Tax Book 2023

Practice Questions with Solutions Chapter- 06

Q.3 Explain section 8B of the Sales Tax Act, 1990.

Solution:

A registered person shall not be allowed to adjust input tax in excess of 90% of the output tax for

that tax period:

Tax charged on the acquisition of fixed assets shall be fully adjustable against the output tax in the

month of acquisition.

The Board may exclude any person or class of persons from this section.

A registered person may be allowed adjustment or refund of input tax on fulfilment of the following

conditions, in case:

(i) whose accounts are subject to audit under the Companies Ordinance, 1984, upon furnishing a

statement along with annual audited accounts, duly certified by the auditors, showing value

additions less than the limit prescribed above; or

(ii) other registered persons, as notified by the Board.

The adjustment or refund of input tax if any to a registered person shall be made on yearly basis in

the second month following the end of the financial year.

The Board may notify any other limit of input tax adjustment for any person or class of persons.

Notwithstanding anything contained in sub-sections (l), (2) and (3), input tax allowed in case of

locally manufactured electric vehicles subject to reduced rate of tax under the Eighth Schedule

shall be limited to the extent of amount of output tax and no refund or carry forward of excess input

tax shall be allowed.

Any auditor found guilty of misconduct in furnishing the certificate shall be referred to the Council for

disciplinary action.

In case a Tier-1 retailer does not integrate his retail outlet in the manner as prescribed under sub-

section (9A) of section 3, during a tax period or part thereof, the adjustable input tax for whole of

that tax period shall be reduced by 60 %.

Q.4: Following information has been provided by Mr. Zohaib registered as commercial importer for the
month of August 20 22.
Rs.
Invoice price of imported goods 500,000
Value for custom duty 550,000
Custom duty 50,000
FED (Federal Excise Duty) 30,000

Compute sales tax payable under following two situations

a) If taxable supplies made at 800,000

b) If taxable supplies made at 700 , 000

Solution (a):

Output tax:

On taxable supplies U/S 3 (Rs. 800,000 x 1 7 %) 136 ,000

Less Input tax:

On commercial imports U/S 3 (Rs. 630,000 x 1 7 %) (Note – 2 ) 107 , 100

Minimum value addition tax paid on commercial imports

Paid under twelfth Schedule (Rs. 630 ,000 x 3%) 18,900

126 , 000