FinanceNews

Revenue Board makes amendment on crossed bank draft payment

ISLAMABAD (April 20 2003) : The Central Board of Revenue (CBR) has announced that payment made through a crossed bank draft or a crossed pay order by a buyer to the seller from a bank in the same city where the buyer does not have an account, is covered under Section 73 of the Sales Tax Act, 1990.

The buyer has to submit certain documentary evidences to the CBR for fulfilment of the above-mentioned condition under section 73.

The CBR has observed that during normal course of business, a buyer obtains a bank draft/pay order in favour of the supplier from a bank in the same city where the buyer does not have an account.

The CBR has notified the decision through a sales tax ruling 8/2003 after taking viewpoint of Ministry of Law and Justice.

The CBR has received representations from various associations of registered persons for ruling as to whether or not payment through a crossed bank draft or pay order in favour of supplier from a bank where the buyer does not have an account, fulfils the requirement as stipulated in section 73. The question was raised in relation to cases wherein the buyer has the proof that the cash had been withdrawn from the account of the buyer and shown as credit in the cashbook.

Later on cash amount was taken to the other bank in the same city for the preparation of crossed bank draft/pay order for payment to the seller.

The issue has been deliberated upon in consultation with the Law, Justice and Human Rights Division.

It has been found that as a normal business practice, a buyer obtains a crossed bank draft or crossed pay order in favour of the supplier from a bank in the same city where the buyer does not have an account.

Therefore, the authorities rule that payment made through a crossed bank draft or a crossed pay order by a buyer to the seller from a bank in the same city where the buyer does not have an account, will fulfil the condition stipulated in section 73 of the Sales Tax Act, 1990.

Provided that the buyer has the documentary evidence to prove the amount of crossed bank draft or crossed pay order has been withdrawn from his bank account and credited in the cash book.

The amount has been shown debited in the cash book and a crossed bank draft or crossed pay order has been got issued from a bank in the same city where a buyer does not have an account for payment in favour of the registered supplier.

The crossed bank draft or crossed pay order was sent to the registered supplier by mail/courier or delivered through a special messenger.

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