KCO Newsletter January 2021 - Khilji & Company

KHILJI AND CO NEWSLETTER Chartered Accountants

Jan- 2021

IN THE NAME OF ALLAH ALMIGHTY, THE MOST MERCIFUL, MOST BENEFICENT

NEWSLETTER

Plot 2, Mezzanine Floor, Khumrial Plaza, I&T Center Street 22, Sector G-8/4, Islamabad. Tel: +92 51 2253303-6, Fax +92 51 2253307, Email: [email protected], Website:www.khilji.net.pk

JANUARY 2021


Jan- 2021

DISCLAIMER

CONTENTS

APPELLATE TRIBUNAL INLAND REVENUE, ISLAMABAD I.T.A. No. 488/IB of

2018

SINDH HIGH COURT, (KARACH) C. P. No. D-5220-2017 & Others

LAHORE HIGH COURT (MULTAN BENCH) S.T.R. No. 07 of 2013

LAHORE HIGH COURT W.P No. 4361 of 2017

NOTIFICATIONS / CIRCULARS

SOCIAL MEDIA PRESENCE

Khilji & Co (Chartered Accountants) is pleased to present Firm’s Newsletter. The only purpose of this document is to provide updated information to our clients about recent circulars/ notifications issued by various authorities during this month and to provide our clients with information on latest useful decisions of appellate courts. The information provided in this document should only be used in conjunction with professional opinion from tax/ legal advisor and checked for updated position of law. This document as a whole or its any part should not be reproduced in any form without prior written approval from Khilji & Co. This newsletter is distributed free of cost to our clients only. We humbly request our readers to please provide us the most valuable comments to make this more informative and useful. It has always been a pleasure to be of service to our clients. EDITORIAL GROUP:

1. Mr. Muhammad Waheed Iqbal, FCA Chief Editor 2. Mr.Saif Uddin Khilji Section Editor 3. Syed Asim Habib Section Editor



Jan- 2021


COVID-19 PREVENTIVE MEASURES

It is matter of our fundamental faith that Almighty Allah is the most merciful and beneficent and the foremost thing to do at all times particularly difficult times like these is to seek forgiveness

from Allah for all our intentional and unintentional mistakes.

Let us pray and seek forgiveness from Allah for all sins and wrongdoings committed by us deliberately or otherwise. May Allah keep all humanity including us and our families safe from

this and all kinds of diseases. AMEEN

While the spiritual prevention of all diseases including this CORONA should be sought through Namaz and Istaghfar however at the same time we have been taught through Quran and Sunnah to take all necessary measures and medicines against all such diseases while keeping faith that

the power to cure remains with Allah.


Jan- 2021

APPELLATE TRIBUNAL INLAND REVENUE, ISLAMABAD I.T.A. No. 488/IB of 2018 The appeal was filed against the order of learned Commissioner Inland Revenue (Appeals), Sialkot, in which commissioner IR (A) remanded back the assessment passed by the assessing officer (ACIR) for the consideration. BRIEF FACTS These of the case are that the appellant is a French National and is not a resident of Pakistan. He is engaged in the business of restaurant and is owner of one in Paris, France and holds that his source of income is outside Pakistan. The proceedings in the case were started by ACIR. On the basis of information where it was alleged that the taxpayer purchased properties in Pakistan, a notice under sections 114(4) and 116(1) of the Income Tax Ordinance, 2001 was issued but on the day of the hearing neither anyone appeared, nor filed any reply. Later on, notice under section 111(1)(b) of the Income Tax Ordinance, 2001, was issued, but to no avail. Consequently, the ACIR completed assessment under section 121(1) of the Income Tax Ordinance, 2001 and vide order, created a tax demand and subsequently attached the bank accounts and recovered the impugned tax so assessed under section 140 of Income Tax Ordinance, 2001. Aggrieved by the said treatment, the taxpayer filed the first appeal before the Commissioner Inland Revenue (Appeals), Sialkot who vide his impugned order No.CIR(A)/SKT-I. Tax/433 remanded back the assessment passed by the ACIR for the consideration. Again, being aggrieved, the taxpayer filed instant appeal before this Appellate Tribunal. AR of the taxpayer contended that for the tax liability under section 111(1) (b) it is necessary for the taxpayer to be a resident of Pakistan. However, the petitioner has not been a resident of Pakistan. This means that his name is excluded from the definition of a “resident” under section 82(a) of the ITO, 2001.The AR also raised the point that the application of section 1(2) of the Income Tax Ordinance, 2001. The section states that the authority of the letter of the law laid out in the Income Tax Ordinance, 2001, extends to the whole of Pakistan. The person is non-resident so, the issue of unexplained income under-section 111(1)(b) is also ill-founded. Further, it was also pleaded that appellant has no means/business in Pakistan and all sources of income are in France and has only made investment in Pakistan by purchasing landed property through foreign exchange brought from France. It was rudimentary for Commissioner Inland Revenue to make someone representative under section 218(1)(a) by exercising the power under section 172(5). In this case no one was made representative under section 218(1)(a) read with section 172(5) on whom the notice could be served. The show-cause notice was not served on the person/taxpayer, who was not in Pakistan when it was issued. Only this fault renders the entire proceedings void ab-inito. AR further contended that, to establish the appellant, as a tax resident of Pakistan, the tax authorities need to apply the residence test, as laid out under Article 4(2) of The Convention between Pakistan and France. The Convention implores that the term “resident of a Contracting State” means a person who “under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature.



Jan- 2021

The Convention lays tests for the tax authorities to overcome in over to decide whether the individual is a resident or not, in the failure of which, would trigger the application of a Mutual Agreement Procedure laid out in Article 25 of The Convention (which reproduces the words of the OECD Model Tax Convention) under which the tax authorities would take up the issue with the French Tax Authorities. For the sake of understanding and case the relevant provisions of The Convention, vis-a-vis the OECD Model Tax Convention (MTC) are reproduced below: 1. For the purposes of this Convention, the term of a Contracting State” means any person who, under the laws of

that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. But this does not include any person who is liable to tax in that State in respect only of income from sources in that State.

2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows;

a) he shall be deemed to be a resident only of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident only of the State with which his personal and economic relations are closer (center of vital interests);

b) if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode;

c) if he has a habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national;

d) if he is a national of both States or of neither of them, the competent authorities Of the Contracting States shall settle the question by mutual agreement.

The paras (a) to (d) above are tie breaker tests which usually found in every treaty. In this case the tie breaker test has been discussed in relation to tax treaties i.e. Permanent Home and Centre of Vital Interests, Habitual Abode, and Nationality. Further, it was also discussed that the special rules must be established which give the attachment to one State a preference over the attachment to the other State. The Appellate tribunal Inland Revenue gave his decision in the favor of petitioner with the following words: “13. We are constrained to hold that the appellant is absolved from Pakistan taxation and no provision of Income Tax Ordinance is attracted as he does not have any plausible source of income that has deemed to have accrued to him. Section 111 is applicable to residents of Pakistan only and cannot be extended to appellant who is resident abroad and do not have taxable in Pakistan. We also hold that section 111 of the Income Tax Ordinance, 2001 cannot be invoked on non-resident French National who’s habitual abode is in France and have more personal and economic interest in France than Pakistan and has not earned any income from any Pakistan source. The department has failed to discharge it’s onus for the reinforcement of Section 111.



Jan- 2021

14. In the light of above we hold that the appellant is not taxable in Pakistan and section 111 is not attracted to non-resident in the presence of tax treaty between Pakistan and France upon applicable tie-breaker text. We therefore, delete the levy of tax under section 111 made by learned ACIR. The consequential to deletion of liability the Zonal Commissioner Inland Revenue is directed to return the amount extorted from the bank accounts of the appellant and with compensation, if applicable, be paid to the appellant. Resultantly, we allow this appeal.” SINDH HIGH COURT, (KARACHI) C. P. No. D-5220-2017 & Others The above petitions were filed against the notification No. SRB-3-4/12/2017 issued by Sindh Revenue Board dated 05 June, 2017. All Petitions involve a common controversy, and therefore, were decided through this common Judgment. The Petitioners were either service providers of labor and manpower and or its recipients and are aggrieved by the above notification, pursuant to which, proviso to Rule 42(E) of the Sindh Sales Tax Rules, 2011 has been deleted / omitted. Brief fact of the case, that in 2017, the SRB had amended a rule regarding third-party contracts, in which it imposed sales tax on the total amount billed by a manpower supplier. SRB, through a notification No. SRB-3-4/12/2017, amended Section 8(2) and Rule 42(E)) of the Sindh Sales Tax Act. As a consequence, thereof, the companies have been asked to pay sales tax on the gross amount of receipts, including the amounts which are reimbursed to the service providers in lieu of salaries and wages etc. Therefore, if a person, rendering labour and manpower supply services, which included salaries and allowances of workers supplied, SRB imposed sales tax on the gross amount and not on the profit of third-party contractor. Through this judgment it was highlighted that after 18th amendment the provincial authority impose tax only on services and not on goods or otherwise. It is only the quantum of services rendered or supplied which can be taxed by Province. It was also observed that in absence of anything to the contrary, ordinarily, the quantum of service charges is a matter between the service provider and the recipient of the services. There was an issue that, the value of an invoice issuing by a service provider is always lesser than what the service recipient is paying to the service provider. However, the honorable high court advised here, that service provider and service recipient can mutually agree to have two separate invoices; one for reimbursement of expenses i,e salary, wages and allowances and other for reimbursement of service fee, or even one invoice showing both these amounts separately; however in any case the tax is only chargeable or payable on the amount of services rendered and not otherwise. The honorable Sindh High Court gave his opinion in the favour of Petitioners/taxpayer, with the following words: In view of facts and circumstances of the case and the law discussed during hearing, we are of the view that the impugned action and interpretation arrived at by SRB is contrary to the Act itself, whereas, even if the proviso stands omitted, in our considered view it is only the quantum and value of service which is taxable in these cases and not the amount being reimbursed by the service recipient and therefore by means of a short order* allowed all listed petitions.



Jan- 2021

Short Order 17 November, 2020’. “All listed petitions are allowed by declaring that the value of service (of taxable supply) for the purposes of levy of sales tax on the petitioner’s / service providers / recipient (in respect of Labor and Manpower) shall be the amount of net receipt of service charges received on actual basis exclusive of all reimbursed amounts of salary and allowances”. LAHORE HIGH COURT (MULTAN BENCH) S.T.R. No. 07 of 2013 The titled appeal was filed under section 47 of the Sales Tax Act, 1990 by the Commissioner Inland Revenue, Multan, against the judgment of the ATIR, Lahore Bench, whereby order of the CIR (A) and order-in-original were set-aside. Brief facts of the case are that the respondent company is a composite unit having a solvent section and ghee section. The solvent section is excluded from the application of section 8-B of the Sales Tax Act, 1990, through S.R.O 647(I)/2007. The respondent company claims to be entitled to adjust 100% of input tax of the solvent section against the output tax. The Show-cause notice was issued to the respondent company for wrong adjustment of input tax and violation of provisions of Section 8-B of the Sales Tax Act. The DCIR passed sales tax Order-in-Original along with default surcharge and penalty. Respondent filed appeal which was dismissed by the Commissioner Inland Revenue (Appeals), Multan. Both the orders were challenged before the Appellate Tribunal. The Tribunal set-aside both the orders by holding that tax-payer cannot be deprived of its legitimate right of adjustment of input tax. The petitioner now contends that the respondent could only adjust 90% of input tax as sales tax and has wrongly adjusted 100% tax; therefore, the judgment is not sustainable in the eye of law. The following questions of law arising out of the impugned judgment have been proposed for determination by this Court: i) Whether the ATIR is justified to ignore the provision of section 8-B (I) read with S.R.O. 647(I)/2007 dated 27 June, 2007? ii) Whether ATIR is justified to vacate the order-in-original and order-in-appeal ignoring that the supplies of ghee and edible oil were not excluded from purview of the above S.R.O.? iii) Whether ATIR is justified to ignore the provision at Serial No. 24 of 6th Schedule of the Sales Tax Act, 1990 read with section 2(21a) of the Federal Excise Act, 2005?



Jan- 2021

The Appellate Tribunal reached the conclusion that the respondent’s case is compatible with the intention laid down in Serial No.4 of the SRO 647(I)/2007 dated 27 June, 2007, which excludes solvent extracting unit of edible oil from the application of Section 8(B) of the Act, However the condition of this notification were not met for four months in which value of such raw material exceeds 50% of the value all taxable purchases. As the format of the return does not show two separate columns for adjustment of 90% and 100%, therefore the respondent made 100% adjustment for the whole period. The Appellate Tribunal had reached the conclusion that by adjustment of 100% input tax against output, no loss has been caused to the revenue because the said amount could subsequently be adjusted by the respondent and the taxpayer cannot be deprived of its legitimate right to do so. For further explanation, that there is no separate column for adjustment of 90% and 100% adjustment, as the major portion of input tax was 100% adjustable therefore, they had sought 100% adjustment of sales tax. The honorable Lahore High Court (Multan Bench) the order of the Appellate Tribunal Inland Revenue (ATIR) upholds in the following words: “We do not find any illegality in the view taken by the ATIR that the respondent was entitled for 100% adjustment. Although procedure prescribed in law has not been followed, at the most the department can claim penalty for the said lapse. In view of what has been stated above, we hold the question No. (i) in the affirmative i.e., against the petitioner (CIR-A). The questions No. (ii) and (iii) do not arise out of the judgment of the Appellate Tribunal, therefore, need not be replied.” For the reasons recorded above, this Tax Reference is decided against the department. LAHORE HIGH COURT (LAHORE) W.P No. 4361 of 2017 The above petitions filed to challenge the SRO 115(I)/2015 (“SRO 115”) issued by the FBR on 9 February, 2015. Through this notification certain powers and functions have been conferred on the officers of Directorate General (Intelligence & Investigation Inland Revenue) [D.G (I&I)] by section 230 of the Income Tax Ordinance, 2001. The Honorable Lahore High court said that section 230 of the Income Tax ordinance, 2001 set up the Directorate General (Intelligence & Investigation Inland Revenue) [D.G (I&I)] It casts two onerous responsibilities on FBR.



Jan- 2021


SRO 115 merely fulfills the mandate of section 230(2)(b) (to confer powers), but the prior mandate has gone unfulfilled. The Lahore High Court judgment said that unless the officer were aware of their jurisdiction and functions, then how they would be able to employ these power within the sphere of activity settled by law. Even more important than specifying the jurisdiction is the act of specifying the functions of D.G (I&I) for that will determine the precise nature of the reason for their existence and set out the details of the field of activity. Section 230 is a specimen of brevity and by sub-section (2), legislature has delegated on FBR the power of rule making to provide for relative details and better protection to private interests, against administrative arbitrariness But FBR cannot exercise that power of administrative legislation by patchwork ignoring the essence of the delegated authority which postulates a structural approach of firstly specifying the functions and thereafter for powers to be conferred. The use of the word ‘and’ after semi-colon at the end of clause (a) in sub-section (2) reinforces the view explicated above and leaves it in no manner of doubt that the notification regarding the functions and jurisdiction has to precede the notification conferring powers, and not the other way round. On this ground SRO 115 is ultra vires and to be set aside. 230. Directorate General (Intelligence and Investigation), Inland Revenue,— The Directorate General (Intelligence and Investigation) Inland Revenue shall consist of a Director General and as many Directors, Additional Directors, Deputy Directors and Assistant Directors and such other officers as the Board, may by notification in the official Gazette, appoint

(1) The Board may, by notification in the official Gazette ,—

a. Specify the functions and jurisdiction of the Directorate General and its officers; and b. Confer the powers of authorities specified in section 207 upon the Directorate General and its officers.”

The honorable Lahore High Court (Lahore) set aside the SRO 115(I)/2015 issued by FBR and the Impugned notices being without lawful authority and of no legal effect. And the FBR is directed to initiate the process of specifying the functions and jurisdiction of the Officers of D.G (I&I) and to complete it within specified time limit. Thereafter FBR may confer powers on officers of D.G (I&I) compatibly with their functions and to accord with the holding by this Court.


Jan- 2021

NOTIFICATION & CIRCULARS FBR Instructions Manual Processing of Appeals prior to TY 2014 Federal Board of Revenue has issued letter to all Commissioners Inland Revenue (Appeals) to process all Income Tax Appeals pertaining to the tax years prior to 2014 manually. Please click below to read the original letter. https://khilji.net.pk/wp-content/uploads/2021/01/FBR-Instruction.pdf ICT (TAX ON SERVICES) ORDINANCE, 2001 Introduction Ministry of Finance, Economic Affairs, Statistics & Revenue (Revenue Division) had issued Sales Tax Notification (S.R.O. 77 (I) /2021) dated January 21, 2021, whereby further amendments have been made in its Notification No. S.R.O. 495 (I)/2016 dated July 04, 2016 to include an explanation of the terms “IT Services” and “IT enabled services” in Islamabad Capital Territory (Tax on Services) Ordinance, 2001. Commentary Federal Board of Revenue (FBR) notified a reduced rate of Five percent (5%) sales tax on “IT services” and “IT-enabled services” vide its Notification No. S.R.O. 781(I)/2018. Through the current notification an explanation has been inserted for the terms “IT Services” and “IT enabled services” to bring it at par with the definition as provided in Clause 133 of Part I of Second Schedule of Income Tax Ordinance, 2001. The terms have been explained as under: “IT SERVICES” includes software development, software maintenance, system integration, web design, web development, web hosting, and network design, and “IT ENABLED SERVICES” includes inbound or outbound call centers, medical transcription, remote monitoring, graphics design, accounting services, HR services, telemedicine centers, data entry operations, locally produced television programs and insurance claims processing. Please click below to view the original Notification https://khilji.net.pk/wp-content/uploads/2021/01/SRO77-of-2021.pdf Tax Laws (Amendment) Ordinance, 2021 Introduction The President of Islamic Republic of Pakistan has promulgated ‘The Income Tax (Amendment) Ordinance, 2021’, which shall come into force on and from first day of January 2021. PLEASE CLICK ON THE LINK BELOW TO READ THE COMPLETE COMMENTARY https://khilji.net.pk/wp-content/uploads/2021/01/Tax-Laws-Amendment-Ordinance-2021.pdf



Jan- 2021


PLEASE CLICK ON THE LINK BELOW TO READ THE ORDINANCE. https://khilji.net.pk/wp-content/uploads/2021/01/Income-Tax-Amendment-Ordinance-2021.pdf KCO IMPORTANT INFORMATION (Withholding Tax & Provident Fund Compliance) Current month of January 2021 is significant with respect to compliances with the relevant provision of Income Tax Ordinance, 2001 and Companies Act, 2017. Following two statements are required to be filed the relevant authority.

Prescribed Statement Relevant Law Deadline Quarterly statement of withholding taxes for the quarter October – December 2020

Section 165 of Income Tax Ordinance, 2001

20th January

Bi-Annual Filing of mandatory submission to SECP regarding investments out of the Provident Fund or Trust.

Employees Contributory Funds (Investment in Listed Securities) Regulation, 2018

31 January

Guidelines regarding preparation of data: Quarterly statement of withholding taxes Complete details of taxes deducted and deposited as withholding agent during the period October -December 2020. The details must include Supplier Name, NTN, Address, section under with tax withheld, gross amount, amount of tax withheld and CPR number through which tax has been deposited. Bi-Annual Filing of Statement to SECP Data as prescribed in Annexure A of Employees Contributory Funds (Investment in Listed Securities) Regulation, 2018 You are requested to prepare and provide the relevant information for timely submission with the authorities. Please feel free to contact in case you need any assistance in this regard. SPECIAL TECHNOLOGY ZONES AUTHORITY ORDINANCE, 2020 (SPECIAL SUPPLEMENT) President of the Islamic Republic of Pakistan, on December 02, 2020, passed the “Special Technology Zones Authority Ordinance, 2020” (STZA Ordinance) to ensure the development of scientific and technological ecosystem through development of Zone to accelerate technology development in the country. Purpose to make and promulgate the STZA Ordinance is to establish an “Authority” for provision of institutional and legislative support to Technology Sectors in Pakistan. We are pleased to present for information of our valued clients our commentary on this Ordinance. The information provided in this document is based on our understanding and should only be used in conjunction with professional opinion from tax/ legal advisor and after checking the updated position of law. This document as a whole or its any part should not be reproduced in any form without prior written approval from Khilji & Co. This document is distributed free of cost to our clients only. We humbly request our readers to please provide us the most valuable comments to make this more informative and useful. LINK OF COMMENTARY https://khilji.net.pk/wp-content/uploads/2021/01/Ordinance-Briefing-Jan-2021.pdf


Jan- 2021

SRB NOTIFICATION Sindh Revenue Board issued notification SRB-3-4/36/2020 dates December 30, 2020 to extend the period of exemption earlier granted vide notification SRB-3-4/3/2016 of Feb 26, 2016. Through notification SRB-3-4/3/2016 of Feb 26, 2016, SRB exempted the whole of the tax leviable on the services, listed below, as are provided or rendered by registered persons (duly registered with SRB and holding SRB registration number) to such of the coal mining companies and coal-based electricity generation companies as are, located with the Thar coal field region and are also duly recognized by the Energy Department, Government of Sindh, for this purpose. The above sales tax exemption was limited till 30 June 2020. Now vide notification dated December 30, 2020, SRB has extended the said exemption period till 30 June 2025.

Please click below to view the original Notification https://khilji.net.pk/wp-content/uploads/2021/01/20201230_NOTIFICATION_36.pdf FBR NOTIFICATION . INTRODUCTION Federal Board of Revenue (FBR), Revenue Division, issued rules for tax treatment of goods supplied from tax exempt areas into taxable areas. In this regard the FBR issued SRO 96(I)/2021dated 26 January, 2021 to make amendment in Sale Tax Rules, 2006, through an addition of a new chapter “Chapter X-A: SUPPLY FROM TAX EXEMPT AREAS”. And two new forms are also inserted after Form STR-31. The Sales Tax Act, 1990 defines “tax-exempt areas” as Azad Jammu and Kashmir, Gilgit-Baltistan, Tribal Areas as defined in Article 246 of the Constitution of the Islamic Republic of Pakistan. COMMENTARY Federal Board of Revenue (FBR) notified through this S.R.O. that, the person bringing, or causing to bring, taxable goods from tax exempt area is required to be registered under the Sales Tax Act, 1990 as adopted in Azad Jammu and Kashmir and all the provisions of the Acts ibid shall apply accordingly. The liability of payment of taxes and furnishing the prescribed documents on the person bringing or causing to bring taxable goods from exempt area. Subject to the applicable provision a registered person shall be entitled of any input tax.



Jan- 2021

Every registered person bringing, or causing to bring, taxable goods from tax exempt area into taxable area is required to generate serially number e-transport advice with a unique ID number, through FBR computerized system, in specified form i.e. STR-32. This advice issued prior to enter in to the taxable area. A blacklisted or suspended person and the person who has not filed return last two immediately preceding tax periods are not allowed to generate e-transport advice. After generation, e-transport advice may be canceled if goods are not transported or not transported as per the details furnished within twelve hours of its issuance. However it can’t be cancelled after it has been examined by authorized officer or any of the check posts. E-transport advice is valid for a one day for a distance of up to 100 km and one additional day for every 100 km or part thereafter. Where the taxable goods cannot be transferred due to any unavoidable circumstances, the concerned commissioner IR may extend the period upon receiving the application from registered person. The details of e-transport advice shall be made available to the recipient of the supply who shall convey his acceptance or rejection of the supply of goods through the FBR computerized system: Provided that where no acceptance or rejection has been communicated by the recipient within forty-eight hours of such intimation or before the delivery of the goods, whichever is earlier, it shall be deemed that he has accepted the supply of the goods: Provided further that the above provisions shall not apply where the taxable goods are brought in to the taxable area by manufacturer or importer to be sold at self-own, self-managed, self-administrated or self-operated distribution, wholesale or retail outlet. The registered person may update the particulars of vehicle while goods are in-transit after intimating to the concerned commissioner IR with reasons for the updating. Only one e-transport advice may be generated against a single invoice or a stock advice as the case may be. However one conveyance may carry multiple advices in case it is transporting taxable goods relating to multiple invoices or stock advices. Provided where e-transport advice has been canceled under sub-rule (2), fresh e-transport advice may be generated against the same invoice or, as the case may be, stock advice. Every conveyance carrying taxable goods originating from tax-exempt areas and entering taxable area shall carry the following documents at the time of entering into taxable areas namely:

a. Original sales tax invoice prescribed under section 23 of the act as adopted in AJK. However for exempt goods a serially number invoice containing all particulars excluding the amount of sales tax and mentioning the legal provision of exemption. Providing further that where the taxable goods brought into the taxable area by a manufacturer/importer to be sold at his self-owned, self-operated/self-adopted distributor, wholesaler/outlets, such goods shall be accompanied by a serially numbered stock advice in the form STR-33 along with a copy of STR-1 Form.

b. Goods declaration in case of imported goods; and c. E-transport advices as specified under rule 69D.

The prescribed documents shall accompany the conveyance up to the destination mentioned in the relevant e-transport advice. The Board may specify the location and other particulars of check-posts and mobile teams, through a notification in the Official Gazette. The chief commissioner IR of any RTO having jurisdiction over areas adjoining tax exempt areas, shall establish a check posts, as notified by the board. At the check-posts every conveyance shall be subjected to scrutiny by the authorized officer. On the basis of credible information, mobile teams may proceed to intercept, examine and search any conveyance on the routes. A summary report of examination of taxable goods under sub-rule (3) or (4), shall be recorded online by authorized officer mentioning the unique ID number of the e-transport advice of the goods examined. Any taxable goods in respect of which any of the provisions of the Act or rules have been contravened shall be liable to be seized along with the conveyance. The adjudicating authority, by passing an order in writing, shall have powers and authority to confiscate taxable goods which are brought in to taxable areas in violation of the Act and these rules. However, such goods shall thereupon vest in the Federal Government.



Jan- 2021


Any taxable goods in respect of which any of the provisions of the Act or rules have been contravened shall be liable to be seized along with the conveyance. The adjudicating authority, by passing an order in writing, shall have powers and authority to confiscate taxable goods which are brought in to taxable areas in violation of the Act and these rules. However, such goods shall thereupon vest in the Federal Government. Goods in respect of which order has been passed, and in respect of which the option of paying a fine in lieu of confiscation has not been exercised, shall be disposed of in such manner as the Chief Commissioner IR, having jurisdiction may direct.”; and 2. After form STR-31 at the end, the new forms are added. namely:

Form STR-32 (E-transport Advice) and Form STR-33 (Stock Advice). LINK OF DOCUMENT https://khilji.net.pk/wp-content/uploads/2021/02/20211261515541195SRO96-2021.pdf FBR NOTIFICATION INTRODUCTION Government of Pakistan, Federal Board of Revenue, (Revenue Division) had issued Sales Tax Notification (S.R.O. 98(I)/2021) dated January 26, 2021, whereby further amendments have been made in its Notification No. S.R.O.1190 (I)/2019 dated October 02, 2019. COMMENTARY In accordance with sub-section (1) of section 8B of the Sales Tax Act, 1990, a registered person shall not be allowed to adjust input tax in excess of ninety per cent of the output tax for that tax period. However, Federal Board of Revenue (FBR) excluded certain class of persons from the purview of aforesaid sub-section (1) of section 8B of the Sales Tax Act, 1990, vide notification No. S.R.O 1190/ (I)/2019. Through this current notification, Federal Board of Revenue had further amended its previous notification whereby excluding “Sales tax registered manufacturing companies of cold rolled, GI or coated coils / sheets which are listed on Pakistan Stock Exchange.” from the purview of sub-section (1) of section 8B of the Sales Tax Act, 1990. Moreover, Automobile manufacturing companies which are listed on Pakistan Stock Exchange till December, 2020 were allowed to adjust input tax to the extent of ninety-five percent of the output tax. Through this notification, condition of December, 2020 has been further extended to June, 2021. These changes are effective from 1st day of January, 2021. LINK OF DOCUMENT https://khilji.net.pk/wp-content/uploads/2021/02/202112616124241SRO98-2021.pdf


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KCO Newsletter January 2021 - Khilji & Company

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