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Adjustment of Sales tax against FED
01-20-2010, 01:50 PM,
#1
Adjustment of Sales tax against FED
Dear all,

I got a situation where a service providing company is going to incur capital expenditure for replacing its current IT system with a new one. New IT system will comprise of hardware and software etc.

From this capital expenditure the company will generate taxable service via e-commerce subject to FED. Presently, the company is registered as FED payer and not registered as sales tax payer.

Please tell me if the company gets itself registered with sales tax, would the sales tax paid on the purchase of hardware and software be adjustable or refundable against the FED charged to its clients.

Please also tell whether the sales tax paid by the company can be adjusted with FED charged to the clients.

Regards,

*
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01-25-2010, 03:13 PM,
#2
 
anyone who has such knowledge please reply.
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01-26-2010, 01:36 AM,
#3
 
Dear,

Yes(in both cases), You may adjust the amount of sales tax paid in the aforementioned situation against FED.


Go through FED Act, Rules regarding levy of duty.

Regards,
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01-26-2010, 01:40 PM,
#4
 
Dear Faisal,

I have gone through the laws suggested by you and understanding is;

Section 6 of Federal Excise Act, 2005....

"Adjustment of duties of excise. — (1) For the purpose of determining net liability of duty in respect of any goods, the duty already paid on goods specified in the First Schedule <b>and used directly as input goods for the manufacture or production of such goods</b> shall be deducted from the amount of duty calculated on such goods."

Section 7 of Sales Tax Act....

"Determination of tax liability.#8213; Subject to the provisions of section 8B, for the purpose of determining his tax liability in respect of taxable supplies made during a tax period, a registered person shall, subject to the provisions of section 73, be entitled to deduct input tax paid or payable during the tax period <b>for the purpose of taxable supplies made</b>, or to be made, by him from the output tax that is due from him in respect of that tax period and to make such other adjustments as are specified in Section 9

Provided that where a registered person did not deduct input tax within the relevant period, he may claim such tax in the return for any of the six succeeding tax periods."

As i have understood from the above quoted sections, FED and Sales tax would only be adjustable when the company make taxable supplies (as per sales tax law)or use the FED loaded purchased goods in manufacturing or production (as per FED law). At both place no where has been stated about the taxable services in respect of adjustment of sales tax/FED...

Please comment.

Regards,

*
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04-20-2010, 07:41 PM,
#5
 
Dears,

Please answer the query above.


Regards,


*
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04-20-2010, 08:11 PM,
#6
 
Faisal is not comming at forum for a long time.
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