Taxation System Chapter- 01
INDIRECT TAXES
Following are the indirect Taxes under the Pakistani Taxation System.
SR. Name of prevailing Law Remarks
- Customs Act, 1969
Goods imported and exported from Pakistan are liable to
Customs duties as prescribed through code or otherwise
in Pakistan Customs Tariff. Customs duties in the form of
import duties and export duties constitute a major part of
the total tax receipts. The rate structure of customs duty
is determined by a large number of socio-economic
factors. However, the general scheme envisages higher
rates on luxury items as well as on less essential goods.
The import tariff has been given an industrial bias by
keeping the duties on industrial plants and machinery and
raw material lower than those on consumer goods. - Federal Excise Act, 2005
Federal Excise duties (FED’s) are leviable on a limited
number of goods produced or manufactured, and
services provided or rendered in Pakistan. On most of the
items FED is charged on the basis of value or retail price.
Some items are, however, chargeable to duty on the
basis of weight or quantity. Classification of goods is
done in accordance with the Harmonized Commodity
Description and Coding system which is being used all
over the world. All exports are liable to 0% FED. - Sales Tax Act, 1990
Sales tax is a value added tax system. Being as indirect
tax collectable from whole supply chain i.e. importers,
manufacturers, wholesalers (including dealers and
distributors) and retailers with certain exceptions.
Therefore, the sales tax is a multi stage tax payable at
standard rate of 17% u/s ( 3 ) of the Sales tax Act, 1990
on:
Goods imported into Pakistan;
All taxable supplies by a registered person in
respect of any taxable activity carried on by him;
VAT is a percentage tax levied on the price each
registered person charges for goods or taxable services
rendered by him.
VAT normally utilizes as system of tax credit (being as
input tax adjustment) to place the ultimate and read
burden on tax on the final consumer and to relieve the
intermediaries from any tax burden except the final
consumer.
Further there are also the concepts of minimum tax and
Final tax under the sales tax Act on specific persons or
class of persons or sectors as the case may be.
2 .2 Tax relief’s in cross border transactions
In cross border Transactions, Pakistan taxation system provides following types of reliefs: