SALES TAX ZERO RATED REGIME

August 7, 2016

Updating Notice: Executive Updating Service (EUS) Products contain linkage of the Original Statutory References issued by the relevant Authorities, alongwith EUS Updating Comments only, since the passage of the Bill “Publication of Laws of Pakistan Act 2015” by the National Assembly during the first week of December 2015, because EUS does not fall under the purview of the definition of “publisher”/Section 2(f) ibid.

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FEDERAL BOARD OF REVENUE

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SALES TAX ZERO RATED REGIME

EUS UPDATE CONTENTS

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SRO. 1125 (I)/2011

PREAMBLE (Amendments)

TABLE-I (Amendments)

TABLE-II (Amendments)

CONDITIONS (Amendments)

Amendments Chronology

USEFUL REFERENCES:

Adjustable Input Tax

Amnesty Scheme

Further Tax

Sales Tax Exemption

WHT Exemptions/Clarifications

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SRO. 1125 (I)/2011:

SRO. 1125 (I)/2011 dated 31.12.2011 effective from 01.01.2012 [Supersession of SRO. 1058 (I)/2011 dated 23.11.2011]

The Federal Government notified the specified goods in the Table, including the goods or class of goods mentioned in the conditions stated in this notification, to be the goods on which sales tax shall, subject to the specified conditions be charged at zero-rate or, as the case may be, at the rate of 5%, wherever applicable, to the extent and in the manner as specified in the conditions effective from 01.12.2012 and amended as follows: (Top)

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PREAMBLE (Amendments):

Latest version of preamble read as amended by SRO. 486 (I)/2015 dated 30.06.2015 w.e.f. 01.07.2015. Earlier it was amended w.e.f. 01.03.2013 vide SRO. 154 (I)/2013 dated 28.02.2013, and SRO. 682 (I)/2013 dated 26.07.2013. (Top)

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TABLE-I (Amendments):

Existing Table renumbered as “Table-I” due to addition of “Table-II” by SRO. 682 (I)/2013 dated 26.07.2013. Table-I read under Original SRO. 1125 (I)/2011 dated 31.12.2011 with following Amendments: (Top)

S. No. 02 relating to Textile amended to substitute certain PCT headings for “and 60” w.e.f. 01.07.2016 vide SRO. 491 (I)/2016 dated 30.06.2016. Read as earlier substituted vide SRO. 504 (I)/2013 dated 12.06.2013. Earlier it was amended to insert the expression “of more than 67 decitex” w.e.f. 02.06.2012 vide SRO. 593 (I)/2012 dated 01.06.2012. 

S. No. 4 relating to Maize (corn) starch 1108.1200 omitted w.e.f. 01.07.2015 vide SRO. 486 (I)/2015 dated 30.06.2015. 

S. Nos. 1, 2, 3, 6 & 7 (relating to leather, textiles, carpets, sports goods & surgical goods) read as substituted vide SRO. 504 (I)/2013 dated 12.06.2013. (Top)

S. No. 56 (other colouring matter & other preparations) amended to exclude “master batches” vide SRO. 504 (I)/2013 dated 12.06.2013. 

S. No. 68 relating to “shoe adhesives” omitted vide SRO. 504 (I)/2013 dated 12.06.2013. (Top)

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TABLE-II (Amendments):

Table-II substituted w.e.f. 01.07.2016 vide SRO. 491 (I)/2016 dated 30.06.2016. Earlier it was substituted w.e.f. 01.07.2015 vide SRO. 486 (I)/2015 dated 30.06.2015. Before substitution aforesaid Table-II was added by SRO. 682 (I)/2013 dated 26.07.2013 and subsequently it was amended to substitute the words “Locally manufactured finished” for the word “Finished” wherever occurring against both S. Nos. 01 & 02 (relating to leather & textiles) vide SRO. 575 (I)/2014 dated 26.06.2014. (Top)

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CONDITIONS (Amendments):

Original Conditions (i) to (xiv) available in Parent SRO. 1125 (I)/2011 dated 31.12.2011 effective from 01.01.2012, which were subsequently substituted as Conditions (i) to (xii) vide SRO. 154 (I)/2013 dated 28.02.2013 w.e.f. 01.03.2013.

Condition Nos. (iii) to (ixa) omitted w.e.f. 01.07.2015 vide SRO. 486 (I)/2015 dated 30.06.2015. (Top)

Before Omission:

Condition No. (iv) was amended by SRO. 682 (I)/2013 dated 26.07.2013. 

Condition No. (v) was amended by SRO. 575 (I)/2014 dated 26.06.2014, SRO. 420 (I)/2014 dated 04.06.2014 and earlier vide SRO. 682 (I)/2013 dated 26.07.2013. 014. 

Condition No. (vi) was amended by SRO. 221 (I)/2013 dated 19.03.2013 & SRO. 682 (I)/2013 dated 26.07.2013. (Top)

Condition No. (vii) amended by SRO. 575 (I)/2014 dated 26.06.2014, SRO. 682 (I)/2013 dated 26.07.2013 & SRO. 221 (I)/2013 dated 19.03.2013. 

Condition No. (viia) was inserted by SRO. 898 (I)/2013 dated 04.10.2013.

Condition No. (viii) was amended by SRO. 682 (I)/2013 dated 26.07.2013 & SRO. 575 (I)/2014 dated 26.06.2014. (Top)

Condition No. (ix) was substituted by SRO. 221 (I)/2013 dated 19.03.2013.

Condition No. (ixa) was inserted by SRO. 682 (I)/2013 dated 26.07.2013.

After substitution by SRO. 154 (I)/2013 dated 28.02.2013 w.e.f. 01.03.2013: (Top)

Condition No. (x) substituted w.e.f. 01.07.2016 vide SRO. 491 (I)/2016 dated 30.06.2016. Earlier it was substituted by SRO. 221 (I)/2013 dated 19.03.2013, wherein proviso was substituted as first & second provisos by SRO. 898 (I)/2013 dated 04.10.2013.

Condition No. (xii) read with Procedure for issuing of general order for grant/withdrawal and rejection of zero-rating on electricity & gas to registered persons falling under SRO. 1125 (I)/2011 dated 31.12.2011, published by the Regulator/FBR as STGO No. 117/2015 dated 14.07.2015. (Top)

New condition (xiii) added w.e.f. 01.07.2016 vide SRO. 491 (I)/2016 dated 30.06.2016. Read with para 1 on page 4 of the Salient Features Budget 2016-17.

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Amendments Chronology in Descending Order:

10. SRO. 491 (I)/2016 dated 30.06.2016 w.e.f. 01.07.2016: (Top)

This notification amended Textile S. No. 02 to substitute certain PCT headings for “and 60” in Table-I, and to substitute Table-II, to substitute condition (x) and to add new condition (xiii). Read with para 1 on page 4 of the Salient Features Budget 2016-17.

09. SRO. 486 (I)/2015 dated 30.06.2015 w.e.f. 01.07.2015: (Top)

Specified expressions in the preamble substituted, S. No. 4 [Maize (corn) starch] in Table-I omitted, Table-II (specified rates for specified imports & supplies) substituted, and conditions (iii) to (ixa) omitted.

The concessionary rate of 2%, 3% and 5% were applicable to 5 export oriented sector, namely, textile leather, carpet, surgical and sports goods. The rate of 2% is being enhanced to 3%. The said notification is also being revamped and simplified without disturbing the existing provisions (except withdrawal of reduced rate on maize starch) in order to facilitate the registered persons as well as field officers. Value addition tax on commercial imports of these sectors @ 2% is being reduced to 1%. (Top)

It is to intimate that the threshold of refund to export ratio, for processing of claims through ERS, has been revised upwards keeping in view the increase in sales tax rate from 2% to 3% in accordance with the average proportion of such inputs in the refund claims. The new threshold is applicable for refund claims for the tax period July 2015 and onwards (Extract from FBR Press Release dated 30.12.2015). (Top)

08. SRO. 575 (I)/2014 dated 26.06.2014:

This notification made certain amendments in Table-II and in conditions (v), (vii) & (viii). Subsequently Table-II was substituted and aforesaid conditions were omitted w.e.f. 01.07.2015 by SRO. 486 (I)/2015 dated 30.06.2015. (Top)

07. SRO. 420 (I)/2014 dated 04.06.2014:

This notification made certain amendment in condition (v), which was subsequently omitted w.e.f. 01.07.2015 by SRO. 486 (I)/2015 dated 30.06.2015. (Top)

06. SRO. 898 (I)/2013 dated 04.10.2013:

This notification incorporated 2 provisos about pre-refund & post-refund audit by way of substitution the existing proviso in condition (x), which was earlier incorporated by way of substitution of all the conditions by SRO. 154 (I)/2013 dated 28.02.2013 effective from 01.03.2013 and subsequently substituted by SRO. 221 (I)/2013 dated 19.03.2013. Further, it inserted new condition (viia), which was subsequently omitted w.e.f. 01.07.2015 by SRO. 486 (I)/2015 dated 30.06.2015. (Top)

05. SRO. 682 (I)/2013 dated 26.07.2013:

This notification re-named the existing Table as “Table-I” and added Table-II, made amendments in conditions (iv), (v), (vi), (vii) & (viii), and new condition (ixa) inserted. Subsequently Table-II was substituted and aforesaid conditions were omitted w.e.f. 01.07.2015 by SRO. 486 (I)/2015 dated 30.06.2015. (Top)

04. SRO. 504 (I)/2013 dated 12.06.2013:

This notification substituted S. Nos. 01, 02, 03, 06 & 07 relating to Leather, Textile, Carpets, Sports goods & Surgical goods, respectively, excluded master batches from S. No. 56 (Other colouring matter and other preparations) and omitted S. No. 68 (Shoe adhesives). (Top)

03. SRO. 221 (I)/2013 dated 19.03.2013:

This notification amended conditions (vi) & (vii) & substituted condition (ix), which were subsequently omitted w.e.f. 01.07.2015 by SRO. 486 (I)/2015 dated 30.06.2015. Further, it substituted condition (x). (Top)

02. SRO. 154 (I)/2013 dated 28.02.2013 w.e.f 01.03.2013:

This notification amended preamble to substitute the words “at the rate of two per cent” for “at zero-rate”, and to substitute the existing conditions (i) to (xiv) as (i) to (xii). Subsequently conditions (iii) to (ix) inclusive of one (ixa) inserted later, were omitted by SRO. 486 (I)/2015 dated 30.06.2015 w.e.f. 01.07.2015. (Top)

01. SRO. 593 (I)/2012 dated 01.06.2012 w.e.f. 02.06.2012:

This notification amended the Table to insert the expression “of more than 67 decitex” after “mono filament” in textile related S. No. 02. (Top)

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USEFUL REFERENCES

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Adjustable Input Tax:

Section 8B p. 32 of the Sales Tax Act 1990 specified restriction/condition in certain case on adjustment of input tax, wherein second proviso od section 8B(1) allowed exclusion by a notification. Such notification read as SRO. 647 (I)/2007 dated 27.06.2007 effective from 01.07.2007 as amended from time to time including to exclude supplier covered under SRO. 1125 (I)/2011 dated 31.12.2011 from operation of said section 8B vide SRO. 492 (I)/2015 dated 30.06.2015 effective from 01.07.2015 as an amendment in the substitution of Table SRO. 529 (I)/2008 dated 11.06.2008. (Top)

Amnesty Scheme:

Following an encouraging response from textile sector, which deposited over Rs. 3 billion to clear their past sales tax liabilities, the FBR has extended the amnesty scheme up to 15.04.2013 vide SRO. 274 (I)/2013 dated 01.04.2013 amendment in Amnesty Scheme SRO. 179 (I)/2013 dated 07.03.2013. Aforesaid Amnesty Scheme was notified with reference to SRO. 283 (I)/2011 dated 01.04.2011 [as clarified on 11.04.2011 and amended by SRO. 323 (I)/2011 dated 27.04.2011. SRO. 283 (I)/2011 superseded SRO. 509 (I)/2007 dated 09.06.2007 as amended including by SRO. 231 (I)/2011 dated 15.03.2011 & SRO. 274 (I)/2011 dated 26.03.2011], SRO. 1058 (I)/2011 dated 23.11.2011 [supersession of SRO. 1012 (I)/2011 dated 04.11.2011, which superseded aforesaid SRO. 283 (I)/2011] & following SRO. 1125 (I)/2011 dated 31.12.2011, which superseded aforesaid SRO. 1058 (I)/2011. (Top)

CREST detection in non-verified zero rated sales is available in special return. You may add missing invoices or edit invoices shown for depositing final liability. These are subject to verification by system.

Further Tax:

According to the FBR, further tax on supplies subject to zero-rate under SRO. 1125 (I)/2011 dated 31.12.2011. All the supplies to unregistered persons are subject to further tax at 2% under section 3(1A) of the Sales Tax Act 1990, except those specified in SRO 648(1)/2013 dated 09.07.2013. Since zero-rated supplies are not mentioned in the said SRO, therefore, no exemption/exclusion from further tax is available to zero-rated supplies covered under SRO. 1125 (I)/2011 dated 31.12.2011. Further, the supplies to unregistered persons involve a risk that the same may end in local consumption, therefore, there is no justification in allowing exemption from further tax on such zero-rated supplies (Business Recorder 07.08.2016). (Top)

Sales Tax Exemption:

Earlier a new S. No. 31 (Raw Cotton and Ginned Cotton) was added in rescinded SRO. 551 (I)/2008 dated 11.06.2008 effective from 01.07.2008 vide SRO. 220 (I)/2013 dated 19.03.2013 to rationalize the zero-rating regime under SRO. 1125 (I)/2011 dated 31.12.2011 which was modified vide SRO. 154 (I)/2013 dated 28.02.2013 effective from 01.03.2013. Above-referred SRO. 551 (I)/2008 was rescinded by SRO. 573 (I)/2014 dated 26.06.2014. (Top)

Withholding Exemptions/Clarifications: 

Brokerage/Commission WHT (Final Tax):

Read as clarified vide FBR Income Tax Circular No. 3/2011 dated 01.04.2011.

Electricity WHT:

Read as clause (66) of Part-IV of the Second Schedule of the Income Tax Ordinance 2001 (p. 478), which was subsequently substituted by SRO. 1055 (I)/2008 dated 10.10.2008. (Top)

Goods & Services WHT:

Read with clause (45A) of Part-IV of the Second Schedule of the Income Tax Ordinance 2001 (p. 466) as inserted by SRO. 288 (I)/2011 dated 01.04.2011 and substituted by SRO. 333 (I)/2011 dated 02.05.2011 (duly and clarified by FBR Income Tax Circular No. 06/2011 dated 18.06.2011), and amended by SRO. 669 (I)/2013 dated 17.07.2013. (Top)

Import WHT:

Read as S. No. 1(iv) (@ 1% of import value and 1.5% for non-filer p. 363) & S. No. 3 (Commercial importer @ 3%/4.5% p. 364) under Part-II of the First Schedule of the Income Tax Ordinance 2001. Earlier it was notified as omitted clause (9C) duly inserted by SRO. 212 (I)/2013 dated 14.03.2013 (p. 440).

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