ISLAMABAD (January 08 2004): To encourage jewellers community to pay general sales tax (GST), the Central Board of Revenue (CBR) has decided to give exemption of 'additional sales tax' and penalty to leading jewellers without withdrawing show-cause notices served on them.
ISSUE: Whether the weight of exempt gold/silver used in jewellery sold refer to 24-kt gold/silver only or are other caratage/mixed gold/silver also included ?
CLARIFICATION: Under Serial Number 24 of the Sixth Schedule of the Sales Tax Act, 1990, exemption of sales tax is available on 'gold and silver in un-worked condition and 'monetary gold' falling under heading no.71.06 and 71.08 of the First Schedule of the Customs Act, 1969. Since the exemption is not limited only to pure (24kt) gold/silver, therefore un-worked gold/silver of the caratage ordinarily sold/available in the market is also exempt from sales tax.
ISSUE: Is it correct to calculate the value of exempt gold/silver used in jewellery sold @ 24kt gold rate or any caratage/mixed gold/silver rate prevailing at the time of selling jewellery in which exempt gold is sold ?
CLARIFICATION: Visible wastage has to be charged to sales tax on its actual value at the time of its supply. As regard invisible wastage, the jewellery obviously includes its cost in the value of the jewellery sold.
ISSUE: Kindly clarify the word 'purchase' and insert the word value in rule 5(ii) because the word 'purchase' is creating confusion as it is not in accordance with rule 4 of SRO.391(I)/2001.
CLARIFICATION: Since the Special Procedures for Jewellers Rules 2001 envisage that sales tax is chargeable on the value-addition made by the jeweller, and not on the price fluctuation of gold/silver in the market, the value of exempt gold/silver used in the jewellery sold shall be that on the date of sale of the jewellery. The word 'purchase' may be interpreted as 'purchased on the date of sale of the jewellery'.
ISSUE: Manufacturers-cum-exporters should be treated as 'zargar' and exempt from sales tax.
CLARIFICATION: The definition of zargar means that any person who is engaged in the making and carrying out any related process on labour charge basis, and is not involved in the sale of jewellery to ordinary consumers. As agreed with the association, zargars are small-scale manufacturers who make jewellery for other jewellers, and are themselves not involved in retail business. It is not comprehensible that such persons would be involved in export.
The association may not attempt to enlarge the definition of zargar. In any case, exports are zero-rated, and such manufacturers-cum-exporters who export 100 percent of their products should have no hesitation to get registered, as they do not have to pay any sales tax.