of the medicines would not deposit sales tax on supplies made during 1-22 August 2002 and the amount deposited during 1-31 July, 2002 would be refunded.

The units would be responsible for defacing the amount or component of sales tax printed on the containers, packing, packets or bottles, etc. of such medicines and medicaments already supplied to the market.

Pakistan Pharmaceutical Manufacturers Association (PPMA), Pharma Bureau and persons claiming refund would ensure that all medicines supplied through their distributors, dealers and retailers are being sold to the buyers without passing the incidence of sales tax to such buyers.

The refund would be adjusted against any outstanding liability or demand of income tax unless there is already determined refund of income tax for adjustment against any outstanding liability or demand of income tax, or the person claiming sales tax refund is not liable to pay income tax under the Income Tax Ordinance, 2001, where refund be processed and sanctioned by the concerned Collectorate of Sales Tax by the Large Taxpayers Unit under section 10 of the Sales Tax Act. 1990.

Following is the text of the SRO 869(I)2002 issued on Monday:

In exercise of the powers conferred by clause (a) of sub-section (2) of section 13 of the Sales Tax Act, 1990, the Federal Government is pleased to direct that the following amendments shall be made and shall be deemed to have always been so made in its Notification No. S.R.0. 555(1)/2002, dated the 23rd August, 2002, namely: -In the aforesaid Notification,

(a) for paragraph 2, the following new paragraph shall be substituted, namely:

“2. The registered manufacturers and importers of the medicines and medicaments shall not deposit sales tax on supplies made during the period from 1st to 22nd August. 2002 (both dates inclusive) and the amount of sales tax, deposited by such manufacturers and importers for the period from 1st July to 31st July, 2002 (both dates inclusive) shall be refunded subject to the conditions stated in clause (a) and through the procedure laid down in clause (b) below:

(a) CONDITIONS: (i) Each person whether importer or local manufacturer-cum-supplier individually as well as through Pakistan Pharmaceutical Manufacturers Association (PPMA) and Pharma Bureau shall be responsible for defacing the amount or component of sales tax printed on the containers, packing, packets or bottles, etc of such medicines and medicaments already supplied for sale in the market;

(ii) PPMA and Pharma Bureau as well as each person claiming refund shall be responsible that all medicines supplied through their distributors, dealers and retailers are sold to the buyers without passing any incidence of sales tax to such buyers;

(iii) payment of refund of sales tax to importers shall be subject to the fulfilment of their legal obligations under corporate tax law;

iv) refund shall also be admissible even in cases where a taxpayer is not a member of any association like PPMA and Pharma Bureau, etc.;

(v) no refund of sales tax shall be claimed or paid on goods which are still liable to sales tax as mentioned against items (a) to (i) of paragraph I of this notification;

(vi) the provisions of section 3B of the Sales Tax Act, 1990 shall not be invoked white processing, sanctioning and paying refund under this notification; and

(vii) the admissible amount of refund of sales tax may be adjusted against any outstanding liability or demand of income tax unless there is already determined refund of income tax for adjustment against any outstanding liability or demand of income tax, or the person claiming sales tax refund is not liable to pay income tax under the Income Tax Ordinance, 2001, in which case refund shall be processed and sanctioned by the concerned Collectorate of Sales Tax or as the case may be by the Large Taxpayers Unit under section 10 of the Sales Tax Act. 1990: and

(b) PROCEDURE:

(i) the persons seeking refund of sales tax paid for the month of July, 2002 shall file their refund claim through their concerned association to the Central Board of Revenue or directly in case they are not member of any such association; and

(ii) on receipt of refund claim as aforesaid, the Central Board of Revenue shall, after necessary scrutiny, transmit the same to the concerned Collector of Sales Tax or as the case may be, Collector of Sales Tax, Large Taxpayers Unit, who shall ascertain the amount of admissible refund and refer the case to the concerned Regional Commissioner of Income Tax or as the case may be, the Director General, Large Taxpayers Unit, Karachi for adjustment of the admissible amount of sales tax refund against the income tax liability or demand and if there is no such liability or demand for the assessment year 2002-03 or for earlier years, the refund shall be processed and sanctioned as stated in sub-clause (vii) of clause (a).”; and

(b) in paragraph 3 for the figure and word 23rd August”, the figure and word “1st July” shall be substituted.

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