Tax Book 2023

Scope and Payment of Tax Chapter- 05

Non applicability of sales tax (withholding) under eleventh schedule on the following:

(i) Electrical energy,

(ii) Natural Gas,

(iii) Petroleum Products as supplied by petroleum production and exploration companies, oil

refineries, oil marketing companies and dealers of motor spirit and high speed diesel;

(iv) Vegetable ghee and cooking oil;

(v) Telecommunication services;

(vi) Goods specified in the Third Schedule to the Sales Tax Act, 1990;

(vii) Supplies made by importers who paid value addition tax on such goods at the time of

import; and

(viii) Supplies made by an Active Taxpayer as defined in the Sales Tax Act, 1990 to another

registered persons with exception of advertisement services.

(ix) Supply of sand, stone, gravel/crush and clay to low cost housing scheme sponsored or

approved by Naya Pakistan Housing and Development Authority.

Responsibilities of a withholding agent

The withholding agent, intending to make purchases of taxable goods, shall indicate in an

advertisement or notice for this purpose that the sales tax to the extent as provided in these

rules shall be deducted from payment to be made to the supplier.

A withholding agent shall deduct an amount equal to 20% of the total sales tax shown in the

sales tax invoice issued by the supplier and make payment of the balance amount to him as per

illustration given below,--

Example: Value of taxable supplies excluding sales tax Rs. 1,000

Sales tax chargeable @ 1 7 % Rs. 1 70

Sales tax deductible by the withholding agent Rs. 3 4 (i.e. Rs. 1 7 0 x 20%)

Sales tax payable by the withholding to the supplier Rs. 1 36 (i.e. Rs. 1 70 - Rs. 3 4 )

Balance amount payable to the supplier by the withholding

agent

Rs. 1,1 36 (Rs. 1,000 + Rs.

136 );

Purchases from un-registered persons: All withholding agents shall make purchases of

taxable goods from a person duly registered person, provided that under unavoidable

circumstances and for reasons to be recorded in writing, purchases are made from unregistered

persons, the withholding agent shall deduct sales tax at 17 % unless otherwise specified of

the gross value of taxable supplies made to him from the payment due to the supplier.

Advertisements on television and radio: Where the registered person who receives

advertisement services, in Pakistan or abroad, shall deduct the amount of sales tax as

mentioned in the invoice and where the sales tax amount not specified in the invoice then the

sales tax at the rate applicable rate on advertisement services.

Notwithstanding anything contained in this Act, Tier-1 retailers shall pay sales tax at the rate

specified in sub-section (1) and shall observe all the applicable provisions of the Act and rules

made there under, including the requirement to file monthly sales tax returns in the manner

prescribed in Chapter II of the Sales Tax Rules, 2006:

Provided further that from such date, and in such mode and manner, as prescribed by the

Board, all Tier-1 retailers shall integrate their retail outlets with Board’s computerized

system for real-time reporting of sales.

Sales Tax on retailers covered under Tier II [U/S 3( 9 )]: