ISLAMABAD: The Federal Board of Revenue (FBR) has been empowered to fix the value of supply in case of imported goods specified in the Third Schedule of the Sales Tax Act 1990 for payment of sales tax on basis of retail price.
The FBR has issued circular number 3 of 2024 to explain sales tax and federal excise amendments made in the Sales Tax Act and Federal Excise Act through Finance Act 2024.
The FBR said that the provision of first proviso to clause (46) of section 2 of the Sales Tax Act (STA), empowers the Board to fix the value of supply of any imported goods or taxable supplies or class of supplies, if the Board deems it necessary. For that purpose, Board may fix different values for different classes or description of same type of imported goods or supplies.
The said proviso has been amended through Finance Act, 2024 to expressly empower the Board to fix the value of supply in case of imported goods specified in the Third Schedule to STA which are subject to sales tax at the rate of 18% of the retail price under the provisions of clause (a) of sub-section (2) of section 3 of the said Act.
As a result of this amendment, Board has the power to fix the value of supply for Third schedule items which will be used to determine the retail price of these items as defined in Section 2(27).
For example, in the case of imported tea, Board vide sales tax general order (STGO) No. 104 of 2019 dated 296August, 2019 read with STGO No. 103 of 2019 dated 7thAugust, 2019, specified that the importer of tea (a Third Schedule item), shall pay sales tax on such imported tea at retail price and the retail price shall not be less than 130 percent of the imported value of such goods as increased by assessed customs duties, excise duty and such other applicable taxes and charges excluding sales tax.
It was also clarified vide said STGO No. 104 of 2019 that having paid sales tax at 130 percent of the value of imported tea as aforesaid, the balance of sales tax as per retail price shall be paid along with return.
After the said amendment, if the Board deems it necessary to fix the value of supply of imported items which are Third Schedule items, the sales tax may be paid at 130 percent of such value as fixed by the Board under the said first proviso to clause (46) of section 2 of STA, as increased by customs duty, federal excise and other applicable taxes excluding sales tax, in view of the said STGOs.
The balance sales tax shall be paid by such importer along with his sales tax return as the sales tax charged on retail price is higher than the amount of sales tax paid on import at 130 percent of the value fixed by the Board as aforesaid, the FBR added.
