Tax Book 2023

Chapter 07 Solved Past Papers Sales Tax Numericals of CA Mod- C

Supplies: Rupees

to corporate customers – registered 20,000,000

to Government hospitals – un-registered 3,780,000

Purchases - Raw material:

from cottage industry 550,000

from local registered persons 25,800,000

RahbarisregisteredundertheSalesTaxAct, 1990 andisengaged inthebusinessofmanufacture and supply of
specialized equipment. Following information has been extracted from his records for the month of August 2022.

Q. NO. 2

Conceptual Approach to Taxes___ _955

from local registered persons 25,800,000

Following information is also available:
(i) Purchases from local registered persons include the following:
Material worth Rs. 1,600,000 against which a discrepancy has been indicated by the CREST.

(ii) An electronic cash register was purchased from High Tech Limited at Rs. 250,000.

(iii)

(iv) On 28 August 2022, Rahbar paid sales tax of Rs. 170,000 on electricity bill.

Raw-materialofRs.2,000,000purchasedfromABEnterpriseson 2 August2022.Thepaymentwasmadeonthe

samedaybypayorder.On 15 August2022,ABEnterprisesinformedRahbarthatwitheffectfrom 1 August 2022

their registration has been suspended by the Commissioner Inland Revenue.

Wires and cablesofRs.500,000and electrical andsanitary fittingsofRs900,000.Theseitemswereusedin

the renovation of a factory building.

On 18 August 2022 RahbaracquiredamachineonoperatingleasefromAromaLimited. Thetotalleaserentals

payableovertheleasetermoftwoyearsareRs.3,500,000.Thefairvalueattheinceptionoftheleaseamountedto

Rs. 3,100,000.

(v) Own manufactured equipment worth Rs. 375,000 was used for internal testing purposes in R & D department.

(vi)

All the above figures are exclusive of sales tax, wherever applicable. Sales tax is payable at the rate of 17%.
Required:

Rahbar

Computation of Net Sales Tax Liability

For the tax period August 2022

UndertheprovisionsoftheSalesTaxAct, 1990 andRulesmadethereunder,computetheamountofsalestaxpayablebyor
refundable to Rahbar and the amount of sales tax to be carried forward, if any, for the tax period August 2022.
Note: show all relevant exemptions, exclusions and disallowances.

ANSWER

Own manufactured equipment worth Rs. 375,000 was used for internal testing purposes in R & D department.

Rahbarmadefreereplacementoffaultypartsonrequestfromthreeofhiscustomers.Thesepartswerecoveredunder

warranty and had a market value of Rs. 175,000.

For the tax period August 2022

SALES TAX CREDIT (INPUT TAX) Taxable Sales Tax Amount of
Value Rate Sales Tax
550,000 Exempt -
20,800,000 17% 3,536,000
250,000 17% 42,500
3,100,000 Inadmissible -
Electricity bill - - 170,000
3,748,500
Less: inadmissible input tax W-2 (582,381)

Input tax for the month (^) 3,166,119
20,000,000 17% 3,400,000
3,780,000 Exempt -
Raw material purchased from local registered persons W - 1
Machine on operating lease
Electronic cash register
TaxablesuppliestoGovt.hospitalsun-registered(assumedcoveredunder
SALES TAX DEBIT (OUTPUT TAX)
Taxable supplies to corporate customers – registered
Raw material purchased from cottage industry
3,780,000 Exempt -
375,000 17% 63,750
175,000 0 -
Output Tax for the Month 3,463,750
Admissible credit (lower of 3,166,119 – (42,500 – 6,603) = 3,130,222) or 90% of 3,463,750
=3,117,375
Admissible credit (3,117,375 + 35,897) 3,153,272
310,478
12,847
25,800,000
(1,600,000)
(2,000,000)
(500,000)
Sales tax to be carried forward (3,166,119 – 3,153,272 )
Sales tax payable
Working: (W-1)
TaxablesuppliestoGovt.hospitalsun-registered(assumedcoveredunder
Sixth Schedule)
Equipment used for internal testing purposes
Free replacement of under warranty parts
Purchases from local registered persons
Less: value of material on which input tax not admissible
Purchases against which discrepancy indicated by CREST
Purchases from supplier whose registration has been suspended
Purchase of wires and cables (500,000)
(900,000)
20,800,000
Purchase of wires and cables
Purchase of electrical and sanitary fittings
Conceptual Approach to Taxes___ _955