Scope and Payment of Tax Chapter- 05
Supplier on receipt of returned goods Issue a credit note
The goods may be returned along with the debit note within 180 days from the date of supply
however the collector on the request of suppliers may extend this period for further 180 days.
The debit and credit notes shall be issued in duplicate and contain the information regarding the
description, quantity and the value of goods, based on the invoices issued at the time of supply,
the amount of sales tax paid and the number and date of original tax invoice. The adjustment of
input and output taxes shall be available in the tax period in which the goods are returned. The
supplier shall reduce the amount of output tax in his return for the tax period in which he
received the goods.
In case of companies manufacturing perishable food items having an expiry date, if such items
are returned on account of becoming unfit for consumption and are then destroyed in
accordance with the procedure as in rule 23, the corresponding credit notes may be issued
within fifteen days of the return of such goods.
Where the goods relating to a returned or cancelled supply are subsequently supplied to the
original buyer or some other person with or without carrying out any repairs, the supplier shall
charge sales tax thereon in the normal manner and account for it in his return for the period in
which these goods were supplied.Rule for destruction of goods [Rule 23]
Where goods are returned on the ground that those are unfit for consumption and need to be
destroyed by the suppliers, then along-with other formalities an approval of collector of sales tax
shall be obtained before the goods are destroyed in the presence of an officer not below the
rank of Assistant Collectorate deputed by the collector.
Input tax on goods subsequently destroyed: A registered person is entitled to reclaim input
tax paid on goods which were subsequently destroyed and were not meant for use – Lahore
High Court in the case of Mayfair Spinning Mills Ltd PTCL 2002 CL.115.
Input tax on wastage of Raw Materials during Manufacturing: Circular 1 of 1989 clarifies that
such input is reclaimable. However, if the wastage is such that can be sold then the same shall
be considered as a by-product and chargeable to sales tax unless specifically exempt.- Refund of input tax [U/S 10]
If the input tax paid by a registered person exceeds the output tax on account of zero rated local
supplies or export made during that tax period, the excess amount of input tax shall be refunded
to the registered person not later than 45 days of filing of refund.
In case of excess input tax against supplies other than zero-rated or exports, such excess input
tax may be carried forward to the next tax period, along with the input tax as is not adjustable u/s
8B, and shall be treated as input tax for that period.
Provided further that the Board may, from such date and subject to such conditions and
restrictions as it may impose, by notification in the official Gazette, direct that refund of input tax
against exports shall be paid at the fixed rates and in the manner as notified in the such
notification.
If a registered person is liable to pay any tax, default surcharge or penalty payable under any
law the refund of input tax shall be made after adjustment of unpaid outstanding amount of tax.
Where a person has claimed input tax credit or refund which was not admissible to him, the
proceedings against him shall be completed within 60 days and may be extended for further 60
days but the same in no case may be extended by Additional CIR for nine months.- Assessment of tax and recovery of tax not levied or short-levied or erroneously refunded
[U/S 11]:
1 - If a person is required to file a tax return fails to file the return for a tax period by the due
date or pays an amount which, for some miscalculation is less than the amount of tax
actually payable,