Federal Budget 2022-2023 i.e. the Finance Act 2022 has brought significant changes in the Sales Tax Act 1990. We we have tried to summarize these in comparative:
| Section | Before The Budget | After the Budget 2022https://www.fbr.gov.pk/Budget2022-23/FinanceBill.html | Comments |
| 2(12) | (12) “goods” include every kind of movable property other than actionable claims, money, stocks, shares and securities; | (12) “goods” include “production, transmission and distribution of electricity” every kind of movable property other than actionable claims, money, stocks, shares and securities; | Electricity was included in the definition clause of goods to remove any ambiguity. |
| 2(29A) | (29A) “sales tax” means – – (a) the tax, additional tax, or default surcharge levied under this Act; (b) a fine, penalty or fee imposed or charged under this Act; and (c) any other sum payable under the provisions of this Act or the rules made thereunder;] | (29A) “sales tax” means – – (a) the tax, additional tax, or default surcharge levied under this Act; (b) a fine, penalty or fee imposed or charged under this Act “excluding fee and service charges imposed and collected under section 76”; and (c) any other sum payable under the provisions of this Act or the rules made thereunder;] | Fee and services charges were kept exempt from levy of sales tax by adding this in clause (29A) of the STA, 1990 to remove ambiguity. |
| 2(33) | (33) “supply” means a sale or other transfer of the right to dispose of goods as owner, including such sale or transfer under a hire purchase agreement, and also includes – (a) putting to private, business or non-business use of goods produced or manufactured in the course of taxable activity for purposes other than those of making a taxable supply; (b) auction or disposal of goods to satisfy a debt owed by a person; (c) possession of taxable goods held immediately before a person ceases to be a registered person and (d) in case of manufacture of goods belonging to another person, the transfer or delivery of such goods to the owner or to a person nominated by him: | (33) “supply” means a sale or other transfer of the right to dispose of goods as owner, including such sale or transfer under a hire purchase agreement, and also includes – (a) putting to private, business or non-business use of goods produced or manufactured in the course of taxable activity for purposes other than those of making a taxable supply; (b) auction or disposal of goods to satisfy a debt owed by a person; (c) possession of taxable goods held immediately before a person ceases to be a registered person and (d) in case of manufacture of goods belonging to another person, the transfer or delivery of such goods to the owner or to a person nominated by him: and “(e) production, transmission and distribution of electricity.”; | Electricity was included in the definition clause of supply to remove any ambiguity. |
| 2(43A) | “(43A) “Tier-1 retailer” means a retailer falling in any one or more of the following categories, namely:-] (a) a retailer operating as a unit of a national or international chain of stores; (b) a retailer operating in an air-conditioned shopping mall, plaza or centre, excluding kiosks; (c) a retailer whose cumulative electricity bill during the immediately preceding twelve consecutive months exceeds Rupees twelve hundred thousand; (d) a wholesaler-cum-retailer, engaged in bulk import and supply of consumer goods on wholesale basis to the retailers as well as on retail basis to the general body of the consumers”; (e) a retailer, whose shop measures one thousand square feet in area or more or two thousand square feet in area or more in the case of retailer of furniture; (f) a retailer who has acquired point of sale for accepting payment through debit or credit cards from banking companies or any other digital payment service provider authorized by State Bank of Pakistan; (g) a retailer whose deductible withholding tax under sections 236G or 236H of the Income Tax Ordinance, 2001 during the immediately preceding twelve consecutive months has exceeded the threshold as may be specified by the Board through notification in the official Gazette; and (h) any other person or class of persons as prescribed by the Board. | “(43A) “Tier-1 retailer” means a retailer falling in any one or more of the following categories, namely:-] (a) a retailer operating as a unit of a national or international chain of stores; (b) a retailer operating in an air-conditioned shopping mall, plaza or centre, excluding kiosks; (c) a retailer whose cumulative electricity bill during the immediately preceding twelve consecutive months exceeds Rupees twelve hundred thousand; (d) a wholesaler-cum-retailer, engaged in bulk import and supply of consumer goods on wholesale basis to the retailers as well as on retail basis to the general body of the consumers”; (e) a retailer, whose shop measures one thousand square feet in area or more or two thousand square feet in area or more in the case of retailer of furniture; (f) a retailer who has acquired point of sale for accepting payment through debit or credit cards from banking companies or any other digital payment service provider authorized by State Bank of Pakistan; (g) a retailer whose deductible withholding tax under sections 236G or 236H of the Income Tax Ordinance, 2001 during the immediately preceding twelve consecutive months has exceeded the threshold as may be specified by the Board through notification in the official Gazette; “(ga) a person engaged in supply of articles of jewelry, or parts thereof, of precious metal or of metal clad with precious metal excluding a person whose shop measures three hundred square feet in area or less;”; and (h) any other person or class of persons as prescribed by the Board. | Jewelers having shop of more than 300 Sq. Feet was included in Tier 1 Retailers regime |
| 3(1A) | (1A) Subject to the provision of sub section (6) of section 8 or any notification issued thereunder, where taxable supplies are made to a person who has not obtained registration number, there shall be charged, levied and paid a further tax at the rate of 3 percent of the value In addition to the rate specified in sub sections (1), (1B), (2), (5), (6) and section 4 provided that the Federal Govt. may, by notification in the official Gazette, specify the taxable supplies in respect of which the further tax shall not be charged, levied and paid. | (1A) Subject to the provision of sub section (6) of section 8 or any notification issued thereunder, where taxable supplies are made to a person who has not obtained registration number “or he is not an active taxpayer”, there shall be charged, levied and paid a further tax at the rate of 3 percent of the value In addition to the rate specified in sub sections (1), (1B), (2), (5), (6) and section 4 provided that the Federal Govt. may, by notification in the official Gazette, specify the taxable supplies in respect of which the further tax shall not be charged, levied and paid. | Scope of further tax was extended on inactive taxpayers in addition to un-registered persons |
| 3(7) | (7) The tax shall be withheld at the rate as specified in the Eleventh Schedule, by any person or class of persons being purchaser of goods or services] as withholding agent for the purpose of depositing the same, in such manner and subject to such conditions or restrictions as the Board may prescribe in this behalf through a notification in the official Gazette. | (7) The tax shall be withheld at the rate as specified in the Eleventh Schedule, by any person or class of persons being purchaser of goods or services “, other than the services liable to pay sales tax under a Provincial enactment, “as withholding agent for the purpose of depositing the same, in such manner and subject to such conditions or restrictions as the Board may prescribe in this behalf through a notification in the official Gazette | Services subject to provincial sales tax was excluded from the purview of withholding regime under the STA, 1990 |
| 3(9) | (9) Notwithstanding anything contained in subsection (1), tax shall be charged from retailers other than those falling in Tier-1,] through their monthly electricity bills, at the rate of five percent where the monthly bill amount does not exceed rupees twenty thousand and at the rate of seven and half per cent where the monthly bill amount exceeds the aforesaid amount, and the electricity supplier shall deposit the amount so collected directly without adjusting against his input tax]: | (9) Notwithstanding anything contained in subsection (1), tax shall be charged from retailers other than those falling in Tier-1, through their monthly electricity bills, at the rate of “rupees three thousand per month where the monthly bill amount does not exceed rupees thirty thousand, rupees five thousand per month where the monthly bill amount exceeds rupees thirty thousand but does not exceed rupees fifty thousand and rupees ten thousand per month where the monthly bill amount exceeds rupees fifty thousand” where the monthly bill amount exceeds the aforesaid amount, and the electricity supplier shall deposit the amount so collected directly without adjusting against his input tax]: | Electricity slabs were increased for retailers other than Tier-1 Retailers as follows: Rs.3,000/- if electricity bill is up to Rs.30,000/- Rs.5,000/- if electricity bill exceeds Rs.30,000/- but does not exceed Rs.50,000/- Rs.10,000/- if electricity bills exceeds Rs.50,000/- but does not exceed Rs.100,000/- |
| 3(9) | Nil | Provided that the above rates of tax shall be increased by one hundred percent if the name of the person is not appearing in the Active Taxpayers List issued by the Board under section 181A of the Income Tax Ordinance, 2001 on the date of issuance of monthly electricity bill: Provided further that the Board may through a general order prescribe any persons or class of person who shall pay upto rupees two hundred thousand per month through their monthly electricity bill.” | Two new provisos were added to penalize inactive taxpayers |
| 3(11) | Nil | “(11) Notwithstanding anything contained in the Act, the Board through Notification in the official Gazette, may require class of persons to integrate their invoice issuing machines with the Board’s Computerized System for real time reporting of sales in such mode and manner and from such date as may be prescribed.”; | New sub-section (11) in section 3 was added authorizing Board to integrate any registered person with its computerized system. Changes in The Sales Tax Act 1990 through Federal Budget 2022-2023 |
| 6 | Nil | “(5) The Federal Government may, subject to such conditions, limitations and restrictions as it may impose, by notification in the official Gazette, allow payment of sales tax on installments basis by the Federal or Provincial Governments or any public sector organization on import or supply of any goods or class of goods: Provided that such payment may be allowed from any previous date specified in the notification under this sub-section.”; | A new sub-section (5) was added in section 6 allowing payment of sales tax on installment basis. |
| 8(1)(m) | 8. Tax credit not allowed. – (1) Notwithstanding anything contained in this Act, a registered person shall not be entitled to reclaim or deduct input tax paid on – (m) the input goods or services attributable to supplies made to un-registered person, on pro-rata basis, for which sale invoices do not bear the NIC number or NTN as the case may be, of the recipient as stipulated in section 23. | 8. Tax credit not allowed. – (1) Notwithstanding anything contained in this Act, a registered person shall not be entitled to reclaim or deduct input tax paid on – (m) the input goods or services attributable to supplies made to un-registered distributor, on pro-rata basis, for which sale invoices do not bear the NIC number or NTN as the case may be, of the recipient as stipulated in section 23. | Changes in The Sales Tax Act 1990 through Federal Budget 2022-2023. Scope of section 8(1)(m) was limited to un-registered distributors only |
| 8B(1) | 8B. Adjustable input tax.– (1) Notwithstanding anything contained in this Act, in relation to a tax period, a registered person other than public limited companies listed on Pakistan Stock Exchange] shall not be allowed to adjust input tax in excess of ninety per cent of the output tax for that tax period: | 8B. Adjustable input tax.– (1) Notwithstanding anything contained in this Act, in relation to a tax period, a registered person shall not be allowed to adjust input tax in excess of ninety per cent of the output tax for that tax period: | Public listed companies were also subjected to section 8B, Changes in The Sales Tax Act 1990 through Federal Budget 2022-2023 |
| 14AB | Nil | “14AB.Discontinuance of gas and electricity connections.– Notwithstanding anything contained in this Act or any other law for the time being in force, the Board shall have power through Sales Tax General Order to direct the gas and electricity distribution companies for discontinuing the gas and electricity connections of any person who fall in the following categories, namely:– (a) Any person, including tier-1 retailers, who fail to register for sales tax purpose or (b) Notified tier-1 retailers registered but not integrated with the Board’s Computerized System: Provided that upon registration or integration, as the case may be, of the above said persons, the Board shall notify the restoration of their gas or electricity connection through Sales Tax General Order.”. | New section was added to penalize for un-registered persons (liable to be registered) and tier 1 retailers who are not integrated with the FBR. |
| 23 | 23. Tax Invoices.– (1) A registered person making a taxable supply shall issue a serially numbered tax invoice at the time of supply of goods containing the following particulars , in Urdu or English language,] namely: – (a) name, address and registration number of the supplier; (b) name, address and registration, number of the recipient and NIC or NTN of the unregistered person, as the case may be, excluding supplies made by a retailer where the transaction value inclusive of sales tax amount does not exceed rupees [one hundred] thousand, if sale is being made to an ordinary consumer. | 23. Tax Invoices.– (1) A registered person making a taxable supply shall issue a serially numbered tax invoice at the time of supply of goods containing the following particulars , in Urdu or English language,] namely: – (a) name, address and registration number of the supplier; (b) name, address and registration number of the recipient and in case of supplies by manufacturer or importer to unregistered distributor, the NIC or NTN of such unregistered distributors, as the case may.”; | Through the changes in The Sales Tax Act 1990 through Federal Budget 2022-2023, word distributor was substituted for un-registered person in clause (b) of section 23 |